The Ephemeral Civilization: Exploding the Myth of Social Evolution

THE EPHEMERAL CIVILIZATION The Ephemeral Civilisation is an astonishing intellectual feat in which Graeme Snooks develo...

Author: Graeme D Snooks

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THE EPHEMERAL CIVILIZATION The Ephemeral Civilisation is an astonishing intellectual feat in which Graeme Snooks develops an original and ground-breaking analysis of changing sociopolitical forms over the past 3,000 years. Snooks challenges the prevailing theories of social evolutionism with an innovative approach which also looks ahead to the twenty-first century. The Ephemeral Civilisation builds on the dynamic-strategy model outlined in the author’s highly acclaimed companion volume, The Dynamic Society. The Ephemeral Civilisation is divided into three parts—theory, history, and future. • Part I: This provides a new strategic theory of human behaviour and institutional change that is based on extensive historical study rather than abstract ideas borrowed from the social or natural sciences. Unlike social evolutionism, this new theory provides an explanation for the complete reversals that are observed in sociopolitical change. • Part II: This focuses on the three fundamental types of civilization identified in The Dynamic Society—conquest, commerce, and technological. The author argues that sociopolitical change is a direct response to the specific dynamic strategies employed by mankind in order to survive and prosper. • Part III: This section looks to the future. The author outlines a number of probable future changes in sociopolitical systems based on his dynamicstrategy model. He focuses on the coming clash between the world’s ‘mega-states’ which will lead, he believes, to a new economic and ecological revolution. The Ephemeral Civilisation is a highly original and controversial attempt to explain systematically not only the changing nature of human civilization over the past 3,000 years, but also to reinterpret a remarkably wide range of historical issues and events. It is a book that should be read by all those interested in the theory and reality of institutional change. Graeme Donald Snooks is the Coghlan Professor and Head of the Department of Economic History at the Institute of Advanced Studies, Australian National University. He has published widely on many central issues in economic history—including very longrun growth, the family, human motivation, and a new role for history—and is editor of a number of prestigious book series.

A COMPANION VOLUME BY THE SAME AUTHOR

THE DYNAMIC SOCIETY Exploring the sources of global change Graeme Donald Snooks

THE EPHEMERAL CIVILIZATION Exploding the myth of social evolution

Graeme Donald Snooks

London and New York

First published 1997 by Routledge 11 New Fetter Lane, London EC4P 4EE This edition published in the Taylor & Francis e-Library, 2003. Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 © 1997 Graeme Donald Snooks All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalogue record for this book has been requested ISBN 0-203-02986-0 Master e-book ISBN

ISBN 0-203-20548-0 (Adobe eReader Format) ISBN 0-415-16995-X (Print Edition)

Where has gone the steed? Where has gone the man? Where has gone the giver of treasure? Where has gone the place of the banquets? Where are the pleasures of the hall? Alas, the gleaming chalice; alas, the armoured warrior; alas the majesty of the prince! Truly, that time has passed away, has grown dark under the helm of night as though it had never been… Here wealth is ephemeral; here a friend is ephemeral; here man is ephemeral; here kinsman is ephemeral; all this foundation of the earth will become desolate. (‘The Wanderer’ (early Anglo-Saxon poem) trans. S.A.J.Bradley)

CONTENTS

1

List of figures List of tables Preface

x xii xiii

THE MYTH OF SOCIAL EVOLUTION Economics and sociobiology A dynamic-strategy approach Reshaping human institutions: the ideal and the real Theory, history, and future

1 2 5 15 18

Part I Theory Part IA: Strategic theory 2

A REALIST MODEL OF HUMAN BEHAVIOUR The building blocks for a new model Motivation The process of decision-making The role of rules The strategic-imitation model of decision-making Conclusions

25 26 27 32 46 49 50

3

A NEW MODEL OF INSTITUTIONAL CHANGE The real nature of institutions and organisations Changes in institutions and organisations A general model of cultural change

52 53 61 68

Part IB: Evolutionary theory 4

THE ETHEREAL WORLD OF INSTITUTIONALISM The old institutional economics Modern evolutionary institutional economics The new institutional economics vii

73 74 78 81

CONTENTS

An evaluation of the new institutionalism Conclusions 5

THE ROBOTIC WORLD OF SOCIOBIOLOGY From economics to sociology—a rinterpretation of Darwin The sociobiological model of behaviour Social organisation Social evolution The sociobiological approach evaluated Conclusions

93 96 97 97 101 112 119 121 127

Part II History Part IIA: Conquest society 6

ROME: SANCTUARY OF THE WOLF The rise and fall of Rome The changing structure of Roman society Conclusions

133 133 145 174

7

TENOCHTITLAN: CITADEL OF THE SUN Expansion of the Aztec Empire The structure of Aztec society The Aztec tragedy—an outcome of bad timing Conclusions

176 178 185 202 204

Part IIB: Commerce society 8

GREECE: JEWEL OF THE AEGEAN The rise and fall of Greek society The changing structure of Greek society Conclusions

207 208 219 236

9

VENICE: APPARITION OF THE ADRIATIC The rise and fall of Venice The changing structure of Venetian society Conclusions

239 239 254 271

Part IIC: Technological society 10

ENGLAND: ALBION AWAKENING The changing fortunes of Albion The changing structure of society Conclusions

viii

274 275 303 363

CONTENTS

11

THE UNITED STATES OF AMERICA: PHOENIX RISING Creation of the world’s first mega-state The institutional response Conclusions

365 365 390 418

Part III Future 12

13

THE COMING CLASH OF THE MEGA-STATES: USA, EU, RUSSIA, CHINA The unfolding of the technological strategy Strategic pathways of the mega-states The European Union The rise, fall, and rise of the Russian mega-state The emerging mega-state of China Conclusions

421 422 425 429 440 465 486

A GLOBAL-STATE? A vehicle for the new millennium The coming of the fifth paradigm Policy and the fifth paradigm Conclusions

488 488 492 498 510

Notes Glossary of new terms and concepts References Index

512 518 527 547

ix

FIGURES

2.1 3.1 3.2 II.1 6.1 6.2 6.3 6.4 7.1 7.2 7.3 8.1 8.2 8.3 9.1 9.2 9.3 9.4 10.1 10.2 10.3 10.4 10.5 11.1 11.2 11.3 11.4 11.5 12.1 12.2 12.3

The concentric spheres model of human behaviour 30 Global technological paradigm shifts 64 Diagrammatic model of cultural change 69 Diagrammatic model of the conquest society 132 Roman territorial expansion, 300 BC–AD 1200 138 The rate of expansion of the Roman Empire, 300 BC–AD 1200 139 Economic fluctuations in the Roman Empire, 300 BC–AD 470 140 The Roman Forum 159 Tenochtitlan—the city centre 177 The civilizations of Mesoamerica 179 Mexica campaigns from Tenochtitlan, 1427–1519 182 The rise and fall of the Greek Empire, 1000–100 BC 209 The Aegean Sea (or Greek ‘lake’) 212 The agora of Athens, late fifth century BC 222 The Venetian lagoon 241 The territorial expansion of Venice, 1000–1797 242 The Adriatic Sea (or Venetian ‘lake’) 244 Venice in 1400 255 The income, prices, and empire of England, 1000–2000276 The kingdoms of Europe, AD 998 278 English average income and taxes, 1150–1625 282 The Anglo-Dutch ‘lake’, AD 1600 290 Diagrammatic model of the English feudal economy, 1086 305 The expansion and growth of the USA, 1790–1992 366 USA inland freight rates, 1784–1900 374 The expansion of American railroads to 1890 375–6 The American ‘lake’ in the early eighteenth century 393 The growth of the American mega-city to 1900 397 Territorial dimensions of the mega-states: Europe, Russia, China, USA, 1483–2000 426 Real GDP of the mega-states, 1800–2000 427 Real GDP per capita of the mega-states, 1800–2000 428 x

FIGURES

12.4 12.5 12.6 12.7

Population of the mega-states, 1800–2000 429 The growth of Western Europe (EU), 1800–2000 431 Countries of the European Union in the mid-1990s 436 The rivers, canals, and railways of Russia and China in the mid-1990s 443 12.8 The growth of Russia, 1800–2000 449 12.9 Diagrammatic model of the classic USSR command system 454 12.10 The growth of China, 1800–2000 475 12.11 The unstable Chinese ‘command’ system, 1953–2000 480 13.1 World mineral prices, 1955–1995 495–6 13.2 World energy prices, 1955–1995 497–8 13.3 European energy use, 1960–1993 499–500

xi

TABLES

3.1 3.2 6.1 6.2 7.1 10.1

Strategic institutions Strategic organizations Net public conquest returns, Republic of Rome Rates of Roman territorial expansion Patterns of Mexica expansion, 1325–1519 Population of London, 1000–1750

xii

56–7 59 135 139 184 316

PREFACE

Civilization is like a river. Walking along its banks we are drawn compulsively to the river’s sparkling, ever-changing surface, with its noisy progressions, its sudden directional changes, its unexpected reversals, and its slow descent into the wild chaos of the great ocean. To begin again anew. Watching from a safe distance we are fascinated by the abundance of life swarming in and around this vibrant surface. Its brilliant ephemeral display distracts us from the river’s hidden depths. We are beguiled into believing that some superficial principle of movement is at work. Only those who wade into its depths discover that powerful, hidden undercurrents, rarely betraying their silent presence, are responsible for the constantly changing surface patterns. The ephemeral surface display has deep eternal origins. Those who wish to negotiate those waters ignore its silent forces at their peril. Human society must be dealt with at two levels. The sparkling ephemeral forms of civilization are driven not by superficial happenings but by deeper eternal forces. These eternal forces have been examined in my recent book The Dynamic Society (1996). Here we will see how the deeper forces of life generate the ever-changing institutional forms of civilization, and will understand why the Ephemeral Civilization is not the outcome of a superficial principle of motion such as social evolution. Social evolution is no more than a myth—a myth that is challenged in this book. Once again I wish to acknowledge the important contribution to our knowledge of human society made by thousands of historians in this and earlier generations. These people, who devote their lives to reconstructing the details of our past, rarely receive the wider recognition they deserve. It needs to be said that, without their valuable work, books of this nature could never be written. Unfortunately only a fraction of these scholars can be recorded in the References at the end of this book. More specifically I wish to thank Gary Magee for reading the entire typescript and making many valuable suggestions, Adrian Snooks for his helpful comments on the Greek and Roman studies (Chapters 6 and 8) in Part II, my xiii

PREFACE

wife Loma Graham for her perceptive comments on the book’s structure, and Barry Howarth for checking the book’s factual statements. I am also indebted to the helpful comments made by a number of anonymous referees on the penultimate version. They all helped to improve the argument and saved me from a number of errors. Those that remain are, of course, my own. Once again I owe a debt of gratitude to Barbara Trewin for formatting the book and, together with Jeannie Haxell and Ann Howarth, for the endless word-processing; to Wayne Naughton for the computer graphics; to Barry Howarth for the copy-editing and, together with Min Mee Teh, for the proof-reading; to Keith Mitchell and his team for the expertly drawn maps; and to Susan Dunsmore, the publisher’s copy-editor in Glasgow. Finally, I am grateful to Alison Kirk at Routledge for her unfailing encouragement and support for this project, and to my desk editor Tim Weiss for his interest and advice. It should be noted that terms appearing in the text in bold type are defined in a Glossary of New Terms and Concepts at the end of the book. No attempt has been made to include in the Glossary those new concepts that were introduced in The Dynamic Society. Readers unsure of the meaning of any new terms not defined in this book should consult the earlier volume. G.D.Snooks Sevenoaks Canberra

xiv

1 THE MYTH OF SOCIAL EVOLUTION

Now, therefore, the thoughts of my heart are in conflict as to whether I for my part should explore the deep currents and the surging of the salty waves. (‘The Seafarer’ (early Anglo-Saxon poem) trans. S.A.J.Bradley) Civilization is an enigma. We are all caught up in its vibrant surface but have little understanding of its hidden depths. Even civilization-watchers cannot agree as to whether its essential characteristics are cultural, social, political, economic, or some combination of them all. Not surprisingly, there is no consensus on the most basic questions asked about civilization. Questions such as: Why do civilizations rise and fall? What accounts for the dominance of Western civilization in the modern world? Does Western civilization have a future? While these questions have attracted many and varied answers, none has been very persuasive. It is not without some qualms, therefore, that I set out on this journey of exploration. Paradoxically the answers are to be found within ourselves. The major reason for our lack of understanding is an inability to face what we are. Our species has an amazing ability to divorce what it does from what it thinks it should be doing. As argued in The Dynamic Society, we habitually isolate our actions (based on genetically determined desires) from our view of ourselves (based on our intellectual faculties). It is a form of existential schizophrenia. What I want to suggest here is that this is a normal rather than a pathological condition because it is required by the struggle to survive and prosper. The actions we are forced to take in order to survive and prosper are often so repugnant to the intellectual image we have of ourselves that we are unable to face them openly, certainly not on a daily basis. The truth could, and sometimes does, lead to self-destruction. And this frustrates the biological desire to survive and prosper. Consequently, over millions of years we have learnt to deceive ourselves with such facility that we are usually unaware that we are doing so. While this is an effective survival mechanism, it is a great liability when it comes to analysing the dynamics of human society. If we can deceive 1

THE MYTH OF SOCIAL EVOLUTION

ourselves about the true nature of our actions and motives, what chance have we of understanding how our civilization works? This is the main reason that the human sciences have developed less rapidly than the natural sciences. It is far easier to be objective about the physical world than about human society. Any advantage arising from inside knowledge of our own species is negated by our desperate need to obscure the truth from ourselves. If, however, we could abstract from this problem, we would find that human society is no more difficult to understand than the rest of nature. ECONOMICS AND SOCIOBIOLOGY There have been many attempts over the past 150 years to examine human society in evolutionary terms. Sociologists influenced by Darwin were the first in the field, followed by economic institutionalists, sociobiologists and, more recendy, systems analysts.1 But, as the theory used in this book is derived inductively from the historical record, it does not draw directly on any of this work. As such, it stands in a tradition of its own. Where comparisons are made with the theory of other traditions, namely economics and sociobiology, it is because we are competing for the same ground. While I do not review the sociology and world-systems literature, because there are few points of contact (especially with the metaphysically influenced work of Herbert Spencer and Talcott Parsons), the conclusions in this book, which deny the existence of social evolution, also have implications for that tradition. Scholars from two major disciplines, namely economists and sociobiologists, claim to have had more success than their colleagues in scientifically analysing the evolution of human society. In doing so they have made very different assumptions about human behaviour—assumptions that obscure rather than clarify the actions of mankind. Economists assume that human decision-makers attempt to maximize their material returns in the shortrun, whereas sociobiologists assume that they attempt to maximize reproductive success. Both groups are also concerned with the dynamics of human society. While economists traditionally have attempted to examine dynamic issues using comparative—static methods, a growing realization that this approach has not been very productive has led to the adoption of evolutionary theory that has been influenced by sociobiologists. And this, despite the very different behavioural assumptions made by both disciplines. These evolutionary models focus on changing societal forms, employ adaptive endogenous mechanisms, and involve unidirectional institutional and cultural processes. Neoclassical economics is a powerful tool for analysing shortrun static issues but, as I have argued in Economics Without Time (Snooks 1993a), it is not very useful for analysing longrun dynamics. The massive investment by 2


economists in so-called growth theory has generated a dismally small return, because it cannot be applied to real-world issues of growth and it does not tell us anything useful that we did not already know from historical observation. Nevertheless, the discipline of economics has inadvertently spawned a number of research programmes that have empirically investigated aspects of the growth of nations. These include the new economic history (sometimes called cliometric history) and the new institutionalism. Predictably, the neoclassical economists have taken no interest in their progeny. The new economic history, which has its origins in the USA in the late 1950s (ibid. 132–9), adopted the static neoclassical benefit-cost framework to analyse dynamic issues, such as the developmental role of railways, slavery, British navigation acts, and imperialism. The best of this work is exciting and stimulating, but the worst of it is mechanical and dull.2 While the best of this quantitative work provides a useful method for sorting out some of the main issues, the dynamic benefits of these developments always seemed to evade detection. This is hardly surprising as these techniques were developed by neoclassical economists to analyse shortrun issues. And in the shortrun very little changes. Accordingly, as we shall see in Part II, the neoclassical benefit-cost approach has led to the underestimation of the net benefits involved and, hence, to historical misinterpretation. In particular, the central longrun dynamic processes have remained largely unexplored. These problems can only be resolved by developing and applying a realistic dynamic model. This does not deny, however, the valuable historical work done on shortrun static issues using cross-sectional data. After all, this is the strength of neoclassical economics. Some of the ageing new economic historians have begun to realize the limitations of the neoclassical framework they employed earlier, and they have returned to a more traditional historical and institutional approach to issues of economic change. Much of this work employs a simple framework of causal factors, usually of a supply-side nature, that theory and history suggest are important sources of economic change (Mokyr 1990:151–92; McCloskey 1994:253–69). While it has been suggested by some (Mokyr 1990:273–300) that an evolutionary model might be useful in examining growth and technological change, no workable dynamic model of this type has been developed. The new institutional economics, on the other hand, has benefited from the growing perception that neoclassical economics and its historical offspring are unable to handle dynamic issues satisfactorily, and that these are the most important issues facing the future of human society. Of the economists dissatisfied with orthodox economics, those with a theoretical inclination have gathered under the banner of evolutionary theory and have borrowed heavily from the sociobiologists (neo-Darwinists); and those with an historical preference have rallied around the purveyors of new institutional economic history. The new institutional economics has brought 3


in from the cold many who always felt uncomfortable with neoclassical theory and quantitative techniques. Ironically, in its early form the new institutionalism retained many of the limitations of neoclassical economics. This was because it was constructed upon neoclassical foundations by merely relaxing the restrictive assumptions concerning the way economic decisions are made (North 1981). These include the assumptions that decision-makers have access to perfect information and have perfect computing abilities. In the real world where these assumptions do not hold, institutions, such as markets and rules regarding property rights, are required to reduce the cost of transactions. There are two problems with this approach. First, it accepts the neoclassical notion that individuals make decisions by collecting as much information as economically feasible about benefits and costs, which are then fed into a preexisting mental model of reality. As argued in Chapter 2, this is just not true. The great majority of individuals make decisions through imitation of those who are demonstrably successful. Hence the only information required for decision-making is who is successful and why. Second, the new institutional economics provides a rather narrow view of institutions, which excludes the important work on organizations by scholars such as Alfred Chandler. It focuses solely upon societal rules. In this book it is argued that institutions have a wider role, even if it is only to facilitate the objectives of the dynamic strategies. Initially, institutional change was regarded as a response to exogenous variables such as population change, but more recently it has come to be seen as an evolutionary response to the selective device of efficiency in the face of competition (North 1990; 1994). Sociobiology became a major intellectual force in the mid-1970s with the influential work of Edward Wilson (1975). This approach involves a neoDarwinian interpretation of natural selection which, I argue in Chapter 5, is a subtle distortion of Darwin’s views, involving a substitution of the sociological concept of ‘reproductive success’ for the original economic concept of ‘struggle for existence’. While merely based upon the study of animal behaviour, sociobiology has made the extravagant claim that it will eventually absorb not only the social sciences but even the humanities. It envisages a process of social evolution in which ‘genes hold culture on a leash’ (Wilson 1978:167). More recently, sociobiology has been concerned with the interaction between genetic and social influences on human behaviour. This is seen as generating cultural evolution. Sociobiologists, however, treat the decisionmaking process in a very general and unsatisfactory way and focus on simple gene-like cultural units (such as ‘memes’) rather than on complex social structures such as legal and political institutions. They also are unable to establish empirically the alleged link between genetic and cultural change. It will take a long time before sociobiology can make good its claim to conquer 4


the human sciences. Nevertheless, it has influenced some recent theoretical work in the social sciences, thereby contributing to the myth of social evolution. What is the myth of social evolution? It is the view that human societies in all their economic—political—social complexity evolve according to an institutional principle of selection that works in a similar way to Darwin’s concept of natural selection. The old institutionalism focused on ‘habits of thought’ (Veblen 1919), the new institutionalism on ‘adaptive efficiency’ (North 1990), and the sociobiologists on ‘reproductive success’ (Wilson 1975). In the case of the new institutionalism this involves the emergence of institutional forms that are the most efficient or otherwise fittest to survive in a competitive world in which earlier decisions have a determining influence on future outcomes (a concept called ‘path dependence’). In other words, social evolution is a superficial principle of motion embodied in a society’s institutional forms, which does not have roots in its hidden economic depths. Clearly these are supply-side models, and they imply unidirectional change. As evolutionary models are unable to explain sudden changes of direction or reversals in institutional development, their advocates are forced to use ingenious ad hoc arguments involving exogenous forces to explain regularly occurring discrepancies in the historical record. There are at least two difficulties with this procedure. First, the use of ad hoc arguments is an implicit, and very obvious, admission that the evolutionary model is unable to explain what most needs explaining; second, it is quite clear that such a ‘model’ cannot be used to forecast the future. If unpredictable exogenous forces are likely to affect the outcome at any time in the future, then the evolutionary model has no predictive power. Social evolution is a myth without substance. A DYNAMIC-STRATEGY APPROACH There is a solution to this problem, which does not involve borrowing inappropriate models from other deductive disciplines. Dissatisfaction with the physics methodology underpinning neoclassical economics does not mean that the methodology of biology applied to the social sciences will be any better. And theory that may be useful in biology is not necessarily helpful in economics. It is curious that when their theory fails them, economists seek assistance from other deductive disciplines rather than from history. The conviction underlying this book is that careful observation of the way civilization has changed in the past can be used as a basis for the construction of a new body of theory that will be directly applicable to the issue of longrun dynamics. The way this can be achieved is discussed (Snooks 1994a: 2–11) and demonstrated (Snooks 1996:378–413) elsewhere. But this is not to say that the study of institutions is unimportant. Quite 5


