Money-based economic systems.

(Jody Gray) this Blog Post is part of my personal research -Origins -understanding how what exists today came to exist. (background, see, *BP: Feudalism and Manorialism of the Middle Ages. http://historicalandmisc. *) This Blog Post, relates to money-based economy…

Agrarian capitalism. The economic foundations of the feudal agricultural system began to shift substantially in 16th-century England; the manorial system had broken down, and land began to become concentrated in the hands of fewer landlords with increasingly large estates. Instead of a serf-based system of labor, workers were increasingly employed as part of a broader and expanding money-based economy. The system put pressure on both landlords and tenants to increase the productivity of agriculture to make profit; the weakened coercive power of the aristocracy to extract peasant surpluses encouraged them to try better methods, and the tenants also had incentive to improve their methods, in order to flourish in a competitive labor market (employer/employee). Terms of rent for land were becoming subject to economic market forces rather than to the previous stagnant system of custom and feudal obligation.

*Commercial Revolution. (13th-18th century)

*Commercial Revolution [https://en.wikipedia.] was a period of European economic expansion, colonialism, and mercantilism which lasted approximately from the late 13th century until the early 18th century. Economic theory: Government's' involvement in trade had an impact on the nobility of western European nations, because increased wealth by non-nobles threatened the nobility's place in society. Mercantilism: an economic policy that emphasizes the goal of each nation was to gain as much money as possible by whatever means. The belief was that the richer the nation the more powerful it was. The idea behind it was an outgrowth of the guild system, as guilds were monopolistic enterprises... Colonialism: Mercantilism was a significant driver of Colonialism, as, according to the theory, the colony existed for the benefit of the mother country. This assumption meant that colonies were prohibited from engaging in their own independent commerce, and therefore competing with the mother country. Colonies were established to provide customers, raw materials, and investment opportunities. Trade monopolies: Triangular trade: A triangular trade occurred in this period: between Africa, North America, and England: Slaves came from Africa, and went to the Americas; raw materials came from the Americas and went to Europe; from there, finished goods came from Europe and were sold back to the Americas at a much higher price.   Because of the massive die-off of the indigenous people, the Atlantic Slave Trade was established to import the labor required for the extraction of resources (such as gold and silver) and farming. Effects: Population growth provided the expanding labor force needed for industrialization. *

*Mercantilism. (16th to 18th centuries)