the contrary. It will be argued here that institutions, together with organizations, are the instruments employed by the dynamic strategists to achieve their objectives. It is essential to examine how these instruments are used to bring the dynamic strategy into play. This can only be done, as Alexander Field (1991a) has argued for years, by specialists in law, business, and institutional economics rather than those in neoclassical, evolutionary, or game theory. The primary dynamic mechanism In The Dynamic Society I developed an existential model—a model of existence—to explain the dynamics of human society over the past 2 million years. This is the dynamic-strategy model. At its centre is materialist man who, in a competitive world characterized by scarce resources, attempts to maximize the probability of survival and prosperity. To do so, the strategist pursues one of the four timeless dynamic strategies: family multiplication (involving procreation and migration to new lands), conquest, commerce, and technological change. The choice of dynamic strategy has depended upon which one at a given time and place provided the greatest probability of survival and prosperity for a given investment of time and resources. This involves an interaction between materialist man and his economic and natural environment communicated through changing relative factor prices. Early hunting societies adopted the family-multiplication strategy and spread across the face of the Earth from their origin in East Africa. Ancient agricultural societies adopted the conquest or commerce strategy in order to build large and wealthy cities and, eventually, empires like those of Greece, Rome, and China in the Old World, and Teotihuacan, Tenochtitlan, and the Maya in the New World. And modern urban societies adopted the technological strategy and generated sustained growth from within. Of course, when we say that a society adopts a particular dynamic strategy, we mean that this is the outcome of choices made by a majority of individual decision-makers and their political representatives. It is a convenient rhetorical device. The competitive pursuit of these simple dynamic strategies—a process I have called dynamic materialism—has led to two different types of societal transformation. The first of these involved the three great technological revolutions, or technological paradigm shifts, that occurred at those critical times in human history when the world’s supplies of natural resources were fully utilized within the prevailing technological paradigm. These great economic transformations were the Palaeolithic Revolution of 1.6 million years ago that led to a change from scavenging to hunting; the Neolithic Revolution of about 10,600 years ago that produced a transition from hunting to agriculture; and the Industrial Revolution between 1760 and 1830 that generated a shift from agriculture to industrialization. Within the modern technological paradigm, the dynamic strategists of competing 6


nation-states attempt to achieve a competitive advantage (to gain extraordinary profits) by developing new technological styles. These technological styles or sub-strategies emerge within the existing industrial paradigm as it unfolds at the global level. The dynamic mechanisms that brought each technological paradigm to its point of exhaustion were the ‘great dispersion’ prior to and during the palaeolithic epoch, the ‘great wheel of civilization’ during the neolithic epoch, and the ‘great linear waves of economic change’ during the modern epoch. The second type of societal transformation is the rise and fall, or the rise and rise, of civilizations. In ancient times great civilizations in both the Old and New Worlds grew populous and wealthy either through conquest (with the capture of land, slaves, and booty) or through commerce (with the achievement of monopolies over trade routes and tradeable goods). The victors grew rich on the life-blood of the vanquished. But only for a limited time. As a dynamic strategy was pursued vigorously, its capacity to provide opportunities for economic growth increasingly approached exhaustion. Sooner or later the cost of an extra war, or an extra trading colony, exceeded the extra rewards that it provided. At this point in time the dynamic strategy was exhausted and the inflow of surpluses and resources required to maintain the empire’s inflated levels of population and living standards was abruptly terminated. The weight of the empire then fell solely upon its inadequate neolithic technological foundations. But at a time when the empire should have been ‘downsized’ to bring its population and wealth into line with its technological base, its rulers were invariably forced by their enemies within and without to maintain the old boundaries through a crushing imposition of taxes on their citizens. There emerged an insupportable strategic revenue gap between income and the expenditures required to maintain the old empire. Inevitably the exhausted empire just collapsed, to be replaced by a new empire that emerged on the foundations of the old. This was the eternal recurrence of the ancient world. Only when the technological strategy was introduced during the Industrial Revolution was the ancient cycle of the rise and fall of civilizations eliminated. Modern growth based on efficiency is internally generated and self-sustaining. What this existential model shows quite clearly is that the dynamic mechanism, which I have called dynamic materialism, underlying the fortunes of human society can be explained with minimal reference to institutional change. This I have called the primary dynamic mechanism. Institutions are important because they provide the vehicle—the ‘chariots of change’—required to facilitate the objectives of the dynamic strategists, but they do not drive human society in any direction, they are merely a response to strategic demand along with all other essential inputs for the pursuit of the dynamic strategy. Institutions, therefore, change not as a result of their own evolutionary processes but as a response to the unfolding of the dynamic 7


strategy. This is the secondary dynamic mechanism. Naturally, the interaction between these two mechanisms is complex, but they can be separated out because institutions play a largely dependent role. The secondary dynamic mechanism The critical issue is that, sharp directional changes and reversals in institutional change observed throughout the historical record cannot be explained by the evolutionary model. But they can be explained by the dynamic-strategy model developed in this book. While this is the subject of Chapter 3, a brief outline will help the exposition here. The superficial appearance of evolution in the civilization of Western Europe since 800 AD has depended upon the fortuitous conquest→commerce→technological change sequence. But, as will be shown in Part II, this strategic sequence was not at all inevitable. It depended critically on the timing of the bid made by Western Europe for dominance, which occurred during the last millennium of the neolithic technological paradigm. Had it occurred at the beginning or the middle of the neolithic epoch, the strategic sequence experienced by Western Europe would have been very different and would not have encouraged observers to think in evolutionary terms. Take the example of ancient Greece, which experienced a more typical conquest→commerce→conquest sequence between 800 and 300 BC. The reversal in Greece’s strategic sequence caused a reversal in its institutional development. Institutions that had changed from elitist types required for conquest to democratic types required for commerce, turned back again from the mid-fourth century BC to those required by the Macedonians for conquest. In a similar way, the emergence of democracy in Britain, as the commerce strategy replaced the conquest strategy in the late fifteenth century, would have been turned back again towards more elitist military institutions in the late eighteenth century had the technological strategy not been the most economic option owing to the timely exhaustion of the neolithic technological paradigm. The secondary dynamic mechanism—the process by which strategic demand is converted into institutional change—is dominated by the struggle between various groups in society for control of the dynamic strategy. By controlling the dynamic strategy they control the sources of their income and wealth. Hence the strategic struggle, which may use the political instruments of order and chaos, is fundamentally an economic struggle—a struggle for survival and prosperity. The political instruments of order and chaos, as argued in The Dynamic Society, are the strategic tactics employed to maintain or to gain strategic control. The tactics of order include laws, regulations, and ideology aimed at achieving compliance, and the tactics of chaos include protest, rebellion, and revolution aimed at breaking down the excluding order. 8


As the strategic-struggle hypothesis developed in this book is entirely different to the prevailing concept of class struggle developed by Marx, and branded upon modern consciousness, we need to introduce an entirely new terminology to express this new theory. The population of any society at any given time consists of what I will call strategists, nonstrategists, and antistrategists. The strategists comprise the dynamic group in society who invest time and resources in pursuing and profiting from one of the four dynamic strategies. As the largest profits are to be obtained from the dominant dynamic strategy, it will attract the attention of the most ambitious, risk-taking strategists. The less ambitious and more risk-averse, however, will find some material comfort in the supporting or secondary dynamic strategies. But the dynamic strategists should not be thought of as a homogenous group. Indeed, during certain phases in the unfolding of the dominant dynamic strategy a deadly tension will be generated between different subgroups among the strategists. In particular, as the dominant strategy approaches exhaustion and as the more adventurous strategists begin seriously exploring the possibility of developing new strategies, greater tension and conflict will emerge between different strategist groups. I have called those supporting the traditional strategy the old strategists, and those supporting the emerging strategy the new strategists. It is the struggle between the old and new strategists for control of society’s resources that has led to major transformations in institutions (for example, the shift from an absolute to a constitutional monarchy) as well as to the transfer of strategic control. And when this transfer did not take place smoothly it led to revolutions such as the English civil war, together with the French, Russian, and Chinese revolutions. The role of the nonstrategist changes dramatically between various dynamic strategies and technological paradigms. Once again there is nothing evolutionary about this. Quite the reverse. During the palaeolithic epoch most adults were participants in and beneficiaries of the dominant dynamic strategy of family multiplication. The family controlled the economic activities of hunting, gathering, and raiding, and, as there was no surplus to fight over, few were forced into the role of nonstrategists. After the Neolithic Revolution, which generated substantial agricultural surpluses, ruling elites emerged to garner, protect, and trade these new commodities as well as to plunder the storehouses of their neighbours. The ruling elites and their supporters are the strategists, and the dependent labourers and slaves are the nonstrategists. In ancient and early medieval conquest societies the nonstrategists represented the vast bulk of the population, while the strategists, who maintained political control through a monopoly of military power, were a tiny minority. Only in those ancient societies that pursued the commerce strategy did the proportion of nonstrategists fall to lower levels, usually restricted to the underclass of slaves. Commerce was the reason for ‘democracy’ in ancient 9


Greece, as it was in Western Europe from the late medieval period. But even by the mid-eighteenth century when the commerce strategy in Western Europe had been exhausted, the ratio of strategists to nonstrategists was not high. Only the pursuit of the technological strategy from the late eighteenth century has led to a widening political involvement of the bulk of the population. As the modern strategy unfolded, this embraced the lower middle and working classes beginning with adult white males and extending, in America, to black males and finally to adult women. Today, as in early hunting societies, the nonstrategists in technologically advanced nations have virtually disappeared, being limited to minors, the poverty-stricken, and criminals. Hence, the last twelve thousand years have seen not an evolutionary progression but a great circle. And we should not regard the present as unalterable. If, as the radical ecologists insist, growth-inducing technological change were to be abandoned, then war and conquest would re-emerge and the proportion of strategists to nonstrategists would fall dramatically as a ruling military elite would emerge to meet the new challenge, as they did towards the end of ancient Greece and, indeed, in Nazi Germany. Our final category is the antistrategist. It comprises those ruling elites who assume control of societies during times of crisis and who engineer repressive economic and political systems. These command systems are designed to eliminate existing strategists, to prevent the re-emergence of potential strategists, and to facilitate the pursuit of rent-seeking. Examples of societies dominated by antistrategists include Rome from the time of Claudius, Soviet Russia, Nazi Germany, and Communist China. Control by antistrategists is the outcome of a military-backed takeover by a small band of professional revolutionaries. A vulnerable time for any society is the transition from a traditional strategy to a new strategy. If the new strategists do not possess sufficient economic power to overwhelm the old strategists quickly, the way is opened for a small band of professional revolutionaries with military support to hijack the strategic transfer. The most successful antistrategists are those who manage to involve potential strategists in the rent-seeking command system, because it widens the network of people who have a vested interest in its survival. Examples include Rome’s public service system from the time of Claudius, and Stalin’s command system. The defining characteristic of the strategist is whether he or she invests in either (or both) physical or human capital (skills and experience) required for the pursuit of a society’s dynamic strategies. This includes the supporting as well as the dominant strategies. This has nothing to do with Karl Marx’s concept of class and class struggle which is based on ownership of the means of production—of ‘capitalists’ and ‘labourers’. An illustration of this difference is furnished by Western society from the late nineteenth century. All ‘classes’ of the technological society—including ‘capitalists’ and ‘labourers’—became strategists of one sort or another because they all 10


invested time and resources in the dynamic strategies and benefited from the surpluses they generated. The reward did not depend on the type of means of production that one owned, as Marx argued, but on the amount and the quality of the investment and the way in which that investment was exploited. In contrast to Marxism, there is no fundamental conflict in the strategic-struggle model between ‘capital’ and ‘labour’, because both accept, pursue, and benefit from the technological strategy. The objective of the struggle between these subgroups over their degree of control of the joint strategy is marginally to influence the distribution of the strategic surpluses. They are both on the same side in the strategic struggle against the rentseeking anti-strategists. They are both new strategists. This is the reason there has been no real proletarian revolution—only an antistrategic takeover of middle-class revolutions—in any technological society. This is the reason Marx was wrong. He incorrectly saw all capitalists as rent-seekers, as exploiters of labour, rather than profit-seekers (although he used the term profit rather than rent). An important mechanism in the shift of support from the old to the new strategies is what, in The Dynamic Society (1996:212–13), I call strategic imitation. This is the mechanism by which successful strategic pioneers, who earn extraordinary profits, are imitated by a growing proportion of the population eager to share in the spoils. A new strategy begins in a small way with a few pioneering strategists who invest in new and very risky ventures. Those who succeed earn extraordinary profits and attract the attention of private profit-seekers and public revenue-seekers. And they are imitated by a large number of opportunistic strategic followers. As the new strategists become increasingly wealthy their influence over the policy of governments increases. Eventually the new strategists will take control of government and, hence, control—either peacefully or through revolution—of the society’s dominant dynamic strategy. In this book (see Chapter 2), imitation is also regarded as the basis of economic decision-making. Individuals, in making decisions, seek information not on all the variables required to compute complicated rates of return on any proposed investment, but only on who is successful and why. This is the basis of strategic imitation, which eliminates both the need for expensive searches as claimed by new institutionalists, and the need to assume perfect knowledge and computing abilities as claimed by neoclassical economists. It is a decision-making mechanism that, as is shown in Chapter 4, has its origins in earlier animal forms. Institutions, therefore, are not squeezed out from the convenient but restricting assumptions of neoclassical economics, but rather are a response to the unfolding dynamic strategy. The dynamic-strategy model, therefore, suggests that the focus of institutionalists on the formal and informal rules of society is far too narrow. As institutions and organizations both respond to strategic demand, they need to be examined together. Hence, while I will draw upon the Commons—North 11


distinction between institutions and organizations when required, I will also use commonplace usage when referring both to societal rules and social groups. A form of shorthand has been used throughout this book which may cause some misunderstanding. When I refer to the ‘unfolding’ of a dynamic strategy I do not mean that the strategy is tracing out some pre-ordained pattern of change like the emergence of a plant from a seed or the opening of a flower. A dynamic strategy ‘unfolds’ because economic decision-makers, operating in a competitive environment and responding to changing relative prices, attempt to achieve their objectives of maximizing the probability of survival and prosperity by exploring all the possibilities provided by a particular dynamic strategy at a given time and place. There is nothing inevitable or unilinear about this process. I use this shorthand here because the detailed development of dynamic strategies was explored in my earlier book The Dynamic Society. A basis for reinterpretation and prediction The dynamic-strategy model of institutional change has been used in Part II of this book to reinterpret a wide range of historical issues for a large number of case-studies on a consistent basis. Until now these historical issues have been only partially examined using either shortrun static theory borrowed from neoclassical economics, or inappropriate evolutionary theory borrowed, even if indirectly, from sociobiology. Accordingly, there has been much inconsistency and misinterpretation in the received story of the fluctuating fortunes of human civilization. The dynamic-strategy model has also been used, in Part III, as a basis for predicting institutional change into the twenty-first century. In the process of telling a new story about our past and outlining new possibilities for the future, my model casts a searching light on a variety of fields—political and philosophical as well as economic and historical. Some of the issues involved will be taken up in further books. The historical reinterpretation is focused on a number of case-studies in Part II that were selected to provide a reasonably representative sample of urban societies through space and time. Only by narrowing our focus in this way is it possible to examine institutional change in meaningful depth. Also it is at the level of the individual society rather than the world level that the dynamic strategies, which are central to social dynamics at all levels, are formed. There is no world-system. The global economy is merely an outcome of interactions between dynamic strategists operating through the institutions of individual societies. Clearly my choice of societies was influenced by my own interests and comparative advantage, and by the casestudies used in The Dynamic Society. Owing to the demonstrated robustness of the dynamic-strategy model, there is no reason to believe that it would be any less effective in the examination of any other set of societies. In 12


particular, it is anticipated that the model will provide useful insights into the dilemma currently facing Third World countries. The case-studies include ancient Greece, Rome, and Tenochtitlan (capital of the Aztec Empire); England (and later Britain) since the fall of Rome; medieval Venice; the USA from its earliest days; Russia since Alexander Nevsky; China from the Song (Sung) dynasty; and the European Union since the Second World War. In each case I have examined the changing fortunes and institutions of society in terms of the dynamic-strategy model. This does not involve forcing history into a theoretical strait-jacket, because the theory was derived from the history. In the case of the USA a new and consistent interpretation has been provided for: the American revolution; the Civil War and slavery; the extension of suffrage to working-class men, blacks, and women; the dynamic role of railways; the changing role of religion; the decline in fertility from 1800 to 1860; the depressions of the 1890s and 1930s; and the long deceleration since 1973. For Britain I attempt to explain the great waves of economic change (300-year cycles) since AD 1000; the societal transformation from tribal to feudal to commercial to industrial forms; the shift from absolute to constitutional monarchy; the emergence of the first modern system of parliamentary democracy; the rise and fall of the old (commerce) and new (technological) imperialism; the rise and fall of Christianity; the civil wars of the seventeenth century; the Navigation Acts and the colonial system; the emergence of commodity and factor markets; the changing legal system and property rights; the Industrial Revolution; the emergence of universal suffrage; the changing party-political structure; the rise of universal education; the rise and fall of the welfare state; and the changing role of public entertainment. And for the European Union, I have considered how the growing integration since 1951 has been a response to the global unfolding of the dynamic strategy of technological change and suggest where this may lead in the future. Russia and China have provided the opportunity to consider issues such as: the rise and fall of serfdom; the causes and consequences of the revolutions of 1917 and 1949; the initial, but short-lived, success of the new strategists against the old strategists, which was terminated by the antistrategists or professional revolutionaries; why the command system of the USSR failed and its society collapsed; what will happen to the Chinese Communist Party as the ranks of the new strategists swell; and how the sociopolitical vehicle of these societies will change in the future. The earlier societies of the Old and New Worlds have made it possible to examine the reasons for the rise and fall of their impressive civilizations; the changes in their political and legal structures; the institution of slavery; the civil wars of Rome; the transition from a republic to an absolute monarchy in Rome; the vast rent-seeking structure of Rome from the time of Claudius; the rise and fall of pagan religion in Rome and its replacement 13


by Christianity during the reign of Constantine. Similar issues have been examined for the Aztec Empire. Answers are also provided for questions like: Why did democracy flourish for a time in ancient Greece and in Venice only to be snuffed out later? Why did Greece not extend democracy to its large slave population? Why were Athens and Sparta so different in outlook and institutional structure? Why did the small city-state emerge in Greece, while the great imperial metropolis arose in Rome? How did Venice, which began with a handful of refugees sheltering on a few swampy islands, develop a great maritime empire? Why did the Fourth Crusade lead to the fall of Constantinople? How do we account for the brilliance of the visual arts in both Greece and Venice? What distinctive roles did religion and philosophy play in the commerce societies of Venice and Greece? These and many more. More, however, should be said here about the function rather than the content of these case-studies. Together with the case-studies in The Dynamic Society they form the historical basis for the reconstruction of the existential models developed in this broader study. Yet not just in the final form presented in these books. It was the wider and deeper historical research conducted over many years that gave rise to the dynamic-strategy model which is used in The Dynamic Society to analyse the primary dynamic mechanism, and in this book to analyse the secondary dynamic mechanism. Clearly there has been an interaction between ideas and history but the main source of the ideas is the history. The case-studies in both books are the outcome of that interaction. This interaction also provides the basis for the discussion of future possibilities in Part III. The difference between this study and others that also attempt to construct futuristic scenarios is that, while they merely extrapolate recent trends into the future (the old historicist fallacy), this study explores the logical outcomes of an existential dynamic model. A word of caution is required. A major objective of these case-studies is to show how the dynamic-strategy approach can provide a consistent interpretation of all major economic, political, social, and cultural changes taking place in human societies widely spread over time and space. This explanation is sufficiently flexible and complex to isolate and explain issues and processes that, at first sight, appear not to fit into this framework. Clearly it is not possible in a single book to examine all of these issues in every society in the detail that they deserve. A separate book using the dynamic-strategy approach could be written on each of these major issues in each of these societies. Also, this ambitious task requires a breadth of expertise that is difficult for any individual to achieve. Undoubtedly the magnitude of the task will lead to errors of fact and interpretation at the detailed level. The test of the undertaking, however, is not whether minor mistakes are made—that is inevitable—but whether the overall exercise is convincing and helpful in understanding our past and possible future. Accordingly, the chapters in Part II should be viewed as general 14


interpretative essays about the dynamics of human society rather than definitive statements about detailed happenings. In my opinion, this model, and the broader existential approach to dynamics, provide almost unlimited scope for further research. We have done no more here than scratch the surface of a field that needs to be ploughed deep and long. If I am correct in this evaluation, and my readers can determine this for themselves, the new field of dynamic-strategy studies will require a new name. My preference is for a short and simple name. We could call the area of study ‘stratology’ and its practitioners ‘stratologists’. This can be compared with the nomenclature of competing approaches, such as institutionalism/institutionalists and sociobiology/sociobiologists. The need for these new words in an already overcrowded vocabulary will become clearer when, in Chapter 13, we are forced to distinguish between the objects of our study—the strategists—and those conducting the study—the stratologists. RESHAPING HUMAN INSTITUTIONS: THE IDEAL AND THE REAL In addition to believing that institutions evolve according to some form of internal selection principle, intellectuals like to think they can redirect this evolutionary process to create a ‘better’ society. Today we hear a great deal about reshaping institutions for the benefit of mankind. Needless to say, any such attempt is fraught with difficulties. And dangers. It requires an understanding of the dynamics of change, a knowledge of what a ‘better’ society means, and the ability to make the required changes. Generally all three requirements are absent. Major difficulties arise in the reshaping of human institutions when the underlying dynamic mechanism of society is not understood. In a viable society, any attempt to restructure major institutions radically will cut across the forces driving it and, as a result, will either be ineffective if the means of social control are inadequate, or will pervert the underlying dynamic if, as in the case of the former USSR, the means of oppression are effective. Only marginal changes can be made, and even these can be counterproductive if the dynamic mechanism of society is not understood. And marginal changes can hardly be regarded as responsible for reshaping institutional structures. The issue becomes even more complex when we inquire into the objective of, and model for, institutional restructuring. The usual response will be that the objective is to create a ‘better’ society, and that this can be achieved by considering a range of universal moral values. This approach, which stretches back at least as far as Plato, involves a vision of an ideal society that is based on a set of moral standards designed to govern human conduct to ensure the greatest happiness of the strategists. These time-honoured values, which include justice, honour, and virtue, are usually thought of as being 15


universal and absolute. This view arises from a static vision of human society. The very opposite is true. Moral values have validity only within the dynamic society that produced them. In order for the ruling elite of any society to facilitate its dynamic strategy, it is essential for them to regulate social conduct through those institutions that promote justice, honour, and virtue. These institutions are provided solely for the benefit of the dynamic strategists. As moral values exist to serve the interests of the ruling elite, the role they play varies according to the type and stage of development of the dominant dynamic strategy. The essential implications are that a set of moral values appropriate to one type of society will be inappropriate to another, and that for a given society the appropriate set will change over time as the dynamic strategies unfold and are replaced. Rather than being universal, absolute, and static, moral values are specific, relative, and dynamic. This is the subject of a forthcoming book. Standards of conduct enshrined in human institutions, therefore, are defined not by a static ideal but by a dynamic reality. Societal values like justice, honour, and virtue should be thought of as strategic privileges produced by and distributed within any society at any point of time. They are part of the living standards of the dynamic strategists and can be thought of as intangible commodities consumed together with material goods and services. As will be shown in Part II, the production and distribution of strategic privileges, like that of income and wealth, depend on the unfolding dynamic strategy. Only those citizens who have become dynamic strategists receive more than the average allocation of these strategic privileges and material goods. Any successful radical attempt to redistribute these ‘privileges’ and ‘goods’ away from the existing strategists forcibly will lead to the breakdown of the Dynamic Society, just as occurred in the former USSR. As discussed in Chapter 12, Lenin attempted to legitimize the dictatorship of the Bolsheviks by claiming that it was a dictatorship on behalf of the proletariat who, at this stage of Russian history, were nonstrategists. In contrast, the industrial workers in Western Europe had already joined the ranks of the strategists, as they would have done in the next generation or so in Russia had the radical reshapers—the antistrategists—not had their way. The Bolsheviks initially eliminated the new strategists by enlisting the support of the nonstrategists, only later to deny their entry into the ranks of the ruling class once the Stalin command system was firmly in place. In the Soviet system the working classes were permanently denied access to strategic privileges and material goods received by their counterparts in the strategic societies. On the face of it, the application of the Marxist ideal (actually a mask for Bolshevik anti-strategism) upon the real led to the condition of the Russian people being much worse than would have been the case if Lenin had not hijacked the 1917 revolution. 16


But is Soviet Russia a fair test of the idealist argument? After all, Lenin and Stalin were not famous as disinterested intellectuals or philosophers. Then let us consider Plato. One of the greatest philosophers of all time, Plato wanted to establish an ideal state in ancient Greece. His ideas on this subject are to be found, as is well known, in his famous dialogues, particularly The Republic, Statesman, and Laws. In Laws (book one), Plato, through his dramatic characters, tells us that the laws of the ideal society should embody all the human virtues of temperance, faithfulness, peace-making, reconciliation, and courage in war, rather than only the last of these as claimed by citizens of Sparta and Crete. The true principles of law-making, he argues, are fear of God, honour of parents, virtue, and justice, because they will lead to the greatest happiness of the people (‘Laws’ 1892a: para. 631). But, Plato continues, only the intellectual few—the philosopher-kings—have the ability both to understand the importance of this issue and to implement it (‘Statesman’ 1892c: 296; ‘Republic’ 1892b:473). Wealthy merchants, by contrast, have ‘no claim to statecraft or polities’, as they are merely ‘servants of the other classes’ (‘Statesman’ 1892c:289–90). Hence, the philosopher-king wisely and ruthlessly employs laws to compel ‘the herd’ to follow the paths of justice and virtue which, even though they fail to realize it, will promote their greatest happiness (ibid.: 293–4). This will lead to the establishment of the ideal state in which the guardians of justice and virtue resort to a eugenics programme to keep the ‘breed of guardians… pure’; a programme of censorship to prevent poets undermining reason through the celebration of desire; an enforced system of division of labour to prevent a decline in the authority and expertise of the ruling elite; and a social structure in which the guardians will live in military barracks and hold the women and children ‘in common’ (‘Republic’ 1892b:375, 383, 460–1, 499, 607). In other words, Plato wanted to override the dynamic strategies of both Sparta (conquest) and Athens (commerce) by appealing to the ‘universal’ virtues of his ideal Republic based on pure reason. But to do so would require the forcible suppression of the desires of those addicted to the plunder of war and the extraordinary profits of commerce. This, Plato realized, could only be achieved through a set of institutions to be established and maintained by an intellectual elite with control over a military class of guardians whose role was to suppress dissent within and without. Plato’s dream of converting a viable dynamic society into a static ideal state would have required the ruthless imposition of oppressive social controls. The effect, if not the intent, of these oppressive controls would be to redistribute both strategic privileges and material goods from the strategists to the antistrategists. Presumably, despite Plato’s rhetoric, only the antistrategists will be happier, at least until the static society collapses. It is fortunate indeed that desires rather than ideas drive civilization—that intellectuals lack the means to enforce their unrealistic ideas—because, as we shall see in Part II, it is desires not ideas that have led to the emergence of 17


democracy. As Plato lamented, common opinion sees philosophers as either rogues or useless hangers-on, owing ‘to the fault of those who will not use them, and not to themselves’ (‘Republic’ 1892b:489). Modern idealists merely provide us with variations on the Platonic theme. One of the major conclusions of this book is that there is no ideal society, only a series of real societies with different distributions of strategic privileges and material goods. The most dangerous error any policy-maker could possibly commit is to impose a set of institutions that bear no relation to the type and stage of development of the current technological paradigm and its attendant dynamic strategies. It needs to be recognized that a ‘better’ society is one that more effectively facilitates the unfolding of a viable dynamic strategy, rather than one that conforms more closely to an imagined ideal society. Inappropriate institutions are refuges for rent-seekers. The ideal is the mortal enemy of the real. THEORY, HISTORY, AND FUTURE The rest of the book is divided into three sections: theory, history, future. For purposes of logical exposition it seemed best to present the theory before the history, even though methodologically the history came before the theory. But the reader should feel free to begin wherever he or she desires. Some will feel more comfortable starting with the history, going back to the theory, and then forward to the future. I would be surprised if there were any who wanted to begin in the future and then go back to the past and ideas about the past. But I do not wish to discourage even the most eccentric reader. Part I examines the major theoretical ideas on social evolution. In Chapters 2 and 3 more realistic models of both human behaviour and institutional change are developed. As already mentioned, these existential models are based on the wider historical studies discussed in Parts II and III. Chapter 4 surveys the different sources of institutionalism in economics and explores its limitations, while Chapter 5 critiques the nature of sociobiology, shows why it is not relevant to human society, and suggests a more plausible economic explanation of animal behaviour. Part II focuses on the three main types of civilized society classified according to the dynamic-strategy framework. The fourth type—the hunting society—lies outside urban society and, therefore, has not been considered here. The examples of the conquest society dealt with in the book are Rome in Chapter 6 and Tenochtitlan in Chapter 7; the commerce societies include Greece in Chapter 8 and Venice in Chapter 9; and the technological societies include Britain in Chapter 10 and the USA in Chapter 11. The issues examined in these chapters have already been outlined. Part III is concerned with the future. From the interaction between the dynamic-strategy model in Part I and the empirical material in Part II, it is possible to sketch a number of probable future changes to the major 18


vehicle—the politico-economic system—of the technological strategy. In Chapter 12 the likely dominance of the mega-state in the twenty-first century is considered. This is seen as a highly competitive interaction between the megastates of the USA, the European Union, Russia, and China—an interaction that will draw other regions of the world into its vortex. Even nation-states as vigorous as Japan will be unable to match the vast economic power of these economic giants and will be forced to seek union with adjacent societies. Finally, in Chapter 13 I consider the future eco-political vehicle of human civilization and the likelihood of a fourth technological paradigm shift. This provides a basis for examining a number of key policy issues concerning the longrun dynamics of human society: national economic policies of price stability versus growth; the role of nuclear weapons; and the problem of reconciling environmental issues with those of the approaching exhaustion of the industrial technological paradigm. It is concluded that: the current economic policy approach in OECD countries that elevates price stability over growth is injurious to the unfolding of the technological strategy; nuclear weapons may be less of an evil than the alternative; and the signs of the approaching fourth technological revolution, which I have called the ‘Solar Revolution’ (after the new source of energy), have been misread by many to be signs of approaching ecological collapse—the ‘sixth extinction’ (Leakey and Lewin 1996). Many believe that our nuclear and ecological problems can be resolved only by centralized global action, possibly through the establishment of a global-state. But if this did happen, the competitive forces driving the Dynamic Society would be snuffed out and the global-state would stagnate. This would be reinforced by any attempt to eliminate growth-inducing technological change in the name of ‘biodiversity’ or ecological sustairiability. Such action would merely hasten what it was intended to overcome. Denied access to the technological strategy, frustrated strategists would turn to the only possible alternative, war and conquest, from which the world might never emerge. The devastation of the ecology would be complete. But there is a solution to the apparent dilemma. The new technological revolution may not be far away. Just as the exhaustion of the neolithic technological paradigm in the eighteenth century led to pressure on organic resources that was effectively relieved by the Industrial Revolution, so the exhaustion of our present industrial system can be expected to place pressure on our natural environment until it is released by the fourth revolution—a revolution that will probably be based on the substitution of solar energy for fossil-fuel energy. In the meantime we can ease the ecological burden of this necessary transition by taking realistic environmental values into account in our strategic decision-making. The only solution to the threat of the ‘sixth extinction’, therefore, is the pursuit of the ‘fourth revolution’. As the globalstate would be a disastrous option, the future must lie with a system of globally competitive mega-states. It is critical that we make the correct choice. 19

Part I THEORY

Part IA: Strategic theory 2. A realist model of human behaviour 3. A new model of institutional change Part IB: Evolutionary theory 4. The ethereal world of institutionalism 5. The robotic world of sociobiology

STRATEGIC THEORY

Why do human societies differ, and how do they change over time? These are among the most important questions mankind has ever asked. But to answer them we need to construct new models of both human behaviour and institutional change, owing to the failure of deductive theory to encompass the world of dynamics. To understand the forces driving the Ephemeral Civilization we need to build existential models—models of existence— rather than borrow models from other deductive disciplines. In Chapter 2 we build a model of human behaviour centred on the attempt of individuals to economize on intellectual processes through the well-documented response of imitation. This involves a rejection of the information-processing assumption of both neoclassical and institutional economics, and of the genetic assumption of sociobiology. And in Chapter 3 we develop a new model of institutional change based on the role of strategic demand in generating changes in societal rules and organisations through a process of strategic imitation. This new ‘strategic theory’, which is based on the historical studies in Part II, explodes the myth of social evolution.

23

2 A REALIST MODEL OF HUMAN BEHAVIOUR

I can tell the true riddle of my own self, and speak of my experiences— how I have often suffered times of hardship in days of toil, how I have endured cruel anxiety at heart and experienced many anxious lodgingplaces afloat, and the terrible surging of the waves. (‘The Seafarer’ (early Anglo-Saxon poem) trans. S.A.J.Bradley) There are no satisfactory models of human behaviour. This fact, demonstrated in Chapters 4 and 5, is quite remarkable because it has been the subject of intensive investigation at least since the time of David Hume (1711–1776). The two most influential behavioural models are those developed within neoclassical economics and sociobiology. As we shall see, the neoclassical model, which is widely employed throughout the social sciences, is seriously flawed. Even the version employed by the new institutionalists is based upon a misconception of the nature of mankind. Both the neo-classicists and the new institutionalists assume that man is an intellectual being and that, therefore, human behaviour is driven by ideas. Quite the reverse is true. Mankind is a passionate being and our behaviour is driven, but not determined, by biologically motivated desires. Certainly we use reason, but only to facilitate our desires. Does this mean that the sociobiological model of behaviour is more appropriate than the neoclassical model to the analysis of human society? The short answer is no. The sociobiological model of animal behaviour is based on the assumption that the actions of individuals are determined directly by their genetic structure. Unfortunately this has not deterred more recent theoretical work in economic game theory from substituting the sociobiological model of behaviour for the neoclassical model. Not surprisingly, these new ‘bioeconomic’ models are populated not by actors able to exercise free choice, but by automatons whose actions are genetically determined. Enter historical inevitability. But even this does not seem to faze the economic theorist. Reality, it would seem, has never been essential to the ‘success’ of economic model-building. Reality, however, is essential when trying to explain the dynamics of 25

THEORY: STRATEGIC

human society. To understand the real-world processes underlying global change we need to employ the historical method to develop a new and more realistic model of human behaviour. We need, in other words, to construct an existential model from the building blocks of historical experience. This new theory will be outlined before the limitations of the existing theory are examined in detail. THE BUILDING BLOCKS FOR A NEW MODEL The type of behavioural model employed in the social sciences will depend on the objectives of the researcher. Theorists interested in the abstract outcomes of economic games may feel comfortable with an unrealistic model of human behaviour if it can be treated mathematically. Empiricists, however, who wish to understand the way reality works and where human society might be heading will require a more realistic model. This will be the case not only for those interested in the way real societies grow, but also for those interested in the nature of institutions and the way these change over time. The essential characteristic of an existential model is that it employs building blocks from history. We need, in this case, to examine closely the way human beings have acted in the past. This requires an examination not only of the nature of the decision-making process, but also of the objectives behind this process. Needless to say, there are considerable difficulties in marshalling the relevant evidence. The most abundant source of data available relates to the outcomes, rather than the process, of decisionmaking. We have extensive data on the growth outcomes of nations pursuing known investment strategies, and we possess a modest amount of data on the rates of return on the investment strategies of individual enterprises. This is available for both the recent and more distant past. While the most obvious application of these data is to provide information about the success or failure of the investment strategies, they also indirectly provide information about the objectives of decision-makers. Information about the actual process of decision-making must be based on more subjective observation of historical and contemporary circumstances. By closely examining the contemporary and past data on decision-making, it is possible to construct a more realistic model of human behaviour. The model possesses three main characteristics that will be explored in detail in the remainder of this chapter. The first is concerned with motivation, the second with the decision-making process, and the third with the role of rules in decision-making. Briefly, the driving force in this model is the biologically determined desires of mankind; its objectives are to satisfy these desires by maximizing the probability of survival and prosperity; its process involves an interaction between the unfolding of a dominant dynamic strategy and the investments of strategic pioneers and their followers; and rules are an outcome not of the cost of information but of strategic demand and the costs of 26

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analytical thinking for a species which, despite its intellectual achievements, is essentially intuitive rather than cerebral in nature. Rules, which are employed to facilitate the dominant dynamic strategy, also economize on the scarcest of all resources in nature—intelligence. MOTIVATION Motivation will detain us here less than either the process or the rules of decision-making, as my views have been published elsewhere. The considerable evidence that I have marshalled in a number of books leaves little doubt that decision-makers attempt to maximize their material advantage. This evidence covers both the recent (Snooks 1994a:42–51; 1996: Chapter 7) and distant (Snooks 1990a:23–49; 1993a:206–30) past. The modern data concern the shift of married women in Western societies from the household to the market sector during the second half of the twentieth century, and the earlier data concern the way the state and manorial economies operated in medieval Europe. These data have been subjected to sophisticated statistical testing. Both sets of statistical results provide a good test of my motivational hypothesis, because the conventional wisdom claims that in both cases decision-making was predominantly influenced by non-economic considerations. In the case of eleventh-century England it has been claimed that the ruling elite acted arbitrarily in their economic dealings and that manorial lords and their peasantry followed social custom rather than individual self-interest. Similarly, it is claimed that the remarkable shift in Western society of married women from the household to the market in the second half of the twentieth century had much to do with cultural influences. In both cases, detailed and careful econometric studies showed that the conventional wisdom was wrong. In both cases the decision-making process could be explained almost entirely in terms of fundamental economic forces. Similar results are emerging from a study of government taxes in Britain for the period 1200–1700.1 There can be little doubt that the average decisionmaker—whether at the macro/micro or the individual/firm/household levels—is attempting to maximize material advantage over his or her lifetime. We should not be diverted in this empirical quest by those who refer us nihilistically to the claim by Lawrence Boland (1981) that it is impossible to falsify the hypothesis of economic rationality. It is possible, as I have done, to set up the ‘materialist man’ hypothesis (which is quite different to homo economicus) in a refutable and, hence, scientific way. In The Dynamic Society I argued that, on this evidence, the average decision-maker can be characterized as ‘materialist man’ rather than ‘moral’, ‘political’, or ‘philosophical’ man. Such a characterization involves drawing a distinction between my concept of materialist man and the neoclassical concept of economic man. Economic man is a static concept involving an 27

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abstract collection of preferences and rational choices (subject to supply constraints) about consumption and production. These rational choices require the realization of a set of totally unrealistic conditions including perfect information, correct real-world models, and superhuman computing abilities. The problem with this concept, as we shall see, is that human decisions are just not made in this way. Materialist man, who is a more realistic characterization of the average decision-maker in a dynamic world, merely attempts to maximize lifetime material advantage in a flexible and pragmatic way. Materialist man is not just an imperfect version of neoclassical man, as he is for the new institutionalists, but embodies an entirely new and realistic approach to decision-making. Our evidence concerning the objectives of decision-makers has implications for the way we view human nature. It suggests that biologically determined desires are far more important than intellectual ideas in human motivation and, hence, in human behaviour. Human decision-making, therefore, is driven not by intellectual objectives but by animal desires. The desire to survive and, having survived, to satisfy our biological urges or appetites is the driving force in human society. Of course, the human intellect does play an important role in the structure and progress of human society, but that role is limited to facilitating the achievement of our basic desires. Reason is the slave to desire. This fact is very difficult for intellectuals to accept, despite the clarity of the supporting evidence. Why? As suggested in The Dynamic Society (Snooks 1996: Chapter 7), the status and wealth of intellectuals depend upon their success in persuading the rest of society—or at least its ruling elite— that ideas are solely responsible for the achievements and progress of civilization. Clearly they have a vested interest in selling ideas. Whenever intellectuals—even of the calibre of J.S.Mill (1806–1873) and F.A.Hayek (1899–1992)—discuss the relative importance of ideas and desires in determining the progress of civilizations, they always choose ideas. This matter is the subject of a forthcoming book. A further difficulty for many intellectuals is their faith in the fundamental altruism of human beings despite all the evidence to the contrary. It is a faith that rises above the ever-present exploitation, physical and psychological abuse, betrayal, abandonment, dishonesty, and theft, not just in society in general but in the family in particular; that rises above the exploitation and war between nations and even regions within nations. It is a faith that surpasses all understanding. It is time we exploded the myth about altruism being the prime—or even a major—determinant of human behaviour. According to widely accepted usage, altruism is a principle for action by which an individual will deliberately attempt to improve the welfare of others even if it reduces that individual’s own welfare. Altruism, therefore, is an end in itself rather than a 28


means to an end. Hence, any individual act that is aimed at maximizing the welfare of self, but which in the process improves the welfare of others, cannot be regarded as altruism. To do so would be to confuse ends and means. As is argued in Chapter 5, if the end is the maximization of individual material advantage, and the means is cooperation with other individuals, then self-interest rather than altruism is the driving force. Much of the writing in economics and sociobiology has confused means with ends. Cooperation is not the same as altruism. A relatively new element in the social science debate about altruism (Becker 1976; Frech 1978; Samuelson 1983; Bergstrom 1995) is the concept of ‘kin selection’ borrowed from sociobiology where it emerged about thirty years ago (Hamilton 1964). This debate casts more light on the nature of both economics and sociobiology than it does on social reality. In the first place, as is discussed in Chapter 5, it demonstrates the deterministic nature of sociobiology. It is a science in which individual actions are determined by genetic inheritance owing to the mechanical selection process of differential reproduction. In the second place, the fact that mainstream economics is prepared to adopt deductive models from other disciplines, rather than resort to the hard work of historical reconstruction, indicates how opportunistic it is, and how little it is concerned with reality. When applied to the social sciences, sociobiological theories generate models in which individuals have no freedom of choice. Rather, they do what they do because they are genetically programmed that way. The willingness of economic theorists to employ totally unrealistic models from other disciplines rather than look to history says a great deal about their lack of concern with the real world. By using the historical method, I have been able to develop a more realistic model, which is also consistent with individual freedom in both human and non-human species (Snooks 1994a:50–1). It is the concentric spheres model, in which the way an individual behaves in relation to other individuals depends not on ‘genetic distance’—or genetic relatedness—but on ‘economic distance’—or the importance of other individuals, other team members, in the maximization of the material interests of the self. In the concentric spheres model, presented in Figure 2.1, the individual is at the centre of a set of concentric spheres that define the varying strength of cooperative relationships between him/her and all other individuals and groups in society. The strength of the economic relationship between the central individual and any other individual or group—which could be measured by what I have called the economic distance between them—will depend upon how essential they are to the maximization of his or her utility Those aspects of his or her objective function that require the greatest cooperation—such as the generation of love, companionship, and children— will be located on circles or spheres with the shortest economic distance from the centre. But even in this case the economic distance will be greater than zero, implying that the average individual will always discriminate between 29

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Figure 2.1 The concentric spheres model of human behaviour Sources: Based on discussion in text and in Snooks (1996:180–2; 1994a: Chapter 3).