*Mercantilism [https://en.wikipedia] was a type of national economic policy designed to maximize the trade of a nation and especially to maximize the accumulation of gold and silver. It was dominant in modernized parts of Europe from the 16th to 18th centuries. It promoted governmental regulation of a nation’s economy for the purpose of augmenting state power at the expense of rival national powers. With the establishment of overseas colonies by northern European powers early in the 17th century, mercantile theory gained a new and wider significance, in which its aim and ideal became both national and imperialistic. Mercantilism functioned as the economic counterpart of the older version of political power: divine right of kings and absolute monarchy. Mercantilism includes a national economic policy aimed at accumulating monetary reserves through a positive balance-of-trade, especially of finished goods. Historically, such policies frequently led to war and also motivated colonial expansion… High tariffs, especially on manufactures goods, are an almost universal feature of mercantilist policy. Other: forbidding colonies to trade with other nations; monopolizing markets with staple ports; banning the export of gold and silver, even for payments; forbidding trade to be carried in foreign ships; subsidies on exports; promoting manufacturing and industry through research or direct subsidies; limiting wages; maximizing the use of domestic resources; restricting domestic consumption through non-tariff barriers to trade.   Mercantilism in its simple form is bullionism (precious metals), yet mercantilist writers have emphasized the circulation of money and reject hoarding. Their emphasis on monetary metals accords with current ideas regarding the money supply, such as the stimulative effect of a growing money supply… In time, the heavy emphasis on money was supplanted by industrial policy, accompanied by a shift in focus from the capacity to carry on wars to promoting general prosperity. Mature neo-mercantilist theory recommends selective high tariffs for “infant” industries or the promotion of the mutual growth of countries through national industrial specialization.   Many nations applied the theory, notably France, which was the most important state economically in Europe at the time. King Louis XIV followed the guidance of Jean Baptiste Colbert, his controller general of finances (1665-1683). It was determined that the state should rule in the economic realm as it did in the diplomatic, and that the interests of the state as identified by the king were superior to those of merchants and of everyone else. The goal of mercantilist economic policies was to build up the state, especially in an age of incessant warfare, and the state should look for ways to strengthen the economy and to weaken foreign adversaries. Influence. Mercantilism was the dominant school of economic thought in Europe throughout the late Renaissance and early modern period (from the 15th to the 18th century). Mercantilism encouraged the many intra-European wars of the period and arguably fueled European expansion and imperialism -both in Europe and throughout the rest of the world -until the 19th century and early 20th century.   Evidence of mercantilist practices appeared in early modern Venice, Genoa, and Pisa regarding control of the Mediterranean trade of bullion. However, as a codified school of economic theories, mercantilism’s real birth was marked by the empiricism of the Renaissance, which first began to quantify large-scale trade accurately… Theory. ...Austria Over All, If She Only Will (1684), comprehensively sums up the tenets of mercantilism: that every little bit of a country’s soil be utilized for agriculture, mining or manufacturing; that all raw materials found in a country be used in domestic manufacture, since finished goods have a higher value that raw materials; that a large, working population be encouraged; that all export of gold and silver be prohibited and all domestic money be kept in circulation; that all imports of foreign goods be discouraged as much as possible; that where certain imports are indispensable they be obtained at first hand, in exchange for other domestic goods instead of gold and silver; that as much as possible, imports be confined to raw materials that can be finished [in the home country]; that opportunities be constantly sought for selling a country’s surplus manufactures to foreigners, so far as necessary, for gold and silver; that no importation be allowed if such goods are sufficiently and suitably supplied at home.   ...Mercantilists viewed the economic system as a zero-sum game, in which any gain by one party required a loss by another. Thus, any system of policies that benefited one group would by definition harm the other, and there was no possibility of economics being used to maximize the commonwealth, or common good. Mercantilists’ writings were also generally created to rationalize particular practices rather than as investigations into the best policies.   ...The early modern era was one of letters patent and government-imposed monopolies; some mercantilists supported these, but others acknowledged the corruption and inefficiency of such systems. Many mercantilists also realized that the inevitable results of quotas and price ceilings were black markets. One notion that mercantilists widely agreed upon was the need for economic oppression of the working population; laborers and farmers were to live at the “margins of subsistence”. The goal was to maximize production, with no concern for consumption. Extra money, tree time, and education for the lower classes were seen to inevitably lead to vice and laziness, and would result in harm to the economy. Infinite growth. The mercantilists saw a large population as a form of wealth which made possible the development of bigger markets and armies. Opposite to mercantilism was the doctrine of physiocracy, which predicted that mankind would outgrow its resources. The idea of mercantilism was to protect the markets as well as maintain agriculture and those who were dependent upon it. Origins. Scholars debate over why mercantilism dominated economic ideology for 250 years… Merchants benefited greatly from the enforced monopolies, bans on foreign competition, and poverty of the workers. Governments benefited from the high tariffs and payments from the merchants. Whereas later economic ideas were often developed by academics and philosophers, almost all mercantilist writers were merchants or government officials.   ...Mercantilism developed at a time of transition for the European economy. Isolated feudal estates were being replaced by centralized nation-states as the focus of power. Technological changes in shipping and the growth of urban centers led to a rapid increase in international trade. Mercantilism focused on how this trade could best aid the states. Another important change was the introduction of double-entry bookkeeping and modern accounting. This accounting made extremely clear the inflow and outflow of trade, contributing to the close scrutiny given to the balance of trade. Of course, the impact of the discovery of America cannot be ignored. New markets and new mines propelled foreign trade to previously inconceivable volumes, resulting in “the great upward movement in prices” and an increase in “the volume of merchant activity itself”.   Prior to mercantilism, the important economic work done in Europe was by the medieval scholastic theorists. The goal of these thinkers was to find an economic system compatible with Christian doctrines of piety and justice. They focused mainly on macroeconomics and on local exchanges between individuals. Mercantilism was closely aligned with the other theories and ideas that began to replace the medieval worldview. This period saw the adoption of the very Machiavellian realpolitik and the primacy of the raison d'état in international relations. The mercantilist idea of all trade as a zero-sum game, in which each side was trying to best the other in a ruthless competition… This dark view of human nature also fit well with the Puritan view of the world, and some of the most stridently mercantilist legislation, such as Navigation Ordinance of 1651, was enacted by the government of Oliver Cromwell. Legacy. (Austrian School of economics, Murray Rothbard): Mercantilism, which reached its height in the Europe of the 17th and 18th centuries, was a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state. Thus, mercantilism held exports should be encouraged by the government and imports discouraged.