him or herself and even those closest to him or her. For the typical individual, spouse and children will occupy the sphere closest to the centre, with other relatives, friends, workmates, neighbours, members of various religious and social clubs, other members of his or her socioeconomic group, city, state, nation, group of nations, etc., occupying those concentric spheres that progressively radiate out from the centre. As the economic distance—a measure of the importance of others in maximizing the central individual’s utility—between the centre and each sphere increases, the degree of cooperation between them diminishes. There is always tension between the centre and the periphery no matter how short the economic distance may be, because all personal relationships are built up by the central individual during his or her lifetime in order to maximize his or her utility. While one must cooperate with others to maximize a joint objective function in order, in turn, to maximize individual utility, other cooperating individuals are still perceived to be a constraint on what one can achieve. Hence the persistence of tension in economic and social relationships. And the degree of tension appears to be inversely related to the economic distance, with most conflict and violence occurring between people who are closely associated with each other. This is not a static model of behaviour. Individuals and groups on the various spheres are constantly changing, in response to changing economic circumstances. And the economic distance between these spheres of relationships, and even the order of those spheres, will change over time. Hence, while mankind’s overwhelming objective is to maximize individual material returns, the means to this end involve a combination of individual and group competition. We form, dissolve, and reform groupings at the various levels of the outwardly radiating concentric spheres in the struggle for life and 30


prosperity. Clearly, not all competition occurs on an individual basis, but all cooperation is part of the struggle of individuals to achieve their materialist objectives. Ultimately the individual is on his or her own. This model can be extended by considering the balance of forces that prevents the relationships in Figure 2.1 from flying off into space. There are two forces, the centrirugal and the centripetal. The centrifugal force is the incessant desire of the self to survive and prosper—a desire that leads the individual to place him or herself above all others. It is the force that provides individuals with energy and momentum. The centripetal force—the economic gravity holding society together—is the need to cooperate with other individuals and groups in order to pursue the dominant dynamic strategy more effectively. It is through both competition and cooperation that the individual maximizes his or her probability of survival and prosperity. But what is it that enables self-seeking individuals to cooperate with each other? Most will argue that it is ‘trust’. Yet this merely begs the question of what generates trust. The institutionalist will respond by saying that trust is an outcome of the evolution of formal and informal rules that determine predictable and cooperative conduct. One scholar, Mark Casson (1991a), who appears dissatisfied with this vague response, has argued that trust is ‘engineered’ by ‘the leader’ of society; and that the leader’s success in this will depend upon the prevailing culture. But even this argument is not sufficient. As we will see in Part II, the leaders of society only inspire ‘trust’ when they embody the dominant dynamic strategy. The dynamic-strategy model provides an entirely new approach. It suggests that the reason chaos does not overwhelm a society is because it is successfully pursuing a viable dynamic strategy. And it is this successful dynamic strategy that leads to a workable network of competitive/ cooperative relationships, together with all the necessary supporting rules and organizations. Individuals in this society, therefore, are relating directly to the successful dynamic strategy, and only indirectly to each other. This is not a matter of mutual trust as such—of having confidence in the nature of other individuals—but, rather, having confidence in the wider dynamic strategy in which they are all involved. It is not individual trust but strategic confidence that keeps society together. What we know as ‘trust’ is derived from strategic confidence. And as the dominant dynamic strategy unfolds, the nature of strategic confidence and, hence, trust changes in subtle ways. Strategic confidence—the economic gravity of the concentric spheres model—lasts only as long as the success of a society’s dynamic strategy. Once the dynamic strategy has been exhausted and cannot be replaced, strategic confidence declines and, in extreme cases, vanishes entirely. And as strategic confidence declines, so too does ‘trust’ and cooperation. In terms of Figure 2.1, the economic distance between the self and the family will decline as the need for mutual support increases, while that between the family and other individuals and groups will increase. Some individuals/ groups will disappear 31

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from these concentric spheres entirely. This, for example, occurred in the last days of the Roman Empire, following the exhaustion of the old conquest strategy, when families transferred their allegiances from the state to regional warlords. A similar sequence of events has occurred in the old nation-state of Yugoslavia. In such cases the former society collapses. And in extreme cases of total chaos, individuals even abandon their own families and attempt to survive by their own wits. This leads to the victory of centrifugal over centripetal forces and, hence, to the total destruction of any form of society. While strategic confidence is the outcome of a successful dynamic strategy, it is communicated to the citizens of that society in two main ways. The first and most important mechanism involves a continuous increase in material standards of living. While this flow of material returns is maintained, so is strategic confidence. But once this stream is broken, confidence begins to decline. This is why so-called economic-rationalistinspired governments in the Western world in the 1990s are playing a very dangerous game in disrupting growth through their deflationary policies in the name of a fictional enemy called inflation. The second and less important mechanism is the use of ideology—particularly religion and entertainment (secular games)—to draw society’s citizens into a celebration of the dynamic strategy and thereby raise their confidence in that strategy. This is less important than the first mechanism because it will only be effective when living standards are rising or, at least, not falling. But, of course, it is a mechanism that is employed more extensively, but less effectively, when the dominant strategy begins to fail. THE PROCESS OF DECISION-MAKING The neoclassical model of human behaviour is based upon the mistaken notion that the average decision-maker possesses a true model of the way the world works (or, at least, of that part of the world with which he or she is concerned), that he or she possesses perfect information, and that he or she is able to use the model and the data to assess correctly the probable outcomes of various alternative choices. This optimizing approach is adopted not because it is a realistic model of human behaviour, but because it enables the mathematical solution of economic theories based on it. It is concerned not to explore the process by which decisions are made, but merely to predict choice in the future. They have failed to take seriously J.M.Keynes’ argument in The General Theory (1936) that as investors base their decision-making on the ‘state of long-term expectations’ and, as there are no data about the future, that neoclassical mathematic models are useless. Keynes’ suggestion, however, that investment decisions are based on ‘animal spirits’ really amounts to saying that he has no idea what they are based on. As shown in this book, longrun investment is a response to strategic demand generated by the unfolding dynamic strategy. 32


But those economists who are concerned less with theoretical elegance and more with reality have been critical of the neoclassical model. They have demanded a more realistic model of decision-making in order to attain greater precision in explaining and predicting economic behaviour at both the macro and micro levels. Two different approaches have emerged from this dissatisfaction: the bounded rationality approach of Cyert and March (1963), Simon (1982), and Williamson (1975); and the new institutional economics approach of Hayek (1988) and North (1990). Advocates of both approaches are also more concerned with the process of decision-making than those in the neoclassical paradigm.2 Bounded rationality The bounded rationality approach attempts to identify the ‘cognitive’ limitations of the decision-maker—which includes limitations of knowledge and computational ability—and to incorporate this into the analysis. It is, therefore, an approach concerned not only with the outcome of decisionmaking as in the neoclassical model, but also with the process by which decisions are made. Various models of bounded rationality have been constructed by relaxing one or more of the restrictive assumptions made in the neoclassical model. The justification for these procedures is usually based on laboratory-based psychological research (Hogarth 1980). This research suggests, in the first place, that the major expenditure of time and money in the decision-making process occurs in the search for and evaluation of various possible courses of action, rather than in making the final decision once the various alternatives are known. Neoclassical theory merely assumes that the alternatives are known and fixed from the beginning. In the second place, psychological research suggests that strong cognitive limits—in the form of real-world recognition and understanding—apply when evaluating the likely consequences of various alternatives. Third, the neoclassical assumption of utility maximization, or economic rationality, is unrealistic because it assumes computational abilities well beyond the capacity of the average decision-maker. The best-known response to these issues is the ‘satisficing’ approach of Herbert Simon (1956). Simon stresses the difficulties involved in making optimal choices owing to the complexity of computational problems, even when electronic computers are used. As he says: ‘The complexity of the world is not limited to thousands or even tens of thousands of variables and constraints, nor does it always preserve the linearities and convexities that facilitate computation’ (Simon 1987:244). Accordingly, Simon argues, when the decision-maker is unable to optimize, or when the costs of doing so are too high, he will choose a ‘satisfactory’ rather than an optimal alternative. In this way only some of the constraints required for optimization will be satisfied. This Simon calls ‘satisficing’, in contrast to the neoclassical 33

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‘optimizing’. While the outcome of this decision-making approach may be satisfactory, there is no guarantee that a better solution could not be achieved by employing an alternative sub-optimal technique. The important question here is: How does the decision-maker arrive at a satisfactory solution? What are the criteria for a ‘satisficing’ outcome? What is the process involved? Owing to his training in psychology and computer science it is probably not surprising that Simon ignores history, which is the real laboratory of economics, indeed, of the social sciences as a whole, and turns to another deductive discipline, psychology. Simon (1987:244) says: Psychology proposes the mechanism of aspiration levels: if it turns out to be very easy to find alternatives that meet the criteria, the standards are gradually raised: if search continues for a long while without finding satisfactory alternatives, the standards are gradually lowered. Thus, by a kind of feedback mechanism, or ‘tâtonnement’, the decision maker converges toward a set of criteria that are attainable, but not without effort. This ‘aspiration-level’ mechanism involves, we are told, much simpler computations than the neoclassical optimization procedure. Yet this approach is not without its costs, both for the decision-maker and the economic theorist. The decision-maker has no way of knowing whether he or she has made the correct choice. There will always be a nagging concern that a better deal could have been made, together with an anxiety that someone may undercut him or her at any time. These costs, which may adversely affect the outcome of decision-making, are the consequence of a model in which choices are made by individuals in isolation from each other. A more realistic model, which eliminates these costs, can, and will, be derived from historical research. Despite Simon’s (1987:244) claim to the contrary, this psychological model is not a better explanation of ‘what is known empirically of actual choice behaviour and of the computational limits of the human mind’. There are costs for the economic theorist in adopting the satisficing approach and Simon readily acknowledges these. The theory based on this model of choice is not only less elegant than neoclassical theory, but the strength and variety of the theorems that can be derived from this version of rationality are significantly diminished. Also, predictions about behaviour using the satisficing rather than the optimizing model are either less precise with the same amount of empirical data, or require a great deal more data to achieve the same degree of precision. Those following in Simon’s footsteps need to gather considerable information about ‘aspiration levels’ and about the way decision-makers adapt to different circumstances. But it is precisely this type of data that is difficult for researchers to obtain, unless one is willing to accept the results of simple experiments undertaken in psychology ‘laboratories’ that take this model for granted. No doubt the economist’s 34


choice between the alternative satisficing and optimizing models will depend on his or her objectives. Neither, I will argue, is realistic in a dynamic setting. It is important to understand the type of model of human thought and action that underlies this approach to economic rationality. Simon regards human beings as ‘information processing systems’, and the metaphor for such a system that emerges constantly from his writings is the digital computer. Simon tells us ‘that human beings, in their thinking and problem solving activities, operate as information processing systems’ (Newell and Simon 1972:47). The process by which this is supposed to take place is described as follows: Human problem solving…is to be understood by describing the task environment in which it takes place; the space the problem solver uses to represent the environment, the task, and the knowledge about it that he gradually accumulates; and the program the problem solver assembles for approaching the task…the problem solver’s program extracts some of the structural information that is embedded in the task environment in order to find solutions by means of a highly selective search through the problem space. (Newell and Simon 1972:867–8) This may be the way in which game-players solve problems, although even chess players and chess-playing programmes fall back on moves that have been successful in the past—that is, on history. Certainly it is not the way the average decision-maker operates on a daily basis. The new institutionalism The new institutionalists, as discussed in detail in Chapter 4, have also attempted to render the neoclassical model more realistic by relaxing the assumptions about perfect information, complete conceptual models of reality, and perfect computing abilities. While they share Simon’s view of human beings as information-processing systems, they look back to an older American tradition of institutional economics, rather than to psychology, for an alternative model of decision-making. They argue that as information available to decision-makers is fragmentary and costly, and as their conceptual models of reality are incomplete, exchange between individuals gives rise to transaction costs, which call institutions, or societal rules, into being. These rules can be either formal, such as the laws of the land, or informal, such as customs. Generally accepted rules, therefore, are employed to overcome the costs and uncertainties of living in an imperfect world. Evidence of this view, however, is conspicuous by its absence. Not only are institutions required to facilitate exchange in an imperfect world, but the imperfect world is the foundation stone for the new institutional economics. Remove that stone and the central role of institutions in a dynamic society 35

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collapses. As we will see, although new institutionalists like Douglass North have used history to illustrate their theories, they have not—indeed, cannot—use it to prove their theories. A realist approach In reality there is little fundamental difference between the basic neoclassical model of decision-making and the bounded-rationality or institutional extensions of it. Both sets of revisionists accept the view that each decisionmaker makes each and every decision in isolation by collecting as much information as is economically possible about the subject under consideration, by applying an appropriate conceptual model to that data, and by computing a rational outcome. The major difference between the parent neoclassical model and the various revisionist versions is reflected in the degree of perfection they are willing to assume. While the neoclassicists assume a perfect world, the revisionists assume a world that is less than perfect. Their response is merely to release some of the assumptions of the basic neoclassical model. This is not the way to develop a better theory of human behaviour. To develop a better theory we need to abandon the present view of human decision-making—developed by atypical individuals with a comparative advantage in abstract thinking—as a problem-solving process of information-processing. Despite the protestations of scholars, human beings are not intellectual game-players of the digital computer variety. Also, the average person makes no attempt to model the world in his or her head. The only ‘models’ they possess are non-functional, such as conspiracy models (which ascribe their difficulties to various minority groups), religious models (which provide divine justification and support), or models of selfjustification (which convert selfish motives into altruistic ones). And these survive largely because they are not confronted by information about reality. A comprehensive, rather than a selective, study of history demonstrates quite clearly that human decisions are just not made in that way. Ironically, even neoclassical economists abandon their models and rely on intuition when involved in national policy-making (see Chapter 13). A better theory—an existential theory—must be based not on psychology or institutionalism, but on historical experience. Historical experience suggests that the decision-making process is imitative rather than isolationist, and is dualistic rather than holistic. While this cannot be established in the psychology laboratory, it can be seen in historical reality. Unlike the established models, it can explain the remarkable cycles of fashion—the bandwagon effect—in decision-making in all aspects of human life. Many have commented upon curious fashions in dress, diet, popular and classical culture, art, architecture, customs, rituals and ceremonies, technologies, religions, and lifestyles (Plato, ‘Republic’ 36


1892b: para. 395–7; Schumpeter 1934; Mises 1958; Dawkins 1989). To this we can add the current fashion in OECD countries of economic policies that focus on price stability at the expense of unemployment and growth (see Chapter 13). While some may appear trivial, an understanding of these fashions is central to an understanding of how society works. An example we are all familiar with is the way fashions change in relation to health. Because the objective in human society is to survive and prosper, the average person is highly anxious about the state of his or her health. Yet despite this critically important objective, the average person has no useful mental model about how the body works, and makes no attempt to collect detailed information about the effects of different foods, lifestyles, and exercises on human health. Instead, we follow the advice of recognized ‘experts’ (even when some of these are really quacks), and imitate the lifestyles of famous and successful individuals. Of course, the joke is that even the experts do not possess ‘true’ models or adequate information and, as a result, their advice is constantly changing. And as the advice changes so too do the lifestyles of our anxious health-conscious community. At one time we are told that dairy products are good for us and that vigorous exercise, unlike walking, is dangerous; then we are told that dairy products and mono-unsaturated fats are bad, polyunsaturated fats in abundance are good, and that jogging is essential; and even later we are told to reduce our consumption of polyunsaturated fats in favour of mono-unsaturated fats and even dairy products, and substitute brisk walking for jogging. And so fashions in health ebb and flow as we imitate the famous and successful. The same is true of fashions in sexual attitudes, ‘political correctness’, and religious and political movements. None of these fashions has been adequately explained in terms of the established models of decision-making. But they can be explained by the strategic-imitation model. In this model, the decision-making process can be divided into the pioneering and routine phases, with each part of the process being dominated by a different type of decision-maker—the strategic pioneer and the strategic follower. Each phase will be dealt with separately. The pioneering phase Investment in new ideas and projects is an extremely uncertain activity because little information of any kind about likely outcomes is available to the strategic pioneers, and it is a risky activity because of the high probability of failure for new ventures. As innovative ideas are without precedent, and as these ideas can change society in unpredictable ways, pioneers can only make informed guesses about likely outcomes. While they may use the limited information available to gauge the benefits and costs of what they are proposing, the pioneers operate more on intuition about outcomes and on faith in their own abilities. Individuals, mainly family and friends, supplying 37

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support in the form of financial and human capital do so because they share this belief in the pioneer’s abilities. This is not an area of economic activity in which conservative financial institutions will want to be involved. They only finance routine decision-making. The essential point to realize is that the strategic pioneers do not make their decisions in a vacuum. They work within the boundaries of an unfolding dynamic strategy, and respond to the changing incentives that it generates. In other words, the pioneers operate at the leading edge of the unfolding strategy and actively explore its economic potential. This involves the development of new substrategies which, within the technological strategy of the modern era, can be thought of as new technological styles. Hence, there is an interaction between the strategic pioneers and the unfolding dynamic strategy, which gives direction and meaning to their activities. These activities are not random. Of course, many pioneers misread the signs and fail, but a few succeed and are followed by the great mass of imitators. It is this mass following that provides the driving energy for the strategic unfolding. The core of the dynamic-strategy model, therefore, is the interaction between the unfolding dynamic strategy and the strategic pioneers, which provides a dynamic structure that marks it off from other theories of economic growth. The pioneers are few in number and even less significant in proportion to the total population of decision-makers. They are more ambitious, possess greater imaginative and intellectual skills, are prepared to take greater risks, have greater faith in themselves and, most importantly, have a greater perception of how the dynamic strategy is unfolding than the vast majority of routine decision-makers. When conspicuously successful, the pioneers are followed by large numbers of imitators. Needless to say, they are not always successful. Indeed, owing to the risks that attend untried ways, only a very small proportion of the pioneers are able to achieve their objectives. But, as the material rewards that fall into the hands of those who do succeed are very great, there is always a steady stream of those willing to test their ambitions, skills, and faith. What is it that drives the pioneers? Is it reason, as suggested by the established models of decision-making, or is it desire, as suggested by historical experience? While reason is employed in the implementation of any investment strategy, it is desire, I argue, that provides the motive force. Humans are not driven to act by ideas but by their biological make-up. As we saw in The Dynamic Society, mankind is driven by the same biological desires (or instincts) that drive all life. All life struggles to survive and, having survived, to satisfy the senses. Reason is merely one of the means by which we are able to facilitate our more fundamental objectives. This argument, however, is not the same as the biological determinism that seems to characterize the work of sociobiology—where each type of animal action is genetically determined—because only desires are an outcome of mankind’s 38


biological structure. Each individual is free, within the constraints of the physical and social environment, to determine his or her own actions. We are now in a position to discuss the mechanism by which successful pioneering decisions are made. There are two parts to this mechanism—the drive and ambition of imaginative risk-takers, and the competitive process of alternative investment projects. The pioneers invest most of their time not in the collection of information about alternative projects, nor in the development of conceptual models of reality, nor in the computation of optimal solutions, but rather in developing imaginative ideas that they believe will bring windfall gains and in demonstrating the successful outcomes of their ideas. These ideas may be arrived at from an awareness of the unfolding dynamic strategy achieved either through contemplation or through a practical involvement in, or association with, a particular industry or activity. In essence, the pioneers provide the driving force required to propel their ideas and projects into the market place. And it is the market place of competing ideas and projects, shaped by the dominant dynamic strategy, that determines the outcome. Only a very small proportion of pioneers will successfully realize their material ambitions. Success breeds success. Those pioneers who get it right are provided with the rationale for what they have done. Successful feedback leads to further developments along the same lines. There is no need to examine alternatives while individual pioneers are achieving the outcomes they deske. Only when the feedback is less favourable will they even consider alternative investment projects, and these will only be pursued if the benefits of the alternative exceed not only the costs of the new project but also the costs of scrapping the initial one. And this will probably only occur in the generation following the successful pioneering phase. By then the, initially pioneering, organization will have entered the routine phase of imitating the success of its forefathers or of others—unless a second generation pioneer comes to the fore. It is this pioneering mechanism—involving an intense competition between individuals pursuing competing ideas and projects—rather than the attempts by individuals to calculate the benefits and costs of alternative strategies that produces what might be regarded as optimal outcomes. In an important sense, the individual pioneers embody the alternative projects that the existing model either assumes to be given (neoclassical) or assumes that each individual attempts to determine and evaluate (revisionist). The effort of each pioneer is directed to the ‘discovery’ of a single project. Of course, many of these projects will be duplicated or will involve some overlapping with other projects. What the pioneers require to become involved in this competitive process is not vast amounts of information and superhuman computing abilities but, rather, great energy and imagination. They do not shop around for the best idea, they believe their idea is best. The market of competing pioneers, which is shaped by the unfolding dynamic strategy, will 39

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do the rest. It is from this competitive process that the most appropriate ideas will emerge. The routine phase Investment in routine ideas and projects by the ‘followers’ is characterized by far less uncertainty and greater predictability than investment in entirely new ideas and strategies by the pioneers. After the pioneering phase, it is clear which projects are the most profitable. The successful pioneers, and their supporters, earn supernormal profits on their strategic investments. This provides, for the first time, positive information about the rates of return on investments in various alternative projects. The central question is how this information is used. In the routine phase, decision-makers do seek information but not of the kind envisaged by the traditional behavioural model. They do not seek detailed information on the costs and benefits of all possible alternatives. Rather, they seek information on who and what is successful and why they are successful. Who is earning supernormal profits on what investments, and how can I get in on the act? Their aim is to imitate not the mechanism of digital computers, but the projects of the successful pioneers. This process, which I call strategic imitation (Snooks 1996:212–13), is based on the observation of both human society (Part II) and animal life (Chapter 5). Of course, strategic imitation is more complex and interactive than this suggests, because once the followers apply imitated ideas to a commercial area, they will make further modifications of their own in the light of their own circumstances and experience. There are still many smaller battles to be fought, lost, and won in the attempt to work out the ideas of the pioneers for new environments. This will involve small changes and innovations in response to slightly different economic and competitive environments in order to apply these new ideas successfully (and sometimes unsuccessfully). The microeconomic process of strategic imitation, therefore, does involve scope for degrees of imagination and independence. It is an important characteristic of human nature that it is able to find scope for imaginative responses on even the smallest scale. This process of adaption has received considerable attention from others (Tunzelmann 1994; Magee 1997). But the important point to be made here is that the wider decision-making process has at its core an imitative mechanism. This is not to say that some information on benefits and costs is not collected, just that it is collected to justify rather than to determine routine investment decisions. Such a procedure has three major advantages: it reduces the time taken to collect and process benefit-cost information; it provides the investor with additional confidence; and it is used to persuade conservative financial interests to make funds available for the enterprise. As the decision on what investment strategy to employ is made before any serious attempt to collect and process information, the difficulties involved 40


in the formal benefit—cost calculation are reduced to manageable levels. The collection of data is highly selective, and the desired outcome is known in advance. The object of the exercise is to confirm decisions made on the basis of entirely different information—information about successful strategists and strategies. This confirmation provides additional confidence in the task ahead. A major reason for at least attempting benefit—cost calculations is to obtain funding for investment proposals. This occurs in both the public and private sectors. More recently the public sector has, under pressure from taxpayers, adopted the procedure of commissioning feasibility studies on large public projects. These studies, however, are generally undertaken after, rather than before, major projects have been chosen. Their purpose is to justify rather than to determine public decision-making. And those undertaking the feasibility studies are chosen accordingly. In the private sector individuals and firms must convince financial organizations that the investment proposal is sound. These organizations have standard forms for roughly estimating likely income flows that are based upon the past financial performance of the individual or organization and on the value of any realizable assets. Even banks do not attempt to gather vast amounts of information nor do they employ complex computer models to calculate likely future returns on proposed investment projects. They merely look at whether or not this individual or firm has previously succeeded or failed and how successful others have been in the past when pursuing similar projects. In effect, this exercise is merely a formalization of the imitative procedure undertaken by all routine decision-makers. It does not attempt to calculate the benefits and costs of all alternative projects as required by the neoclassical and revisionist models. The information required for strategic imitation is, in contrast to that required in the neoclassical model, readily available and is easily evaluated. We gain it from direct observation of those around us, from professional advice, from the media, and from books, magazines, and electronic sources. In the past the main form of imitation was through direct observation of local celebrities. While this was probably more important then than it is today in sophisticated societies, we are still only too aware of the nouveaux riches in our midst. Mankind possesses a primitive and unquenchable need to display the objects of material success. The intense deske to imitate the successful is matched only by an intense desire to display the fruits of success. It is true that imitation is the sincerest form of flattery. The only difference between sophisticated and primitive societies, apart from the scale of material success, is the way in which this interactive mechanism of display and imitation is effected. While in the past the main mechanism was wordof-mouth, today the media play a major role. Most of us gather a large proportion of our imitative information from the media which specialize in watching the rich and successful and in sharing this information, often in the 41