*Physiocracy. (18th century)

*Physiocracy [https://en.wikipedia.] (from the Greek for “government of nature”) is the economic theory developed by a group of 18th century Enlightenment French economists who believed that the wealth of nations was derived solely from the value of “land agriculture” or “land development” and that agricultural products should be highly priced. Their theories originated in France and were most popular during the second half of the 18th century. Physiocracy is perhaps the first well-developed theory of economics.   The movement was particularly dominated by Francois Quesnay (1694-1774) and Anne-Robert-Jacques Turgot (1727-1781). It immediately preceded the first modern school, classical economics, which began with the publication of Adam Smith’s The Wealth of Nations in 1776.   The most significant contribution of the physiocrats was their emphasis on productive work as the source of national wealth. This is in contrast to earlier schools, in particular mercantilism, which often focused on the ruler’s wealth, accumulation of gold, or the balance of trade. Whereas, the mercantilist school of economics said that value in the products of society was created at the point of sale, by the seller exchanging his products for more money than the products had “previously” been worth, the physiocratic school of economics was the first to see labor as the sole source of value. However, for the physiocrats, only agricultural labor created this value in the products of society. All “industrial” and non-agricultural labor was “unproductive appendages” to agricultural labor.   At the time the physiocrats were formulating their ideas, economies were almost entirely agrarian. That is presumably why the theory considered only agricultural labor to be valuable. Physiocrats viewed the production of goods and services as consumption of the agricultural surplus, since the main source of power was from human or animal muscle and all energy was derived from the surplus from agricultural production. Profit in capitalist production was really only the “rent” obtained by the owner of the land on which the agricultural production was taking place.   “The physiocrats damned the cities for their artificiality and praised more natural styles of living. They celebrated farmers.” Individualism and laissez-faire. The physiocrats… believed that self-interest is the motivation for each segment of the economy to play its role. Each individual is best suited to determine what goods they want and what work would provide them with what they want out of life. While a person might labor for the benefit of others, they will work harder for their own benefit; however, each person’s needs are being supplied by many other people. The system works best when there is complementary relationship between one person’s needs and another person’s desires, and trade restrictions place an unnatural barrier to achieving one’s goals. Private property. None of the theories concerning the value of land could work without strong legal support for the ownership of private property. Combined with the strong sense individualism, private property becomes a critical component of Tableau’s functioning. The physiocrats believed in the institution of private property, they saw property as a tree and its branches, as social institutions. They actually stated that landlords much enjoy ⅖ on the land surpluses. They also advocated that landlords should be given dues, otherwise they will take the land away from the cultivators. Diminishing returns. Turgot was one of the first to recognize that “successive applications of the variable input will cause the product to grow, first at an increasing rate, later at a diminishing rate until it reaches a maximum.” This was a recognition that the productivity gains required to increase national wealth had an ultimate limit, and, therefore, wealth was not infinite. Investment capital. (economists) recognized that capital was needed by farmers to start the production process, and were proponents of using some of each year’s profits to increase productivity. Capital was also needed to sustain laborers while they produced their product. Turgot recognizes that there is opportunity cost and risk involved in using capital for something other than land ownership, and he promotes interest as serving a “strategic function in the economy.” Subsequent developments… Henry George was the driving force behind what became known as the Single Tax movement (see), not to be confused with Flat Tax. The Single Tax is a proposal for the use of the annual rental value of land (land value taxation) as the principal or sole source of public revenue.

*Laissez-faire.

*Laissez-faire [https://en.wikipedia.] (from French, “let do”) is an economic system in which transactions between private parties are free from government intervention such as regulation, privileges, tariffs, and subsidies. The phrase is part of a larger French phrase and basically translates to “let (it/them) do”, but in this context usually means to “let go”. Etymology and usage. ...The anecdote on the Colbert-Le Gendre meeting appeared in a 1751 article in the Journal economique, written by French minister and champion of free trade Rene de Voyer, Marquis d’Argenson: “Leave it to itself has been the proper motto of public powers since the dawn of civilisation.” “Appalling is the principle of seeking glory solely by debasing our neighbors! In it are but the malice and spitefulness of heart typical of fat cats: the public interest lies elsewhere. Leave it to itself, for the love of God! Leave it!”

*Single Tax Movement -Georgism. (late 19th and 20th century)

*Georgism [https://en.wikipedia] aka single taxers, is an economic philosophy holding that, while people should own the value they produce themselves, economic value derived from land (including natural resources and natural opportunities) should belong equally to all members of society. Developed from the writings of Henry George, the Georgist paradigm seeks solutions to social and ecological problems, based on principles of land rights and public finance which attempt to integrate economic efficiency with justice.   Georgism is concerned with the distribution of economic rent caused by natural monopolies, pollution, and the control of commons, including title of ownership for natural resources and other contrived privileges (e.g., intellectual property). Any natural resource which is inherently limited in supply can generate economic rent, but the classical and most significant example of 'land monopoly' involves the extraction of common ground rent from valuable urban locations. Georgists argue that taxing economic rent is efficient, fair, and equitable. The main Georgist policy recommendation is a tax assessed on land value. Georgists argue that revenues from a land value tax (LVT) can be used to reduce or eliminate existing taxes (for example, on income, trade, or purchases) that are unfair and inefficient. Some Georgists also advocate for the return of surplus public revenue back to the people by means of a basic income or citizen's dividend. …   ...Georgist ideas were popular and influential during the late 19th and 20th century. Political parties, institutions and communities were founded based on Georgist principles during that time. Main tenets. Henry George is best known for popularizing the argument that government should be funded by a tax on land rent rather than taxes on labor… he concluded that many of the problems that beset society, such as poverty, inequality, and economic booms and busts, could be attributed to the private ownership of the necessary resource, land… According to George, people justly own what they create, but that natural opportunities and land belong to all.   The tax upon land values is, therefore, the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by Nature be attained. No citizen will have an advantage over any other citizen save as is given by his industry, skill, and intelligence; and each will obtain what he fairly earns. Then, but not till then, will labor get its full reward, and capital its natural return. -Henry George, Progress and Poverty, Book VIII, Chapter 3.