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most crudely voyeuristic form, to its readers and viewers. We are treated to a continuous parade of the successes to be imitated—and the failures to be avoided. This information is not the stuff of benefit—cost calculations, but of who we should imitate if we are to be successful in life. One fascinating aspect of this process of providing imitative information is the media’s passion for interviewing successful people from all parts of society. Much of this is done in a benignly entertaining way. But in those instances where the subject matter is controversial and unproven, the interviewing will generally involve a savage critical attack upon the individual or organization concerned. In this way many ‘eccentrics’ are effectively destroyed. Lopping tall poppies has become a national and very public sport in Western democracies. While it is often done for base reasons, I want to suggest that it is largely an indirect attempt to gather and evaluate information about the likely success of what is being proposed by the pioneering individual or organization. If the pioneers under interrogation can successfully resist this type of savage attack, then they might just be correct. A similar procedure is employed in academic circles, where new ideas are subject to intense, often personal, criticism in public seminars and printed journals. This is the modern counterpart of the medieval practice of trial by ordeal, where the person being tested was subjected to physical torture—if they survived, they were innocent. Trial by interrogation is a far more economical way of collecting and evaluating information than that implied by the neoclassical model. And it is more appropriate to the process of routine decision-making in the real world. Popular books and magazines are also important sources of information for routine decision-making. Once again these sources supply not the type of information required to undertake benefit—cost calculations, but information about who or what should be emulated and how we should do so. This type of imitative information covers all aspects of our lives, not just investment decision-making. Hence it is a fertile source of data for the fashions that continually sweep through human society. By browsing the shelves of popular bookshops and newsagencies, we discover an almost endless range of specialized magazines and books on every facet of our lives at work, at home, and at leisure. We are shown who are the most successful in material terms, what their opulent lifestyles are like, and how we can imitate them in even the most modest ways. We are told about their businesses and investments; about their houses, gardens, swimming pools, and tennis courts; about their motor vehicles, yachts, holidays, clothes, hairstyles, lovers, children, and their various leisure interests. And we are told how to obtain some of these things for ourselves. These magazines and books are not just for entertainment. They are also for instruction—to enable us to imitate the successful. It is this information that feeds our desires and thereby fuels the driving force in human society. Increasingly the imitative information obtained through popular books 42


and magazines is being provided through computer software and international computer network systems. This has been called, somewhat extravagantly, the ‘information superhighway’. I say extravagantly, because it is a function already provided through the media and popular books and magazines, and because its promoters like to give the impression that this information will be the basis for some sort of intellectual revolution. In fact, what the ‘information superhighway’ will provide in the main is popular entertainment and imitative information, not the type of intellectual information originally carried on the Internet. There is no mass market for hard ideas and facts, and there never will be. And, as an article in Time reported (Elmer-Dewitt 1995:38, 40), a recent survey suggests ‘one of the largest (if not the largest) recreational application of users on computer networks’ is trading in sexually explicit imagery! What will not receive pride of place on the ‘information superhighway’ is information that will enable subscribers to undertake detailed benefit-cost calculations of the type envisaged by the neoclassical model. Why? Because there is little demand for this type of information, either in electronic or book/magazine form, except by a dwindling number of students taking university courses in economic theory—students who are trained in the use of mathematics and technical econometric computer software. And even students recognize that these exercises amount only to intellectual game-playing. It has nothing to do with the real world. But what the Internet has achieved is a revival of the role of word-of-mouth as a means of distributing imitative information; this time globally rather than locally. Our modern epoch is not unique in this respect. All ages abound with information about successful individuals and the sources of their success, rather than about theoretical models and the data required to apply them to reality. Imitative information in conquest societies focuses on successful military and state leaders, in commerce societies on successful commercial leaders and practices, and in technological societies on successful moneymaking practices. A foundation for the above discussion can be provided with a brief survey of conquest and commerce societies. In the conquest society of Rome, the main forms of literature were the political and military histories written by successful generals and statesmen for the ruling class (Schumpeter 1963:67). This literature included works by Julius Caesar on his wars in Gaul, Spain, and Africa; by Livy and Virgil on the history of Rome and its wars; by Plutarch on the great Roman generals and statesmen; and by Tacitus on imperial Rome and its conquests in Germany.3 These ‘histories’ were written to glorify the great generals and leaders of the conquest strategy, and were read by hopeful young aristocrats desperate to achieve greatness, and by others wanting to share vicariously in these triumphs. The reason is that fame was the key to fortune (Chapter 6). Also, as the booty from war was invested in agricultural land to provide a reliable income (see Part II), 43

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there was also a demand for information on how these assets could best be managed (just like managing a portfolio of financial assets today). This generated a minor literature on the practical principles of successful estate management as a basis for widespread imitation (ibid.: 70–1). What was conspicuously lacking in the entire Graeco-Roman world was any literature on theoretical models of the way the economy, or any part of it, operated (ibid.: 53). The reason for this, which has for long puzzled economists, is that decision-making was based not on deductive but on inductive principles involving experience and imitation (Snooks 1993a: 95–106). This is true for all societies throughout history. In the commerce societies of medieval and early-modern Europe, the main source of strategic information involved accounts of successful mercantile practice. These began as early as the fourteenth century (including F.B.Pegolotti’s La Practica della Mercatura about 1315), and grew rapidly after the commercial break-out of Europe from the late fifteenth century, especially in the seventeenth and eighteenth centuries (Schumpeter 1963:156–9). Essentially they were manuals on how to succeed in trade, and they included instruction on how to make interest calculations, handle financial arrangements, and employ double-entry bookkeeping. And in societies like England and the Low Countries, which initially based their commerce strategy on agricultural commodities, there was an extensive literature on farm management and agrarian technology, extending from Walter of Henley’s Husbandry (before 1250), Sir Anthony Fitzherbert’s Boke of Husbandrie (1523), Sir Richard Weston’s Discours of Husbandrie used in Brabant and Flanders (1650), Jethro Tull’s Horse-hoeing Husbandry (1731), to Arthur Young’s Rural æconomy (1770). Also the travel descriptions of observers such as William Temple (Observations upon the United Provinces of the Netherlands 1672) and Arthur Young (Travels in France, 1792) were important sources of information on successful continental practices and technologies that could be advantageously imitated in England. With the commercial break-out of Western Europe into the rest of the world, and the severing of traditional links between those at home and those in the colonies, came a need for a new kind of imitative information—the building pattern book. The pattern book, which supplied standardized master plans for residential, commercial, and public buildings, flourished from the fifteenth to the nineteenth centuries. It provided successful practical construction ideas and designs that could be employed by builders and craftsmen who, transplanted over the seas to North America, Australasia, India, and elsewhere, no longer had access to traditional sources of information. The most influential of these pattern books were Andrea Palladio’s Four Books of Architecture (first issued in 1570), Colen Campbell’s Vitruvius Britannicus (1715–25), and William Halfpenny’s The Modern Builder’s Assistant (1742, 1757). Thereafter these pioneers had 44


many pattern-book imitators in the various British colonies. Owing to the studious imitation of these patterns, handsome classical buildings sprang up in Britain and throughout the British Empire. Owing to this excellent example of imitation it was possible for a wealthy traveller from Britain to encounter a built landscape in cities, towns and, even, villages on all the world’s continents that was both familiar and pleasing to the eye. The same would have been true for travellers from any other part of Western Europe. What is it that drives the followers to imitate the pioneers? There appears to be a genetically determined desire to do as well if not better than our neighbours, and the fear that if we do not run with the herd something nasty will happen (possibly perpetrated by the herd itself which mistrusts dissidents). This is something we share with all other species in nature. It is a central part of the desire to survive and prosper, which always emerges in competitive environments. In the case of our own species it amounts to good old-fashioned envy regarding the prosperity of others. Imitation comes easily and pleasurably to us. It is a natural outcome of one of our most conspicuous characteristics—mimicry. And, as discussed in Chapter 5, it is a characteristic we share with other animal species. In childhood we learn through mimicry, in youth we amuse ourselves and our peers by mimicking others, and in our later years we laugh along with professional comedians whose stock-in-trade is mimicry. It has a more serious purpose, too, as the basis for human decision-making. There is a darker side to the process of imitation that reinforces the natural desire to be part of the crowd. In every society there are some who react against the crowd. These are the dissenters, the original thinkers—those who dare to be different. They would appear to be less well adapted genetically to survive and prosper. And as such they will either be forced to conform or will be rooted out of society. Although the dissenters are always in a small minority, they are seen by the crowd as a threat to the survival and prosperity of the majority. This can be seen throughout history in the way society has turned against highly original thinkers like Socrates, Galileo, and Darwin; it can be seen in the widespread persecution of religious and political minorities; it can be seen in the vilification of individuals who speak out against prevailing attitudes on issues like race, sex, gender, and immigration; and it can be seen in the attempted repression by academic societies of original thinkers who challenge the conventional wisdom. This predictable intolerance works to strengthen the mechanism of strategic imitation. What, then, is the imitative process of decision-making? It comprises two elements. The first of these involves the immediate strategic followers who, in the pursuit of survival and prosperity, attempt to imitate the actions of successful pioneers. The second of these is the market of innumerable opportunists, all jostling for a share of the supernormal profits first generated by the pioneers. Only the most skilful or the most fortunate of the followers 45

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will reap more than normal profits—and even then only for a limited period— while some will fail completely. The eventual outcome for any society operating in a competitive international framework will approach the optimal, not because individuals were able to estimate that outcome, but because they followed the successful pioneers and were tested in the market place. The strategic-imitation model has more in common with the theory of J.A. Schumpeter (1934;1939) than any other. The reason is, no doubt, that Schumpeter’s theory of innovation and economic development also incorporates historical observation. Schumpeter argues that innovations emerge from an economy in equilibrium when the ‘social climate’ favours the emergence of ‘New Firms’ led by enterprising ‘New Men’. Owing to the creation of monopoly profits, opportunistic imitators enter these new fields in ‘clusters’. This leads to an upswing in economic activity that continues until the monopoly profits are driven down to normal levels and the supply of innovations dries up. These innovations include new goods, new processes, new markets, new resources, and new industrial organizations. Clearly there are important differences between Schumpeter’s theory of innovation and my dynamic-strategy model. First, the dynamic-strategy model is a theory of decision-making that is relevant to the entire society, whereas Schumpeter’s model only attempts to explain why the class of ‘New Men’, who have a propensity to innovate, emerge, and why they are imitated by others. Second, the dynamic-strategy model attempts to explain the emergence and development of broad strategies and substrategies, while Schumpeter’s model is really only an explanation of the upswing of the business cycle; it is even unable to explain the longrun growth rate (Higgins 1959:137). Third, in my model the strategic pioneers respond to the incentives generated by an unfolding dynamic strategy, whereas Schumpeter’s innovators emerge in response to a vaguely defined ‘social climate’; my model has a dynamic structure that is lacking in Schumpeter’s model. Finally, the dynamic-strategy model incorporates a theory about the fundamental reason for imitation in decision-making—which I have called intellectual economizing—and Schumpeter does not. THE ROLE OF RULES The existence of rules is widely assumed to be evidence for the institutionalist argument about the costs of information. To the contrary, the theory of human behaviour developed here suggests that rules are evidence not of the costs of obtaining information, but of the costs of thinking. Rules, in other words, emerge from an attempt to economize on nature’s most scarce resource—the intellect. The human race is the only species in the last four billion years that has had the capacity to think creatively but, I claim, even we are basically intuitive rather than intellectual in nature. We respond to 46


desires rather than ideas. Ideas are only used by society, and then sparingly, to facilitate the achievement of our desires. Despite the fact that modern man emerged at least 100,000 years ago, thinking is not an activity that comes easily to us. Systematic thinking can be achieved only after many years of training. While originality in highly formalized thinking—using symbols and a set of simple rules as in mathematics—can be achieved after fifteen to twenty years of training, originality in less formalized thinking—the detection of complex relationships between variables in real-world processes—can be achieved only after about forty years of intensive training. As abstract thinking is a very scarce resource most people develop routines and rules in order to conduct their daily lives. Even academics, who deal with ideas on a professional basis, go through much of their professional work and their daily lives using formal and informal rules. While intensive thinking may be undertaken when designing research programmes and in drawing conclusions from research results, the major part of scholarly activity involves routine data collection and highly repetitive experiments. The old saying that research is 99 per cent perspiration and 1 per cent inspiration is not far from the mark. Intellectuals, like everyone else, are forced to economize on this extremely scarce resource. We reserve thinking for any unfamiliar or critical problems that arise—yet even here we prefer to follow others who have successfully negotiated these problems rather than think about them ourselves—and we employ rules and custom, which are flexible rather than rigid, for the rest. There are parallels here with the way scarce brain cells are employed in nature. Animals at the top of the food chain (lions, tigers, etc.) are able to devote a higher proportion of their brains to the problem of survival than to the production of fatty acids by consuming animals (cattle, sheep, etc.) that specialize in this type of production. Could artificial intelligence (AI) be the answer? Although progress since the mid-1950s (the international conference on AI at Dartmouth College in 1956) has been much slower than expected, critical observers suggest that recent developments have been encouraging and that the ‘goal of a general artificial intelligence is in sight, and the 21st-century world will be radically changed as a result’ (Lenat 1996:18). While this will certainly help us to economize on that scarce resource, ‘natural intelligence’, it will not radically change the way we make decisions. We will continue to imitate the successful and will employ AI to gather imitative information rather than benefit-cost information, not only because there are no data about the future but also because we just do not make decisions as neoclassical economists believe. AI will merely become an important instrument in the timeless process of strategic imitation. Yet, despite the fact that intelligence is a very scarce resource, those who specialize in its development—scholars, academics, and intellectuals—receive no more than a modest return for their services. In the jargon of the economist, 47

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these specialists do not possess a relatively high marginal product as their services are not in great demand. Why? The answer is obvious. Despite the size of our brains, humans are not intellectual beings. We do not use complex systems of thought to make day-to-day decisions, and we do not pursue intellectual leisure activities. The size of the market for intellectual ideas and hard facts about reality, even in the most highly educated societies, is pathetically small. On the one hand, the best decision-makers are decisive ‘men of action’ who operate more on intuition than intellect and, on the other, we prefer uncomplicated entertainment to intellectual pursuits. Certainly both our leaders (political and business) and our entertainers (popular culture and sport) receive much higher material returns than our intellectuals. Little reflection is required to see why this is so. We need only think— briefly of course—about the way we spend our lives. How much intensive and sustained thinking is involved? At work we rely heavily on established procedures—generally established by others. Even if we were responsible for these routines, the thinking involved is restricted to the establishment phase. In such an environment, change, which causes us to re-evaluate and to solve new problems, appears burdensome. It possesses a significant cost. We do it reluctantly and only at all because of the pressure of competition. Without competition there would be little intensive or sustained thinking. This is what having a quiet life is all about—not having to think. When we return to our homes in the evenings and weekends we are quick to turn our backs on the competitive pressures of our work environments and to engage in leisure activities that do not require systematic thought. We submerge ourselves in a variety of activities including craft work, listening to music, watching sport or other intellectually undemanding programmes on television, reading entertaining books, playing with the children, gossiping with other family members and friends, consuming intoxicating substances, or even meditating. Where there is work in the house or garden to be done we give ourselves entirely to a well-rehearsed and unthinking routine. Our only frustration is when something goes wrong or some essential item has not been returned to its proper place—frustration because we are forced to rethink our routine. Even when shopping we delight in the familiar. If any supermarket owner wishes to infuriate his or her customers it is only necessary completely to rearrange the consumer goods on the shelves. We normally shop by routine and these changed locations cause a great deal of annoyance as they force us to devise new strategies for finding the goods we need. Thinking imposes a significant cost. Leisure outside the home is spent in various ways, very few of which are very demanding intellectually. Some seek entertainment and diversion in cinemas, theatres, and sports arenas; some even engage actively in these entertainments; and some seek diversion through social interaction at public functions, private homes, public houses, and dance venues. We enjoy the release from intellectual activities. Once again in pursuing these leisure 48


activities we crave the familiar. The unknown, the challenging, the unexpected can cause displeasure because these situations force us to think. Of course, there are those who have more adventurous personalities, and less demanding careers, but even these rare birds like to be in charge of any situation. They like to economize on thinking. What we need to consider here is exactly who needs rules. There are three main groups who find rules, or institutions, attractive—the strategists in pursuit of profits, the strategic imitators, and the antistrategists in pursuit of rents. The strategic pioneers have only a limited need for rules, because they do not need to economize so heavily on things intellectual and because they have great confidence in their own ideas and abilities. They are convinced they can take on all comers, and win. They are the rule-breakers of society who find the conventional way of doing things impossibly restrictive. Those who seek rules are the strategic followers. They need rules to facilitate the dynamic strategy because they are forced to economize heavily on thinking and because they have little confidence in their own ideas. They are the rule-makers in society. When something goes wrong with their plans they believe someone else is to blame and that they should be compensated for their loss. Those who follow others are rarely able to accept responsibility for their actions. They even devise rules to be exercised through the courts of law to ensure this. They are able to do so because they—the strategic followers—are in the majority. Second, the political representatives of the dynamic strategists use rules to encourage and direct the population to support their initiatives. This is the reason for the strategic struggle in society—so that the strategists can gain control of the instruments of policy to secure the sources of their wealth and income. Finally, rules are demanded by the antistrategists who pursue rentseeking through the establishment of exploitative systems. The representatives of order, who are the rule-makers in society, wish to direct other individuals to support or comply with their objectives. This is achieved through formal rules, informal conventions, and centralized religion and propaganda. On the other hand, the representatives of chaos, who constitute the creative forces in society, attempt to break down these rules. There is, therefore, a strategic and tactical element in the rules of society. THE STRATEGIC-IMITATION MODEL OF DECISION-MAKING The strategic-imitation model involves two processes and two phases. The two processes are the individual struggle to survive and prosper by investing in successful investment strategies, and the competitive interaction between individuals and groups, each pursuing their own objectives. Individual decision-makers believe either in their own eventual success or in their ability to imitate the success of others. They do not seek information that would be required to estimate the optimal outcome, rather, they look for information 49

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about who and what is successful, and why. They do not search exhaustively for alternative projects or strategies, rather, they devote themselves to the promotion of their own personal strategy. In effect, these investment alternatives are embodied by the various pioneers promoting them. Individual decision-makers provide the drive and imagination for various alternative projects or strategies, while the competitive process ensures that the outcome approaches what might be regarded in that time, place, and historical context as optimal. The successful development of civilization over the past 6,000 years is evidence enough of this. It is important to emphasize that this is not a passive process, because individual decision-makers take a central and active part. These two processes take place within two distinct phases of social decision-making. The two phases, as we have seen, are the pioneering and the routine. The pioneering phase of great uncertainty is dominated by a small number of decision-makers who, by interacting with the unfolding dynamic strategy, invest in new ideas, projects, and strategies in the hope of earning supernormal profits. As there are no reliable data to inform their decisions, they rely on their own intuition, imagination, and faith in their own abilities. Those whose faith is misdirected will fail completely; others will adjust their expectations, revise their investment plans, and salvage what they can. Only a small minority will be successful in these high-risk ventures; only a small minority will have the right combination of skill and luck that is required to win. It is this success that will attract a swarm of followers who seek to imitate what the pioneers have done. Their ability to do so will be reflected in their degree of success in the market place. A minority will fail completely; some will be forced to readjust their investment plans and be satisfied with lower rates of return; while the majority in this less uncertain routine phase of the dynamic strategy will successfully earn normal rates of profit, with some even receiving, for a time, supernormal profits. CONCLUSIONS The strategic-imitation model of human behaviour developed in this chapter implies that the justification for much of the new institutionalism must be abandoned. If institutions are not a response to the costs of information, then we must seek their source and dynamics elsewhere. It will be argued in the next chapter, and demonstrated throughout the remainder of the book, that institutions—which are essentially an outcome of the need to economize on nature’s most scarce resource, the intellect—change in response to demands generated by the fundamental dynamic process of human society. It is an outcome of changing strategic demand for organizations as well as institutions. But it must be emphasized that we seek the source and dynamics of 50


institutions elsewhere not just, nor indeed primarily, because of a lack of conviction in the new institutionalism. We seek it because, as was clearly shown in The Dynamic Society, the dynamics of human society is driven by fundamental economic forces. In such circumstances institutional change (the secondary dynamic mechanism) must be derived from the more fundamental process (the primary dynamic mechanism) operating in society.

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3 A NEW MODEL OF INSTITUTIONAL CHANGE

A State…arises…out of the needs of mankind. (Plato, The Republic (fourth century BC) trans. B.Jowett) The objective of this chapter is to examine the process of interaction between the fundamental dynamics of human society and institutional change. To do so we need to abandon the deductive approach of the new institutional economics and to adopt the existential approach I have proposed elsewhere (Snooks 1993a; 1994a). In this way we are able to distinguish between the primary and secondary mechanisms of societal dynamics. The primary dynamic mechanism was analysed and modelled in The Dynamic Society, and the secondary dynamic mechanism, by which institutions emerge and change in response to these more fundamental processes, is explained in the present chapter. This involves an examination of the relationship between dynamic strategies and tactics, on the one hand, and human institutions and organizations, on the other. As Plato says, the state arises out of the needs of mankind. The analysis is based on the realist model of human behaviour developed in Chapter 2, and on the historical analysis in Part II of this book. It is important to realize that this new model of institutional change has been derived inductively from an extensive historical analysis. The model explains why civilization is ephemeral. The beginning of a new existential theory of human behaviour was presented in The Dynamic Society (1996: Chapter 7) and developed more fully in Chapter 2 in this volume. The theory has three main characteristics. First, decision-making has an economically rational basis, in that individuals attempt to maximize their material advantage. Hence, the outcomes of the decision-making process are consistent with their having been made on a benefit-cost basis. Second, although the decision outcomes are consistent with a benefit-cost approach, the process of decision-making does not take place along neoclassical lines. It involves imitating those individuals and those practices that are perceived to be successful. There are two categories of decision-maker: the innovators and the followers. Third, both groups economize on the use of intellectual skills, which are society’s scarcest 52

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resource. I have called this the strategic-imitation model. Also we need to expand our horizons and consider organizational as well as institutional change. THE REAL NATURE OF INSTITUTIONS AND ORGANIZATIONS The basic argument in this chapter is that institutions and organizations emerge and change primarily in response to changing dynamic demand generated by an unfolding dynamic strategy. Only their superficial, ephemeral forms are shaped by what I have called relative institutional prices. Hence, in a competitive environment, dynamic demand for both institutional and organizational support will be met in the most efficient way possible at the time in response to the relative costs of various possible alternatives that reflect factor endowments and prior historical developments. Societal rules, both formal and informal, will be established and constantly altered to carry out the dynamic strategies by which decisionmakers attempt to maximize their chances of survival and prosperity and to impose the dynamic tactics by which competing groups attempt to control the distribution of society’s wealth. These rules are required in order to economize on that scarcest of resources, the intellect. Similarly, societal organizations of all types—economic, political, social—also respond largely to these dynamic strategies and tactics, rather than to institutions as North argues. Hence, the incentives to which organizations respond are to be found in the strategic and tactical opportunities rather than the opportunities provided by institutions. Societal rules do not provide opportunities or incentives of their own volition, they merely communicate the opportunities generated by the real economy. There will, of course, be a degree of interaction between these demand and supply forces, but causality flows overwhelmingly from the former to the latter. It is in the process of strategic imitation, by which the vast majority of decision-makers emulate the action of the successful strategic pioneers, that societal rules are employed. As argued in Chapter 2, institutions are needed to economize not on information, but on intelligence. Rules are required also by those who attempt to achieve their objectives through order and control. Hence the rule-makers are the strategic followers and the apostles of order, while the rule-breakers are the strategic pioneers and the apostles of tactical chaos. As the former constitute the vast majority of decision-makers, rules are essential to the dynamics of human society even though they are purely derivative of it. While these variables will be modelled more fully later in the chapter, enough has been said to provide a framework for categorizing institutions and organizations in order to see how institutional change occurs. They can 53

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be divided into two broad groups: strategic institutions and organizations and tactical institutions and organizations. Institutions and organizations are dealt with here together because both respond to dynamic demand in similar ways, and because the new institutionalist focus on institutional rules is too narrow. They are jointly determined by dynamic demand, and any independent interaction between them is relatively minor. Strategic institutions Strategic institutions are those formal and informal rules of conduct that are required to support the emergence and development of the dynamic strategies of family multiplication, conquest, commerce, and technological change. These institutions, which operate at both the macro/micro and national/regional levels, cover the full societal spectrum of economic, social, and political activities. They include the economic and political system; the rules by which business is conducted; the way goods, services, and factors of production are bought and sold; the way business is financed; the rules of money supply; the way property rights are allocated; the way politics is conducted; and the way people interact at a social level. The type of dynamic strategy pursued by a particular society has a characteristic and predictable impact upon all these institutions. In simple societies the demands made upon intellectual faculties are relatively light and, hence, the role of formal rules is relatively unimportant; informal rules and custom are sufficient. As the society becomes increasingly complex, strategic costs (interpreted by institutionalists as transaction costs) will rise with the increasing demands made upon intellectual resources. This will lead to the growing importance of formal institutions or rules. This is not, as Mark Casson (1991b:3) has argued, a result of declining ‘mutual trust’; nor does it endanger the viability of that society. What endangers society is the exhaustion and non-replacement of the dominant dynamic strategy. This eventuality leads not to a reduction in trust, but to a decline in strategic confidence. Any decline in confidence in the prevailing strategy by decision-makers leads to less cohesion than before, because there is no longer the same degree of strategic leadership which the bulk of agents normally follow. It is not a matter, as Casson (ibid.) argues, of a decline in ‘moral leadership’, but rather a decline in strategic leadership. The variable nature of society’s strategic institutions can be seen in Table 3.1, which has been compiled from the historical study in both The Dynamic Society and Part II of this book. The four main dynamic strategies generate demands for different types of societal rules in order to facilitate very different approaches to the eternal pursuit of survival and prosperity. A few examples taken from Table 3.1 will suffice to illustrate my point. As far as the economic and political system is concerned, a conquest strategy will lead to central economic and political control by a military strongman (king or 54


dictator) because of the monopoly of economic ownership; the commerce strategy will see the emergence, owing to a more widespread ownership of economic resources, of a regulated market system with a wider political franchise which, depending on the era, will range from elected merchant princes in democratic city-states to parliamentary systems with an upper middle-class franchise in nation-states; and the technological strategy results in a market system with a parliamentary democracy based upon universal franchise owing to the universal system of economic democracy. While this set of relationships between the dominant dynamic strategy and the economic and political system is not entirely precise at the detailed level, it is quite clear in bold outline. The same is true of the different systems of exchange, of property rights, of law, and of social intercourse. The historical reasons are discussed in Part II. These relationships are not accidental. Different strategies can best be implemented with different economic and political systems. A society that switches from a commerce or a technological strategy to a conquest strategy, for example, will see the emergence of a new ruling elite; it will experience significantly less freedom of political or economic expression; control over its rules of exchange will pass from private (free markets, private monopolies, guilds) to public (forced labour, plunder, state distribution) control; its property rights will change from a widespread to an elitist basis; its guarantees to individuals will change from a universal to a restrictive and authoritarian basis; and its democratic rules of social exchange will be replaced by autocratic decree. Changes of this nature can be seen throughout the historical record, as in the case of Carthage (after 300 BC) and of Greece (after 338 BC) as they turned increasingly from commerce to conquest; and in the case of Germany and Japan after the mid-1930s as they turned from the technological to the conquest strategies. These reversals, which are due to changing dynamic strategies, cannot be explained by evolutionary institutionalism. Tactical institutions Tactical institutions are even more ephemeral than strategic institutions, because they are deliberately employed by ruling elites and their opponents to gain control of the dominant dynamic strategy and to effect short-term changes in the distribution of wealth. But this is a relative matter as the same tactics may be successfully employed over decades, generations, even centuries. Just as the dynamic tactics can be divided into the categories of order and chaos, so can the institutions that are required to facilitate them. Institutions of order are demanded by the ruling elite to maintain the existing distribution of wealth. They are employed to ensure the compliance of all members of society. These orderly constraints include rules governing finance (particularly taxation); criminal and civil law; enforcement of these 55

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Table 3.1 Strategic institutions

laws; economic, social, and political exchange; property rights; and ideology, both established religion and propaganda. Institutions of chaos, on the other hand, are demanded by those who wish to break down the existing order and to change the existing distribution of wealth. This involves negating the rules governing order through the deregulation of commodity and factor markets, 56


Table 3.1 cont.

reform of political and social structures, rebellions, and the propagation of radical ideology (such as Christianity in the late Roman Empire, Marxism in late nineteenth-century Europe, and capitalist ‘economic rationalism’ in the Western world during the 1980s and 1990s). These tactics, and the rules 57

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relating to them, fluctuate within the opportunistic boundaries provided by the fortunes of the dominant dynamic strategy. Strategic organizations As in the case of institutions, the various dynamic strategies call forth a set of characteristic and predictable organizations. These have been detailed in Table 3.2 which, like the earlier table, is based upon my historical investigations. I have divided strategic organizations into two main categories—major strategic organizations and support organizations. The major strategic organizations are those demanded by decision-makers to implement and expand society’s dominant dynamic strategy. For societies pursuing the family multiplication strategy this involves the kinship teams required for hunting and gathering; for those pursuing conquest it covers military and imperial organizations; for those pursuing commerce it includes trading and financial organizations together with state naval and foreign service organizations; and for those societies pursuing the technological strategy it encompasses industrial and commercial organizations together with a comprehensive state bureaucracy. Any society changing its dominant strategy would also need to change its major strategic organizations. A society, for example, switching from commerce to conquest—such as Athens during the Peloponnesian wars— would gradually replace its commercial organizational structure with a military structure; while a society switching from commerce to technological change—such as Western Europe between the eighteenth and nineteenth centuries—would replace its commercial structure with an industrial system. And we could expect to see a massive change in our present organizational structure if, under pressure from an eco-dictator, the technological strategy collapsed and, by default, was replaced by the conquest strategy (Snooks 1996: Chapter 13). In this event the industrial-commerce complex would be subordinated to a military-imperial system. The effect would be similar to that achieved partially in both Europe and Asia in the 1930s and 1940s which saw the emergence of dictators pursuing irrational objectives such as racial purity. Support organizations also depend upon the type of dynamic strategy pursued by any society. Table 3.2 suggests that the nature of education and training, the type of manufacturing concerns, the character of research and development, and even the forecasting methods employed (compare the nonscientific forms employed in both Nazi Germany and ancient Rome) depend on the dominant strategy. Once again this can best be seen in a society switching its dynamic strategy. With a shift from commerce to conquest— which can be seen in Carthage in the third century BC, Greece in the fourth century BC, and Venice in the early sixteenth century—the support organizations shift from a preoccupation with the development of skills and 58


Table 3.2 Strategic organizations

the production of products required in trade to a focus on activities needed for war. Quite clearly, the strategic and support organizations of society depend upon the opportunities and incentives generated not by institutional constraints, as argued by Douglass North and other new institutionalists, but by its dynamic strategies. And changes in these organisations are driven not by forces on the supply side, as favoured by these institutionalists, but by the forces of dynamic demand generated by an unfolding dynamic strategy. The role of supply forces—relative institutional prices—is limited to considerations of organizational design. 59

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Tactical organizations Tactical organizations are a response to the demand generated by those employing the dynamic tactics of order and even chaos. I say ‘even’ chaos because this tactic involves a breaking down rather than a building up of societal structures. Those wishing to break down an existing orderly structure require organizations to do so, as political strength comes from numbers. Quite clearly, individuals working on their own are unable to change society. Tactical organizations of order are demanded by the ruling elite so as to force or persuade the rest of society to comply with their wealthdistributional objectives. Clearly, some of these institutions have a joint purpose in that they are employed both for strategic and tactical ends. The sharpest distinction between strategic and tactical organizations occurs in societies controlled by antistrategists who pursue rent-seeking tactics rather than profit-seeking strategies. In most societies, however, strategies and tactics reinforce each other. They include state-controlled organizations: to raise revenue; to make and supervise civil and criminal law; to enforce all kinds of laws, regulations, and the whims of the ruling elite; and to generate and disseminate the ideology of order. Revenue-raising organizations have included the royal household, the exchequer (the first modern finance department, established in England in the twelfth century), and modern taxation departments. Law-making organizations have included royal councils, military cabals, and elected parliaments. And organizations supervising the resulting laws have included the formal courts of kings, lords, and the people. Organizations enforcing these laws have included the armed forces of kings, lords, and military strongmen, and, more recently, uniformed police, secret police, and, in the last resort, the army. Finally, ideological organizations have included state religions ranging from ancient sun worship to the modern religions of Judaism, Christianity, Islam, Buddhism, and Marxism, together with bureaucratic departments responsible for creating and disseminating official propaganda. Clearly some of these organizations are also employed for strategic purposes, such as the use of state religion to involve the entire population in the dominant dynamic strategy (for example, the gods of war in Rome and Tenochtitlan). Tactical organizations of chaos, or dissent, are demanded by those who wish to change, or even overthrow, the existing order so as to alter the distribution of wealth. These organizations attempt to marshal resources, ideas, and human support to effect the reform of existing institutions, to deregulate commodity and factor markets, to create and disseminate dissenting ideology, and even to overthrow the existing system. They include groups at the local, national, and even international levels that are concerned with such diverse issues as the abolition of slavery, the release of political prisoners, the promotion of feminism; groups concerned with land rights, 60


wage justice, financial deregulation; and groups holding and promoting dissenting political and religious schemes, some of which may be illegal and forced to operate underground. The essential point to realize is that the tactical institutions and organizations of both order and chaos are instruments in a strategic struggle. They are used by competing groups to alter, in their own favour, the distribution of wealth generated by a society’s dynamic strategies. The boundaries of this continuous strategic struggle, therefore, are defined by the degree of success of the dynamic strategies both old and new. Realization of this point is essential because the literature of institutionalism, both old and new, gives the impression that society is a holistic entity which adopts institutional constraints on the freedom of individuals in order to reduce the costs of exchange. This is an unrealistically static and narrow conception that is totally rejected by the dynamic strategic/tactical approach adopted here. CHANGES IN INSTITUTIONS AND ORGANIZATIONS The key to understanding institutions is the realization that they can only achieve the objectives of those who employ them, at both the strategic and tactical levels, if they are relatively stable. It is not possible to conduct business successfully if the rules of the game, such as property rights and market regulations, are constantly changing. Continuous revolution, as the Chinese discovered in the 1960s and 1970s, is bad for business. Institutions, therefore, are of no use unless a degree of stability can be attained. But we know that they do change over time. The argument developed in The Dynamic Society is that this change in the longer term is driven by dynamic demand and shaped by relative institutional prices. As we have seen, dynamic demand depends upon the longrun strategies and the shortrun tactics of society, and it changes when, and only when, there is a change either in the fortunes of a strategy or in the balance between the forces of order and chaos. Hence, those periods of relative stability in society’s institutions reflect the stability of dynamic demand rather than the stasis that, as we are told by the evolutionary institutionalists, is supposed to characterize the Darwinian process of institutional change. Relative institutional prices, which are the costs of alternative institutions that can be adopted to facilitate both strategies and tactics, change owing to changes in economies of scale and technology that arise from the dynamic processes of the real economy. This, therefore, is the basis of the great paradox of human society: what is static is ephemeral, and what is in flux is eternal. This paradox is at the centre of my wider research programme. This model is seen as revisionist. It is seen as an alternative to existing models of institutional change that are extensions of supply-side neoclassical models (North 1990) or of biologically inspired supply-side evolutionary models (Veblen 1919; Hayek 1988; Hodgson 1993). The major 61

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driving force in my theory of institutional change is dynamic demand, although supply-side forces do help to shape the form of changing institutions. And on the supply side I acknowledge the important work undertaken by the institutionalists. But my theory is very different from theirs. Institutional change is not the primary mechanism of societal dynamics operating through either ‘group selection’ or path-dependence. Rather, it is part of a secondary mechanism that responds to the dynamic process of the real economy. This is not to deny some feedback between institutional change and the primary dynamic mechanism, just that it is a secondary and minor force. Dynamic demand Dynamic demand for institutional and organizational structures is, as indicated above, generated by the dynamic process of the real economy and consists of both strategic and tactical demand. Strategic demand, which exerts a longrun influence, is an outcome of the major dynamic strategies of family multiplication, conquest, commerce, and technological change. Shifts in strategic demand occur in response to the changing fortunes—or unfolding—of the dominant dynamic strategy, and to the transition from one strategy to another. In turn, these developments depend upon changes in relative factor endowments and in the wider competitive environment. Tactical demand operates in the shortrun, changing with the balance between groups struggling for strategic control. The most powerful and enduring of these shaping influences, therefore, is strategic demand and, as such, it will dominate the historical reinterpretation in Part II. As will be seen, dynamic demand is very different to the neoclassical concept of aggregate demand, which is merely an outcome of the dynamic system at any point in time. Aggregate demand could be thought of as ‘static demand’, which is both narrower than and derivative of dynamic demand. We need to consider both the nature of strategic demand and the forces that cause it to shift over time. The outcomes of strategic demand for institutions and organizations are outlined in Tables 3.1 and 3.2. These outcomes are achieved by human agents wanting to invest in the dominant dynamic strategy and needing to establish stable rules and organizations to do so. The demand for relevant organizations is quite straightforward. Individuals form associations with each other—such as trading, financial, shipping, insurance, industrial, and military organizations—to enable investment in, and the operation of, the dominant dynamic strategy. The demand for institutions, however, is more complex because the procedure involved is less direct. To change the formal strategic rules it is necessary to influence those who hold political power. This can be achieved either by tempting or pressuring the political leaders. Temptation can be exercised by giving the political leaders a 62


share of the strategic profits either through bribery or through legal business arrangements. Political pressure is exercised by lobby groups who threaten to divert the political support of their strategic backers to the political opposition. The central mechanism by which strategic and tactical demand is converted into institutional change is the competitive struggle between various groups in society for control of the dominant dynamic strategy. These competing groups in society can be classified, as explained in greater detail in Chapter 1, as follows: • the strategists (or profit-seekers) • old strategists—supporters of the traditional strategy • new strategists—supporters of the emerging strategy • the nonstrategists (or coerced workers and dependants) • the antistrategists (or rent-seekers) All societies at any time contain representatives of these strategic groups, who are involved in a continuous struggle for influence or control over the sources of income and wealth. As we have seen, the ratios between these groups have changed remarkably. Not as a simple progression over time but as a complex function of strategic and paradigmatic variables. Hence, the nature of the struggle between these groups, who demand and employ new institutional changes, depends upon the type of dynamic strategy pursued, the point reached in strategic development, the nature of the prevailing technological paradigm (pre-palaeolithic, palaeolithic, neolithic, industrial), and the point reached in paradigmatic development. The unfolding of a society’s dynamic strategy, via strategic pathways, is outlined by the timescapes presented in Part II. These consist of territorial (see Figure 6.1, p. 138 for Rome) and GDP per capita (see Figure 10.1, p. 276 for England) profiles that are the outcomes of strategic sequences. And the unfolding of the world’s technological paradigms is outlined in Figure 3.1. It should be realized that the pathways of an unfolding dynamic strategy are not smooth. There can be disruptions on both the demand and supply sides, with a resulting loss of strategic confidence and, hence, a fall in investment. This is discussed more formally in my forthcoming book Longrun Dynamics. At the beginning of a dynamic strategy the new strategists will be in the ascendancy as the successful pioneers are followed by packs of imitators (strategic imitation) who will generate an effective demand for a wide range of new institutions. By the middle development phase there will be a healthy balance between strategic groups and the increasing exercise of order, resulting in a slow-down, even stagnation, in institutional change. Hence periods of rapid institutional change will be followed by periods of stability. But this is not equivalent to the biological concept of ‘punctuated equilibria’ as some (Hodgson 1993) have claimed. It is due to forces on the strategic demand side rather than on the evolutionary supply side. 63

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Figure 3.1 Global technological paradigm shifts Source: Snooks (1996:403).

As the society approaches strategic exhaustion, the conflict between the old and new strategists will increase, with each resorting to tactics of order and chaos respectively. Ultimately there will be a transfer of political control from the old to the new strategists, either peacefully or through revolution. There are, however, two possible alternative scenarios. First, if the new strategists are sufficiently powerful to create a revolution, but not to quickly overwhelm the old strategists, the chaos resulting from the unplanned involvement of nonstrategists may lead to victory for the professional revolutionaries or antistrategists. Seizing their opportunity the antistrategists, initially with the support of the nonstrategists, ruthlessly eliminate all the existing strategists, both old and new, and construct a command system that not only enslaves the nonstrategists and prevents the re-emergence of the new strategists, but maximizes the extraction of rents from all the people. The second scenario will emerge if, as our society approaches strategic exhaustion (as in the case of Rome during the first century AD), there is no available new strategy. In this case the old strategists, or profit-seekers, will reinvent themselves as antistrategists, or rent-seekers, and will construct oppressive institutions. The type of institutions and organizations demanded and employed by the strategists in all these phases will depend (as can be seen in Tables 3.1 and 3.2) on which of the four dynamic strategies is being pursued. The nature of this strategic struggle also depends upon the point reached in the prevailing technological paradigm. In their early phase, human societies are involved in establishing a radically new technology through the construction of a network of very different and far more sophisticated 64


institutions, such as those established during the Neolithic and Industrial Revolutions. This involves a struggle for the control of resources between the old ‘paradigmists’ and the new ‘paradigmists’ as the new technological frontier rolls over the face of the occupied world. During the middle phase of an unfolding paradigm, our main interest is in the strategic sequence experienced by the society. It is in this phase that strategic reversals are possible: such as the conquest→commerce→conquest sequence in ancient Greece, or the family multiplication→conquest→familymidtipHcation sequence in China after c. AD 500. This leads to a reversal of the earlier victory of one group of strategists over another, such as merchants over warriors followed by warriors over merchants as in Greece, with a corresponding reversal in institutional development. And, finally, as paradigmatic exhaustion is approached there is a struggle between those new strategists/paradigmists who wish to push on beyond this paradigm into the next, and those antistrategists (such as the radical ecologists of the late twentieth century) who wish to retreat from this threshold. As always, the resolution of these strategic struggles determines the nature of institutional change. Tactical demand, as we have seen, changes with the changing balance between the forces of order and chaos in the struggle for strategic control. Hence, the influence that it exerts is of a short-term nature. This dynamic balance owes much to the expansion—exhaustion cycle of the dominant dynamic strategy. During the expansion phase of the strategic cycle, the tension between the forces of order and chaos contributes to the creativity of society. A competitive balance is achieved between conservative and radical forces, which contributes to rapid change in the structure and the living standards of society. Naturally, this tactical balance will not be stable throughout the long period of strategic expansion (some four centuries in the case of ancient Rome), but will fluctuate at first towards chaos—the creative stage—and then towards order—the stage of growing ossification. During the temporary shift towards chaos more radical forces will influence a move to more liberal institutions, with the reverse occurring during the temporary shift to order. These fluctuations will depend largely upon the changing fortunes of the dominant strategy, with success encouraging liberalism and reversal encouraging conservatism. Following the end of the long expansion, the tactical fluctuations around the trend will increasingly favour order over chaos until, with the onset of decline, this temporary shift becomes permanent. A permanent shift of the tactical balance towards order, when conservative economic and political forces gain tighter controls over the distribution of wealth, will lead to a tightening of the system of compliance. This control will be achieved through rules and organizations governing taxation, property rights, law, and ideology. But the attempt to create a more inequitable distribution of 65