*Rent-seeking.

*Rent-seeking [https://en.wikipedia.] In economics and in public-choice theory, rent-seeking involves seeking to increase one’s share of existing wealth without creating new wealth; (which) results in reduced economic efficiency through poor allocation of resources, reduced actual wealth-creation, lost government revenue, increased income inequality, and (potentially) national decline. Description. Georgist economic theory describes rent-seeking in terms of land rent, where the value of land largely comes from government infrastructure and services (e.g. roads, public schools, maintenance of peace and order, etc.) and the community in general, rather than from the actions of any given landowner, in their role as mere titleholder. This role must be separated from the role of a property developer, which need not be the same person.   Rent-seeking is an attempt to obtain economic rent (i.e., the portion of income paid to a factor of production in excess of what is needed to keep it employed in its current use) by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth. Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity. The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee (or rent of the section of the river for a few minutes) to lower the chain. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is helping nobody in any way, directly or indirectly, except himself. All he is doing is finding a way to make money from something that used to be free.   Rent-seeking is distinguished in theory from profit-seeking, in which entities seek to extract value by engaging in mutually beneficial transactions. Profit-seeking in this sense is the creation of wealth, while rent-seeking is the use of social institutions such as the power of government to redistribute wealth among different groups without creating new wealth. In a practical context, income obtained through rent-seeking may contribute to profits in the standard, accounting sense of the word.

*Capitalism.

*Capitalism [https://en.wikipedia.] is an economic system and an ideology based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist economy, decision-making and investment are determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market. Economists, political economists, and historians have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free market capitalism, welfare capitalism (industrial paternalism, company town), and state capitalism (state-owned or controlled). Different forms of capitalism feature varying degrees of free markets, public ownership, obstacles to free competition, and state-sanctioned social policies. The degree of competition in markets, the role of intervention and regulation, and the scope of state ownership vary across different models of capitalism;  the extent to which different markets are free, as well as the rules defining private property, are matters of politics and policy. Most existing capitalist economies are mixed economies, which combine elements of free markets with state intervention, and in some cases economic planning.   Market economies have existed under many forms of government, in many different times, places, and cultures. The development of capitalist societies, however, marked by a universalization of money-based social relations, a consistently large and system-wide class of workers who must work for wages, and a capitalist class which dominates control of wealth and political power, developed in Western Europe in a process that led to the Industrial Revolution. Capitalist systems with varying degrees of direct government intervention have since become dominant in the Western world and continue to spread.   Capitalism has been criticized for establishing power in the hands of a minority capitalist class that exists through the exploitation of a working class majority; for prioritizing profit over social good, natural resources, and the environment; and for being an engine of inequality and economic instabilities. Supporters believe that it provides better products through competition, creates strong economic growth, yields productivity and prosperity that greatly benefits society, as well as being the most efficient system known for allocation of resources. Contents -History. Agrarian capitalism. Mercantilism. Industrial capitalism. Modern capitalism. Relationship to democracy. Varieties of capitalism. Etymology. The term capitalist, meaning an owner of capital, appears earlier than the term capitalism. It dates back to the mid-17th century. Capitalist is derived from capital, which evolved from capitale, a late Latin word based on caput, meaning “head” -also the origin of chattel and cattle in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries in the sense of referring to funds, stock of merchandise, sum of money, or money carrying interest. By 1283 it was used in the sense of the capital assets of a trading firm. It was frequently interchanged with a number of other words -wealth, money, funds, goods, assets, property, and so on.   According to the Oxford English Dictionary, the term capitalism first appeared in English in 1854 in the novel The Newcomes… where he meant “having ownership of capital”... a German-American socialist and abolitionist, used the phrase private capitalism in 1863. Wage labor. Types. Comparison to slavery. Capitalism and war. In modern times, it has often been possible to rebuild physical capital assets destroyed by wars completely within the space of about 10 years, except in cases of severe pollution by chemical warfare or other kinds of irreparable devastation. However, damage to human capital has been much more devastating, in terms fatalities (in the case of World War II, about 55 million deaths), permanent physical disability, enduring ethnic hostility and psychological injuries which have effects for at least several generations.

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