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income in the face of declining real GDP per capita will generate growing dissent. Attempts to suppress the emerging chaos, with the use of the secret police or the army, will become increasingly oppressive in intent but less effective in practice. The established order of rules, regulations, and ideology begins to break down, with subversive organizations and dissenting ideologies (such as Christianity in the Roman Empire) becoming more common. Ultimately, in the absence of a new dynamic strategy, chaos will overwhelm order and the society will collapse. Everything depends on the success of the dynamic strategies of human society. It will be clear that this complex pattern generated by the unfolding dynamic strategy cannot be explained by simple supply-side models of either the Darwinian or neoclassical kind. Institutional supply While the primary dynamic mechanism generates a changing demand for institutions and organizations to facilitate the objectives of materialist man, their design is shaped by supply-side forces. Basically these forces involve costs associated with the range of feasible rules and organizations that could be employed in any particular society to meet the change in dynamic demand. The forms chosen will depend upon which of the available alternatives meet the prevailing dynamic demand most efficiently and hence maximize material advantage. This process must take into account past decision-making and the general cultural context. In other words, the most efficient institution or organization ‘available’ to a particular society at any point in time is not necessarily the most efficient form available in a timeless sense. While a society’s history of decision-making does not lock it into a particular development path, as many under the influence of recent ideas about ‘path-dependence’ claim, it does affect the costs of alternatives. Within the limits provided by the strategic-demand framework, changes in institutions and organizations will also occur as relative institutional prices change. Relative institutional prices change whenever there is a change in technology broadly conceived to include ideas relevant to the structure of human society. But even these changes depend upon the primary dynamic mechanism. Enough has been said about the supply side, as this has been discussed at length in the works of the new institutional economics. Yet a new perspective and orientation that give pride of place to strategic demand are required in institutional analysis. Until now we have lacked a persuasive account of the demand side. Only strategic demand can solve the puzzle in Douglass North’s work about why apparently inefficient institutions persist in the longer term. The model developed here suggests that inefficient institutions persist in societies where formerly successful dynamic strategies have been exhausted, or where dynamic strategies have never been successful. In these circumstances of 66


strategic failure the most profitable tactic for the ruling class is rent-seeking. And this rent-seeking generates a demand for tactical instruments—rules and organizations—that are, in comparison with societies employing successful dynamic strategies, relatively inefficient. Rent-seeking is a tactic rather than a strategy because it aims not to increase prosperity through the growth of real GDP per capita but merely to redistribute wealth more inequitably. While the institutions associated with rent-seeking might seem inefficient to the successful dynamic strategist, they are effective instruments in the hands of either failed strategists (as in many Third World societies today), or dedicated antistrategists (as in the former USSR or in Communist China) in their attempt to gain a greater share of existing wealth. This model can, therefore, effectively account for those differences in institutions, organizations, and economic performance between England and Spain in the pre-modern period, or between developed and Third World countries in the late twentieth century, that have puzzled North (1990:113–17). Spain’s earlier successful conquest strategy had been exhausted by the early seventeenth century and, in the competitive circumstances of the time, could not be replaced with the commerce strategy so effectively used by England throughout the sixteenth and seventeenth centuries. This produced in Spain a level of performance and an efficiency of structure that compared unfavourably with England’s, particularly as the exhausted commerce strategy in the eighteenth century gave rise to the technological strategy we know as the Industrial Revolution. The Spanish ruling elite, however, was able to use new and existing institutions quite effectively in redistributing wealth in their own favour and in maintaining the existence of a less efficient economic system. North’s explanation, that Spain’s poor performance was the result of its culturally determined inefficient institutions, is not at all persuasive. It is not valid to use the coincidence of poor performance and inefficient institutions as evidence for the institutional hypothesis for societal dynamics. Both are jointly determined by the dynamics of the real economy. The same is true for the continuing contrast between First and Third World nations. The secondary dynamic mechanism The process of institutional change, therefore, is a derived process—derived from the demands generated by the real dynamic process. To sum up, the primary dynamic mechanism generates a demand for institutional and organizational support and operates primarily through the process of strategic struggle between various groups in society. This involves both strategic and tactical demand. Strategic demand is of a more enduring nature and involves the search for rules and organizations that will facilitate investment in a society’s dominant dynamic strategy, which, in turn, leads to very longrun growth. Tactical demand, which aims to influence the 67

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redistribution of existing wealth, is of a more ephemeral nature and is generated by the balance between the forces of order and chaos in the struggle for strategic control. Only the form of the institutional response will depend upon the institutional costs of the various possible alternatives. Of all possibilities, the most efficient will be employed and its superficial characteristics will be determined by the dominant culture. While there may be some interaction between institutions and organizations, this is not sufficiently important to generate the independent process of institutional change hypothesized by North. Both institutions and organizations are jointly determined by dynamic demand. Dynamic demand provides the incentives, opportunities, and imperatives for the changing structure of civilization. As we have seen, the strategic cycle of adoption, expansion, exhaustion, and decline have a characteristic impact upon observed changes in the strategic and tactical structure of society. Institutional change has no life of its own. It cannot evolve in isolation from what is happening in the real economy. It is reactive, not proactive. It has no evolutionary logic of its own. It fluctuates rather than evolves. Accordingly, if, as suggested in The Dynamic Society, Western civilization were to adopt the conquest strategy by default, owing to determined efforts to abolish growth-inducing technological change, then there would be a reversal in the development of Western institutions. This, of course, is not possible in the evolutionary model of institutions where change is irreversible. In the end it must be recognized that human civilization is merely a vehicle—albeit a vehicle of dazzling form—for achieving the basic desires of mankind, and that while the dynamic process is eternal, the institutions of civilization are ephemeral. A GENERAL MODEL OF CULTURAL CHANGE We are now in a position to outline a general model of cultural change. By cultural change I mean changes that take place in the entire fabric of human society, including the arts, industrial crafts, sciences (natural and social), humanities, popular culture, religion, and sport, in addition to the economic and political institutions that we have been discussing. In other words, cultural change encompasses everything that contributes to the complex structure of human civilization. It will be argued that cultural change is an outcome rather than a driving force in the Dynamic Society. A distinction can be made between cultural change, on the one hand, and institutional and organizational change, on the other. As we have seen, institutional change is a direct outcome of changing dynamic demand. It is required to facilitate changes in productive forces that are to be found at the very centre of the Dynamic Society. There is, of course, another type of demand generated by this dynamic process with which economists and historians are more familiar. It is private and public consumer demand. 68


Figure 3.2 Diagrammatic model of cultural change

Clearly it is the end-product of the dynamic process. While consumer demand is a derivative of the dynamic process, it does directly influence the production of those final goods and services consumed by materialist man and, as such, is the object of his deskes. These goods and services are the products of the leisure, entertainment, artistic, scholastic, health, and welfare industries that feed into the process of cultural change. A general model of cultural change is presented in diagrammatical form in Figure 3.2. It shows the main causal thrust in the development of human civilization, proceeding from the driving force of materialist man to the dynamic strategies of family multiplication, conquest, commerce, and technological change. In turn, the dynamic strategies generate dynamic demand which leads to economic growth, on the one hand, and to institutional and organizational change, on the other. There is a degree of interaction between growth and institutional change. Finally, both economic growth and institutional change influence cultural change through increasing consumer demand and changing societal forms. Needless to say, there are a variety of feedback effects, particularly from technological change to relative prices, but these do not alter the causal path shown here. A few comments are also required about the influences on the driving force embodied in materialist man, the forces determining the dynamic 69

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strategies, and the way these impact upon institutional and organizational change. As shown in Figure 3.2, materialist man is a product of his animal desires, tastes, learning abilities, physical and intellectual faculties, and his physical and social experiences. In turn, mankind’s deskes for survival and for satisfaction of the appetites are shaped by its genetic structure, while mankind’s tastes, learning abilities, and physical and intellectual faculties are influenced both by its genetic structure and its physical and social environment (particularly its competitive environment). As shown in The Dynamic Society, the dynamic strategies are determined by relative factor endowments of land, labour, and capital expressed through relative factor prices in a competitive context where materialist man is attempting to maximize his material advantage. In turn, the nature of factor endowments is determined both by the physical environment and the driving force of mankind. Finally, as is argued in this book, institutional change is a response to strategic and tactical demand. In the process by which the institutional forms are shaped, relative institutional prices—the costs associated with alternative institutional and organizational arrangements—play a more minor role. The forms chosen will, at any point in time, tend to be the most efficient available. This is not to say that optimal institutional arrangements are ever achieved. That is a timeless analytical concept in neoclassical economics that requires perfect knowledge and perfect computing abilities. Abilities that materialist man neither possesses nor requires. Culture embodies the spirit of the Dynamic Society. It carries the vital principle of the age. The reason is that cultural activities, both ‘high’ and ‘low’, respond to the needs of the dynamic strategists and reflect the technology of the time. The culture of a society changes as its dominant dynamic strategy unfolds and, particularly, as one strategy is replaced by another. This is reflected, for example, in the changing nature of entertainment in Europe, from the aristocratic war games of the conquest strategy, to the middle-class interest in the performing arts of the commerce strategy, and to the electronic entertainment for the masses under the technological strategy (see Chapter 10). But while culture embodies the spirit of human civilization, it does not play a determining role in the fundamental dynamic process. There is no independent feedback from culture to the unfolding dynamic strategy. Cultural ideas that pursue an independent path fail to flourish because there is no strategic demand for them. And once all dynamic strategies have been exhausted, the culture of a society goes into inevitable decline. The role of culture is, none the less, essential. It both transmits and transcends the materialism of the dominant dynamic strategy. Cultural activities such as religion, higher learning, the arts, and sport translate the vital principle of the age into forms that people can understand and respond 70


to. By doing so they draw the people into the prevailing dynamic strategy and inspire them to cooperative action. This reinforces the dynamic principle in society. But more than this. By giving the dynamic principle aesthetic shape, cultural activities are able to transform the crude and joyless pursuit of survival and prosperity into an almost spiritual experience. At the very least they entertain and divert us from the harshness and repetition of life. Culture can be manipulated by society’s leaders for their own benefit. It can be employed consciously to achieve compliance with leadership objectives. Religion and the associated arts (such as the decoration and visual ‘messages’ in temples and cathedrals, together with religious music and plays) have long been used in this way. Where this has been undertaken by strategic leaders, where these cultural forms actually embodied the spirit of the age, the outcome is much more than mere propaganda. It satisfies a genuine need in society But, where societies have been hijacked by antistrategists, the attempt to employ the arts (religion is usually eliminated) solely for propaganda purposes—such as the crude social realism in the visual and performing arts in Nazi Germany, the USSR, and Mao’s China— invariably fails, precisely because antistrategic art does not embody the dynamic spirit of the time. Antistrategic art is without soul or meaning. Purely propaganda, it is unable to transmit or transcend the dominant dynamic strategy. It is unable to involve the people. A culture devoid of the spirit of the age is just marking time. In simplifying the main lines of interaction in this general model, much of the complex detail has been suppressed. That complexity is discussed in much greater depth both in The Dynamic Society and in Part II of this book. The intention here is merely to show how institutional and cultural change are outcomes of the central dynamic process in the real economy. Institutional change is not a causal force in that central dynamic. Accordingly, those theories in economics and sociobiology that focus on the social evolution experience considerable difficulty in explaining reality. This is the subject of the following two chapters.

71

EVOLUTIONARY THEORY

Why do human societies differ and how do they change over time? Currently the most popular answer is that societies, in all their institutional complexity, are involved in evolutionary processes that differ mainly in terms of their initial conditions and environments. While there are a variety of scientific (as opposed to metaphysical) theories of social evolution, they all fall into two broad categories: institutional theories that, through analogy with neoDarwinism, emphasize evolutionary selective devices such as Thorstein Vebkn’s ‘habits of thought’, Friedrich Hayek’s ‘trial and error’, and Douglass North’s ‘adaptive efficiency’; and sociobiological theories that emphasize the role of genetics. Institutional economics (Chapter 4), both ‘old’ and ‘new’, and sociobiology (Chapter 5) are the subjects of study in this section. As we shall see, they are both unable to answer our original question.

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4 THE ETHEREAL WORLD OF INSTITUTIONALISM

He, therefore, who has experienced life’s pleasure in cities, and few perilous journeys…little credits how I, weary, have often had to remain on the ocean path. (‘The Seafarer’ (early Anglo-Saxon poem) trans. S.A.J.Bradley) Over the past few decades there has been a remarkable resurgence in institutional economics. At first sight this might be regarded as surprising owing to its limited influence on the economics profession during the generation following the Second World War. Indeed, at that time institutional economics was regarded, quite wrongly, as an inferior branch of the profession. Like a number of other non-mainstream approaches, institutionalism received its chance to move from the wings onto centre stage when the neoclassical synthesis began floundering from the mid-1970s. But the main hope for institutionalism emerged from the realization, by a growing number of economists, that mainstream economics, irrespective of its ability to cope with shortrun issues such as inflation and unemployment, would never be in a position to analyse societal dynamics. Some of those on the margins of the mainstream—post-Keynesians, neo-Marxists, and economic historians—felt that institutional economics, particularly of an evolutionary kind, just might be able to explain the dynamics of human society. This wistful hope will be investigated here. Institutionalism has a long tradition in the English-speaking world. Its origins can be traced back to the German and English historical schools of economics in the nineteenth century (Snooks 1993a:26–9). While the historical schools did not survive long into the twentieth century they did give rise to two more robust offspring—the British economic and social history tradition and the North American school of institutional economics. Both, however, were summarily dismissed by the mainstream deductive tradition, particularly during the ‘golden age’ from 1950 to 1973. Over the past decade or so, one of these traditions, institutionalism, has experienced a renaissance both in old and new forms. But the results have been disappointing. The laws of institutional change are just as elusive as ever. 73

THEORY: EVOLUTIONARY

THE OLD INSTITUTIONAL ECONOMICS American institutionalism is usually associated with the names of T.B. Veblen (1857–1929), J.R.Commons (1862–1945), W.C.Mitchell (1874– 1948) and, more recently, C.E.Ayres (1891–1972). While some of their views on the role of institutions differ, they have a number of elements in common (Hodgson 1994:400–2). First, like the historicists before them, they reject the ‘hedonistic’ rationality of neoclassical economics and claim (in some instances) that human motivation evolves with human institutions. Second, they focus on collective action arising from institutional constraints, or rules, rather than, as in the case of mainstream economics, on the ‘atomistic’ action of individuals. Third, they reject the shortrun equilibrium approach of neoclassical economics in favour of a longrun evolutionary approach. Veblen and institutional evolution Thorstein Veblen is widely regarded as the father of American institutionalism. Possibly Veblen’s two most notable contributions to this school are his views about human nature and his interpretation of the nature of economics (Ramstad 1994). Rejecting the economic rationality of orthodox economics, Veblen argued that human behaviour must be understood largely in terms of ‘basic drives and propensities’ which are given form through institutions that he regarded as the ‘settled habits of thought common to the generality of men’ (Veblen 1919:239). While his arguments are somewhat vague, he also sees a role for culture in shaping habits of thought (Hodgson 1993:126). Veblen viewed the emergence of institutions, which he saw as the central focus of economics, in evolutionary terms. He argued that instincts, habits, and institutions in human society can be compared with genes in biology and that they are involved in a Darwinian process of selection. He claimed that ‘an evolutionary economics must be the theory of a process of cultural growth as determined by the economic interest, a theory of a cumulative sequence of economic institutions stated in terms of the process itself (Veblen 1919:77). Surprisingly, Veblen does not specify the precise mechanisms nor the criteria of the institutional selection process. Nevertheless, we are told that institutions are the equivalent of genes in biological evolution and that human agents are involved in ‘purposeful behaviour’. A sense of this viewpoint can be gained from the following extract from Veblen (1899:188): The life of man in society, just like the life of other species, is a struggle for existence, and therefore it is a process of selective adaptation. The evolution of social structure has been a process of natural selection of institutions. The progress which has been and is being made in human institutions and in human character may be set down, broadly, to a natural selection of the fittest habits of thought and to a process of 74

THE ETHEREAL WORLD OF INSTITUTIONALISM

enforced adaptation of individuals to an environment which has progressively changed with the growth of the community and with the changing institutions under which men have lived. Institutions are not only themselves the result of a selective and adaptive process which shapes the prevailing or dominant types of spiritual attitude and aptitudes; they are at the same time special methods of life and of human relations, and are therefore in their turn efficient factors of selection. We are also told that these institutions, or habits of thought, are conservative and resist any fleeting forces of change. Veblen (ibid.: 190–1) states that men’s present habits of thought tend to persist indefinitely, except as circumstances enforce a change. These institutions which have been so handed down, these habits of thought, points of view, mental attitudes and aptitudes, or what not, are therefore themselves a conservative factor. It is this conservatism or ‘social inertia’ that enables institutions to be treated as the equivalent of genes in biology. A major force in overcoming this conservatism is, for Veblen, the ‘purposeful action’ of ‘man’ motivated by ‘idle curiosity’. Veblen (1934:80) tells us, ‘by selective necessity he [man] is endowed with a proclivity for purposeful action’. Like all institutionalists, Veblen was concerned with the brilliant surface rather than the deep, dark currents of life. While Veblen’s work contains a number of suggestive comments of this type about what an evolutionary institutional economics might involve, it was not sufficiently substantial to challenge the neoclassical economics of his day. Only those desperately searching for the roots of a possible future school of evolutionary economics would wish to read much into these tantalizing comments (Hodgson 1993:136–8). There are a number of issues raised in this brief outline of Veblen’s ideas that are relevant to the central concerns of this book. They include the positive role for human agents, the concept of habits of thought, and Veblen’s model of decision-making. Veblen’s positive role for human agents is generally regarded as being non-Darwinian. While the idea of a positive role for decision-makers does contrast with the role played by individual organisms in the neo-Darwinian interpretation of natural selection—the socalled ‘modern synthesis’—in my opinion it is not inconsistent with Darwin’s original position. As discussed in Chapter 5, Darwin’s theory of natural selection, which involves a desperate struggle for existence by a multitude of individuals, provides a powerful driving force in Darwin’s analysis. Individuals survive because they possess an intellectual or physical advantage which becomes more general in the population as they go on to reproduce. It is but a short step, and not inconsistent with Darwin’s theory, to argue that individuals actively exploit any physical or intellectual 75


advantage that they possess in this struggle for existence. Certainly in human society this is a deliberate and conscious process. Where Veblen does differ critically from Darwin is in his rejection of the struggle for survival as a rational process. But this is not as radical as the position adopted by the neoDarwinians who, as we shall see in Chapter 5, have stripped the driving force from Darwin’s model of natural selection, replacing it with a passive sorting device called ‘reproductive success’, thereby denying the possibility of purposeful action. Others (Popper and Eccles 1977) have also called for a more ‘active Darwinism’. As I see it, this is no more than a return to Darwin’s The Origin of Species. Veblen’s concept of ‘habits of thought’ has a similar conservative function to that attributed by some to custom in pre-modern societies. Rather than pursue their material advantage, human agents follow traditional habits of thought and rules of behaviour. This is what I have called ‘moral man’ (Snooks 1993a:206–9; 1996:150–63), who can be contrasted with neoclassical ‘economic man’. Veblen appears to have opted for a version of moral man because of his distaste for the neoclassical assumption of economic rationality (Veblen 1904). Indeed, his version of institutionalism owed much to its historicist roots, mainly German, in its rejection of orthodox deductive theory based upon the concept of economic rationality, in its substitution of the metaphor of biology for that of physics, and in its focus upon societal dynamics. Yet he was rightly dismissive of historicism because it failed in its efforts to construct a body of theoretical work (Veblen 1919:262–5). Anyway, Veblen (ibid.: 441) claims: Under the Darwinian norm it must be held that men’s reasoning is largely controlled by other than logical intellectual forces; that the conclusions reached by public or class opinion is as much, or more, a matter of sentiment than of logical inference; and that the sentiment which animates men, singly or collectively, is as much, or more, an outcome of habit and native propensity as of calculated material interest. While this is understandable in those, like Veblen, born in the midnineteenth century, it is curiously myopic in those, like some modern institutionalists and economic evolutionists (Hodgson 1988:57–144), who have the advantage of a mountain of evidence to the contrary. As will be discussed below, the attraction of the idea of routinized behaviour has much to do with the attempt by unorthodox supply-side thinkers to project order and stability onto the chaos of a world assumed not to possess a pattern of dynamic demand. Orthodox supply-siders, on the other hand, are not worried by visions of chaos because they believe in the order imposed by rational decision-makers. Both Veblen and the neoclassicists have failed to realize that the attempt by humans to maximize material advantage is not a result of ‘logical intellectual forces’, but rather of genetically determined desires that are pursued rationally through a process of imitation. This is discussed in Chapter 5. 76


Finally, we need to consider the model of decision-making implicit in Veblen’s work. As we have seen, he rejects the central concept of economic rationality in neoclassical economics. Human agents do not possess perfect information, understanding, or computing abilities. Hence they are unable to maximize individual utility. Instead, they rely upon customary habits of thought and rules of behaviour to interpret the information they receive and to respond to this information. Institutions, in other words, provide the framework for human decision-making; and this framework is conservative, changing only slowly, except when there is a clash between societies which causes institutions to change more rapidly. Commons and transaction costs Much of the pioneering foundations for recent work on property rights and transaction costs were laid by John Commons. In reflecting upon his long career in ‘collective activities’, Commons (1934:4) wrote: Meanwhile I was trying to find what could be the unit of investigation which would include these three constituents of conflict, dependence, and order. After many years I worked out the conclusion that they were found combined together only in the formula of a transaction, as against the older concepts of commodities, labour, desires, individuals, and exchange. So I made the transaction the ultimate unit of economic investigation, a unit of transfer of legal control. This unit enabled me to classify all the economic decisions of the courts and arbitration tribunals under the variable economic factors involved in transactions as they actually are made. This classification permitted an historical development, showing how it was that courts, as well as arbitration tribunals, ruled out what they deemed, at the time, to be coercive and unreasonable values arrived at in transactions, and approved what they deemed, under the circumstances, to be persuasive transactions and reasonable values. By applying his concept of transactions to the ownership of tangible and intangible property, Commons was able to develop his own brand of institutional economics, which he saw as standing alongside orthodox economics. Commons (ibid.: 5) argued that ‘ownership becomes the foundation of institutional economics, but material things are the foundations of the classical and hedonic economics, whose “corporeal” meaning of property was equivalent to the material thing owned’. In this way Commons was able to distinguish between the transfer of material things as ‘exchanges’ and the transfer of ownership as ‘transactions’. And it is on these distinctions and concepts that the new institutionalism of the latter part of the twentieth century is based. 77


Commons was also responsible for making the distinction between institutions (the rules of the game) and organizations (the decision-making units) formed by individuals cooperating in order to achieve their objectives. This distinction, as we shall see, plays an important role in the recent work of Douglass North. Commons (ibid.: 67–74) called institutions ‘working rules’ and organizations he termed ‘going concerns’. He envisaged the evolution of ‘working rules’—particularly legislation, custom, and common law—as the outcome of a long-term historical process. Further, by employing this framework of ‘going concerns’ and ‘working rules’, Commons was able to examine the nature of transactions between the parties involved in the exchange of goods and services (Rutherford 1994:63–9). While employing these concepts to examine the institutions of American capitalism and to formulate policy, Commons was unable to develop a satisfactory model of institutional evolution. The main focus of his empirical research work, from which his theories emerged, was on trade unions (Commons 1905), government (Commons 1921), and the legal system (Commons 1924). While the ‘old’ institutionalists, like the historicists who had inspired them, rejected orthodox deductive economics, they were unable to establish an alternative set of theories and laws. They were unable to displace deductive theory from the shortrun and they were unable to fill the gap— longrun dynamics—left by neoclassical economics. And the recent resurgence of interest in the old institutional economics has yet to take this approach much beyond the point at which it was left by the founding fathers. MODERN EVOLUTIONARY INSTITUTIONAL ECONOMICS Recent attempts to build a new theory of evolutionary economics have been influenced by the old institutionalism, particularly by Thorstein Veblen. Some (Hodgson 1988; 1993) have argued that Veblen’s concept of institutions—conventional habits of thought and rules of behaviour—is the appropriate level for selection in a Darwinian model of evolution. While our discussion of evolutionary economics will be limited to the institutionalists, other approaches can be found surveyed elsewhere (Witt 1992; 1993; Nelson 1995). The chief characteristic of the evolutionary approach to institutional change is its supply-side approach. Institutions are formed, achieve a degree of stability, and occasionally change rapidly owing to an internal adaptive process. The key issue here is how stability and order emerge from the chaos of a world devoid of any demand-side pattern. The neoclassical supplyside response is that order emerges from a world in which individual decisionmakers have perfect knowledge, perfect understanding, and perfect computing abilities. But with the rejection of neoclassical economic man by the old institutional economics—which has its origins in the clash between historicists and deductivists in both Germany and England during the last 78


quarter of the nineteenth century (Snooks 1993a:46–63)—what is to prevent the triumph of chaos? The institutionalist response is that stability can be achieved in their model of change by assuming that human behaviour is dominated by habit and routine. In other words, human action is subject to the rule of custom, such that individuals do not seek to maximize their material advantage, but rather they conform to the conventional way of doing things. Only in a world of habit and routine, we are told, are prediction and orderly decisionmaking possible. Veblen (1919:241) tells us that ‘institutions are an outgrowth of habit. The growth of culture is a cumulative sequence of habituation, and the ways and means of it are the habitual response of human nature to exigencies that vary incontinently, cumulatively.’ Taking up this idea Hodgson (1988:132–3) claims: The critical point is that both routines and formal institutions, by establishing more or less fixed patterns of, or boundaries to, or regulations over, or constraints upon, human action, actually supply information to other agents. Such inflexibilities or constraints actually suggest to the individual what other agents might do, and the individual can then act accordingly. Whereas if these rigidities or ‘imperfections’ did not exist the behaviour of others could change with every perturbation in the economic system, and such frequent adjustments to behaviour might be perceived as random or chaotic. In other words, institutions and routines, other than acting simply as rigidities and constraints, play an enabling role, by providing moreor-less reliable information regarding the likely actions of others. Thus the habits and routines formed by some individuals enable the conscious decision-making of others. One consequence of this function of institutions is that in a highly complex world, and despite uncertainty, complexity and information overload, regular and predictable behaviour is possible. Hence, the order and stability required for systematic decision-making come from the rule of custom—from the supply side. In contrast, in this book it comes from imitation of the dynamic strategist—from the demand side. But how do the evolutionary institutionalists explain the emergence of these convenient patterns of habit and routine? Veblen, as we have seen, thought that habits arose, in some sort of vague way, both from human instincts and human society—from genetics and culture. Hodgson discusses this issue more fully. Habits, he tells us, have emerged to ‘help us deal with complexity and information overload’ (ibid.: 128), and he goes on to explain: Given that fully conscious rational deliberation about all aspects of behaviour is impossible because of the amount of information and 79


computational competence involved, human agents have acquired mechanisms for relegating particular ongoing actions from continuous rational assessment. These are commonly known as habits, and their high degree of relevance to our subject was emphasized by Thorstein Veblen in many of his works. (ibid.: 124–5) Curiously, this is the same explanation as that employed by Douglass North (1981;1990), a leading exponent of the new institutional economics, which is rejected by Hodgson and other evolutionary institutionalists. Further, Veblen and followers like Hodgson believe that the spread of ‘selected’ habits and routines takes place through a process of replication similar to that described by Richard Dawkins (1989: Chapter 11). How far have the evolutionary institutionalists come in the last century since Veblen’s pioneering, but largely impotent, work? In a recent book promisingly called Economics and Evolution (1993), Hodgson merely restates, in Veblenian terms, a possible future basis for evolutionary economics. We are told that institutions, or conventional habits and routines, are appropriate units of selection; that routinized behaviour is necessary to bring order out of the chaos of reality; that, in imitation of Eldredge and Gould (1972), ‘socioeconomic development’ should be viewed ‘as periods of institutional continuity punctuated by periods of crisis and more rapid development’ (Hodgson 1993:254); and that ‘there should be a place in an evolutionary explanation for some freedom of will, but not in quite the same sense as the fully deliberating and choosing agent found in the rhetoric of economic theory’ (ibid.: 229). Even the broader, more interesting approach to evolutionary economics taken by Richard Nelson (1995)—an approach encompassing evolutionary growth models focusing upon technological change (Nelson and Winter 1982), path-dependent models (Arthur 1988; David 1985), as well as institutionalism both old and new (North 1990)—has little to add. Nelson (1995:85–6) concludes a recent survey: Many years ago Veblen (1898) asked, ‘why is economics not an evolutionary science?’ In my view economics would be a stronger field if its theoretical framework were expressly evolutionary. Such a framework would help us see and understand better the complexity of reality. It would do nothing of the sort. The only way to see the complexity of reality, and to understand its underlying processes, is to look directly at reality rather than to borrow deductive models from other disciplines. It is not an exaggeration to say that the achievement of the evolutionary approach to economics is merely to import some deductive baggage into the discipline from evolutionary biology. It is claimed, for example, that: 80


recourse to biological analogies, while they need to be handled with great care, is probably the best strategy for moving economics out of its restrictive and mechanistic patterns of thought, and providing a basis for fruitful development at the fundamental level. (Hodgson 1993:26) In this book I will argue that not only is this not the best strategy, but that it might even divert economics from adopting the best strategy. The current crisis in economics is not so much a crisis in neoclassical economics with its mechanistic metaphors, but a crisis in the deductive approach to economics irrespective of where it borrows its metaphors from, either physics or biology. Economics needs to develop its own metaphors, and this can be done only by examining reality directly through the historical method. What, we might ask, does the evolutionary approach tell us about the nature of human society, about where it has been in the past, and where it will go in the future? The answer is, very little. Indeed, even as a metaphor evolution is misleading, because institutions are capable of major reversals while evolution is not. THE NEW INSTITUTIONAL ECONOMICS The new institutional economics involves an extension of mainstream deductive theory to accommodate some of the views of the old institutionalists. Probably the two most important pioneering figures in the field of longrun institutional change are F.A.Hayek (1899–1992) and D.C.North (1921–). As is well known, Hayek comes from the neo-Austrian tradition and North from the neoclassical tradition of mainstream deductive economics. They both emphasize different aspects of the old institutionalist school, with Hayek, like Veblen, focusing upon a ‘Darwinian’ evolutionary process, and North, like Commons, opting for an historical process involving an interaction between institutions and organizations. But recently there have been signs that North’s approach is becoming increasingly evolutionary. Hayek and cultural evolution Friedrich Hayek’s work on the evolution of institutions stems from his overriding interest in the contrast between market and non-market (‘socialist’) societies. As early as the 1920s Hayek believed that socialist systems could never succeed because they outlaw markets which are the essential source of information required for the effective operation of any society. Socialist systems, he claimed, are a logical inconsistency. Only systems characterized by ‘spontaneous order’, as in capitalism, have any chance of long-term success. The fate of the former USSR appears to prove his point. If the rational mind is unable to create the institutions required for the 81


successful operation of complex societies, how, Hayek asks, can we account for the remarkable order that exists in capitalist societies? This is a question that has long exercised the minds of imaginative economists, going back to Adam Smith (1723–1790) and other seventeenth- and eighteenth-century writers (William Petty, John Locke, Bernard Mandeville, Adam Ferguson, and David Hume). The answer, Hayek believes, falls ‘between instinct and reason’, and involves the evolution of institutional rules. These rules, which restrain the demands generated by animal instincts, are not foreseen or planned by the human intellect. Yet these rules are responsible for the emergence and viability of human society. Hayek (1988:12) explains: What are chiefly responsible for having generated this extraordinary order, and the existence of mankind in its present size and structure, are the rules of human conduct that gradually evolved (especially those dealing with several [i.e. private] property, honesty, contract exchange, trade competition, gain, and privacy). These rules are handed on by tradition, teaching and imitation, rather than by instinct…[and] often forbade him to do what his instincts demanded, and no longer depended on a common perception of events. There is, therefore, a tension between instinct and rules—the ‘restraints on instinctual demands’—that leads to an uneasy cooperation that will often break down under competitive pressure. This tension plays an important role in Hayek’s view of human history: ‘the conflict between what men instinctively like and the learnt rules of conduct that enabled them to expand…is perhaps the major theme of the history of civilisation’ (ibid.: 18). As we shall see, the role of institutional constraints receives more effective examination by North. Clearly Hayek’s explanation of the evolution of institutional rules is not novel. Not only was it anticipated some six decades earlier by Veblen, it was probably influenced by Karl Popper (1972) as well as by sociobiologists such as Edward Wilson (1975). Nevertheless, it is an issue that Hayek had made his own—the so-called ‘knowledge problem’—as early as 1948, and it dominated much of his subsequent work (Vanberg 1994:316). Hayek adopts a simple neo-Darwinian explanation, which involves the adoption of institutional variations through a process of group selection which, if successful, become dominant in the ‘rule pool’ by an increase in the population of the innovating society that absorbs other less successful societies (this is very similar to the sociobiological mechanism of ‘reproductive success’). Hayek (1988:16) asserts: The various structures, traditions, institutions and other components of this order arose gradually as variations of habitual modes of conduct were selected. Such new rules would spread not because men understood that they were more effective, or could calculate that they would lead to 82


expansion, but simply because they enabled those groups practising them to procreate more successfully and to include outsiders. This evolution came about, then, through the spreading of new practices by a process of transmission of acquired habits analogous to, but also in important respects different from, biological evolution. Hayek’s discussion of the role of economic agents is revealing, and is an outcome of the idiosyncratic neo-Austrian approach to reason and experience. Human agents are reactive rather than proactive. They do not calculate the benefits and costs of institutional change, which just occurs in a passive way through ‘trial and error’. Mankind, in Hayek’s vision, is trapped in a world where its instincts are frustrated and its intellect is useless. But Hayek’s vision, which stubbornly refuses empirical assistance, is a prisoner of its own presumptions. While in Hayek’s mind the operation of civilization depends upon cooperation, exercised through institutional constraints, the evolution and maintenance of these rules depend upon competition. In his own words (ibid.: 26): ‘Not only does all evolution rest on competition; continuing competition is necessary even to preserve existing achievements.’ Hence, while cooperation is required for stability in society, competition is required to maintain both the health of a society and its dynamic quality. Hayek’s approach to cultural evolution is deductive in the tradition of the new institutionalism, and it is peculiarly anti-empirical. Like his old friend Karl Popper, he believes that knowledge is the product of reason and not of experience. Hayek (1952:143) explains: ‘All we know about the world is of the nature of theories and all “experience” can do is to change these theories.’ Yet, like most hypothetical-deductivists, Hayek cannot resist the temptation to ‘illustrate’ the general relevance of his theory by employing specially selected ‘stylized’ facts from history. And even these facts are concerned with the evolution of ideas rather than reality. Hayek does little to advance our understanding of the evolution of institutions beyond the views of Veblen. Indeed, his emphasis on a passive selective mechanism, which relies very heavily upon the neo-Darwinian theory of evolution, is less realistic than Veblen’s insistence upon a positive role for human agents. Despite opinion to the contrary, Veblen’s emphasis on a more active role for individual organisms in evolution is more faithful to Darwin than is Hayek. Indeed, the passive role of human agents accepted by Hayek has more in common with the revisionist ‘reproductive success’ model of the sociobiologists. Further, as we shall see, his treatment of institutional constraints is not as sophisticated or as persuasive as that given by D.C. North. Finally, because Hayek fails to adjust these basic views in the light of historical experience—a possibility he refuses to accept—his theories take on a markedly unrealistic appearance. 83


Yet, the main problems with Hayek’s theory of cultural evolution are similar to those of the institutionalist tradition as a whole. First, Hayek proposes a theory of the evolution of rules that is divorced from the real economy. Rules emerge not in response to a demand from those investing in the strategic infrastructure of society, as argued in this book, but rather because they are more successful than other rules in promoting ‘reproductive success’. This is a rather passive, supply-side approach in the tradition of sociobiology, which provides little room for decision-makers. Hayek’s agents are reactive rather than proactive. Second, as shown in The Dynamic Society, the major theme in history is not the conflict between instinct and rules, but rather the competition between individuals pursuing different dynamic strategies and tactics. As demonstrated in this book, rules are adopted and modified in order to facilitate these strategies and tactics. North and path-dependence The new institutional economics in history has been pioneered by Douglass North, who adopts a deductive approach to this issue. North begins with the neoclassical model and releases a number of restrictive assumptions that bring institutions into play. These include the assumptions that decisionmakers possess perfect information, appropriate models of reality, and perfect information-processing abilities. But, North argues, as the information reaching decision-makers is fragmentary and costly, and as their conceptual models of the world are imperfect, exchange between individuals gives rise to transaction costs which call institutions—or rules of the game— into being. These rules can be either formal, such as those enshrined in the statute books, or informal, such as customs or traditional forms of behaviour. While North’s work has been widely embraced, there are some institutionalists, such as Alexander Field (1991b), who believe that his focus on transaction costs is far too narrow and who advocate a broader approach to economies and economic institutions. North’s views on the role of institutions in the dynamic process have changed significantly over the past three decades. Over that time he has moved progressively closer to a social-evolutionary approach. In The Rise of the Western World (North and Thomas 1973), it is argued that economic performance is determined by changes in institutions, and that institutional change is largely a function of population change (driven by plagues, wars, and other exogenous events) through its impact upon the labour/land ratio, at least until the Industrial Revolution when technology became the driving force. The main mechanism of change involves relative price changes which create incentives to construct more efficient institutions. North’s explanation, in other words, is derived from the deductive neoclassical model which suggests that economically rational decision-makers will adopt the most efficient institutions available in the face of exogenous change. 84


Hence, the persistence of apparently inefficient institutions, such as those in Spain during the pre-modern period, remained as a puzzle that North and Thomas could not solve. As North (1990:7) later admitted: ‘Such an anomaly did not fit into the theoretical framework.’ But this was not the only problem (Field 1994). Why, for example, did markets continue to develop after population was halved with the Black Death of 1348 if population growth was the driving force behind the earlier growth of markets? Why was there no reversal in this process over the following century? At the time, he and Thomas attempted to explain away such anomalies in an unsatisfactory ad hoc way. In Structure and Change in Economic History North (1981) developed a more sophisticated analysis of institutional change. He moved away from the simple neoclassical efficiency mechanism and closer to the old institutionalists by developing a transaction-costs model that attempted to explain the differential economic performance of societies with both efficient and inefficient institutional frameworks. The perseverance of inefficient institutions is the outcome of leaders devising property rights in their own interests. But he fails to develop an encompassing model to explain why they do so. Further, North’s deductive economic model changes abruptly from period to period. For the pre-modern period he adopts an augmented classical model, in which exogenous population growth runs into diminishing returns in the face of the fixed resource of land; and for the modern era he adopts an augmented neoclassical model, which assumes constant returns to scale and embodies a highly elastic supply curve for knowledge (ibid.: 60). Both variations are extended in an adhocvrxy by theories about institutions and ideology because he believes that the original models cannot explain the totality of the progress of Western society. His aim, he tells us (ibid.: 7), is ‘to fill out the gaps in the neoclassical model’. This model, which lacks cohesion, is discussed more completely elsewhere (Snooks 1996:130–4). To ‘illustrate’ the general nature of this model North provided an interpretation of institutional change in Western civilization since the Neolithic Revolution. He did not attempt any formal testing of his model. But still a puzzle remained. Why, ultimately, did competitive pressure fail either to eliminate inefficient nations or to force these nations to adopt more efficient institutions? Why was it that all societies did not move to optimal institutional arrangements as predicted by neoclassical theory? By the time Institutions, Institutional Change and Economic Performance (North 1990) was published, North believed he had the answer to this final puzzle. It is an answer that involves three elements that are tacked onto the basic neoclassical model: a ‘symbiotic’ relationship between institutions and organizations; a path-dependence of the institution-organization interaction that leads to a ‘lock-in’; and a feedback mechanism involving imperfect information and imperfect conceptual models. Much of the weight of his new approach rests on both the distinction made by Commons some six decades 85


earlier between institutions and organizations, and on the recent pathdependence literature. In other words he has abandoned, as Field (1991b: 1000) has noted, the attempt to build a general model of rule variation. According to North, institutions, in conjunction with the usual economic constraints, provide the economic opportunities in society, while organizations emerge to exploit these opportunities. In this interactive process, maximizing organizations alter the institutions that brought them into existence. This is a type of evolutionary model, inspired by neoclassical economics as well as (indirectly) Darwin, in which the selective device is ‘adaptive efficiency’. Owing to different information processes—involving different costs of information and different conceptual models (cultures)— institutional change in different societies takes different evolutionary paths. This is a path-dependent process involving increasing returns and fragmentary information feedback which leads to institutional ‘lock-in’ that resists competitive pressures. It is North’s explanation of why inefficient institutions can persist into the longrun. Hence, in searching for a resolution to the problem of sub-optimal institutional arrangements in some countries—a problem that has worried him for some three decades—North has moved a long way towards the evolutionary supply-side approach of the old institutionalists. Economic growth, he tells us, is an outcome of the interactive evolution between institutions and organizations. North’s view of institutions North makes very strong claims for the role of institutions in human society—claims that, on his own admission, he does not attempt to test empirically. He asserts that ‘the past can only be made intelligible as a story of institutional evolution’, and that ‘institutional change shapes the way societies evolve through time and hence is the key to understanding historical change’ (North 1990: vii, 3). If these assertions are ever to be persuasive they must be tested empirically. But, North (ibid.: vii) tells us, ‘the history I include is illustrative, designed to show the promise of the approach’. In other words, the theory does not arise from historical research, and it is not subjected to systematic historical verification. We must begin at the beginning by asking how North views institutions. As we shall see, he views them through neoclassical lenses. North (1990:4) tells us: Institutions include any form of constraint that human beings devise to shape human interaction… I am interested both in formal constraints—such as rules that human beings devise—and in informal constraints—such as conventions and codes of behavior. By constraints he means restrictions on behaviour adopted by individuals to promote more effective human interaction. He is careful to distinguish 86


between institutions, which provide the framework of rules within which human interaction takes place, and organizations, which are groups of individuals bound by some common purpose to achieve their objectives. Here he takes his lead from John Commons. Of institutions North (ibid.: 107) writes: ‘We cannot see, feel, touch, or even measure institutions; they are constructs of the human mind.’ They are merely the written and unwritten rules that guide human conduct. Organizations, on the other hand, are far more tangible, and they include ‘political bodies (political parties, the Senate, a city council, a regulatory agency), economic bodies (firms, trade unions, family farms, cooperatives), social bodies (churches, clubs, athletic associations), and educational bodies (schools, universities, vocational training centers)’ (ibid.: 5). This distinction is crucial to his explanation of the evolution of society, involving as it does an interaction between institutions and organizations. Institutions provide the ‘wealth-maximizing opportunities’ and organizations, which emerge to exploit these opportunities, change the nature of institutions. This is similar to the interaction in Veblen’s evolutionary model between ‘habits of thought’ and ‘culture’. But what role do institutions play in society? According to North (ibid.: 6), ‘the major role of institutions in a society is to reduce uncertainty by establishing a stable (but not necessarily efficient) structure to human interaction’. These uncertainties arise owing to the complexities of realworld problems, incomplete information, and limited problem-solving abilities of human agents. In such a world, institutions reduce both uncertainty and the costs of transacting business. They do this by defining and limiting the set of choices available to individuals within society. They set down the conditions under which individuals are permitted to engage in certain activities and they indicate what and when activities are prohibited. Yet, although rules provide a stable structure for human activity, this, North asserts, does not prohibit change—change that is typically incremental. While it is clear that North’s more recent thinking about institutions has been influenced either directly or indirectly by John Commons, he is keen to demonstrate the link with the neoclassical paradigm. North (ibid.: 5) writes: Defining institutions as the constraints that human beings impose on themselves makes the definition complementary to the choice theoretic approach of neoclassical economic theory. Building a theory of institutions on the foundation of individual choices is a step toward reconciling differences between economics and the other social sciences. But, if successful, it would consign all the social sciences to the deductive, supply-side, static, shortrun approach of neoclassical economics. This is hardly the way to approach the greatest challenge facing the social sciences—the issue of longrun dynamics. 87


Not surprisingly, North has constructed an augmented neoclassical model to explain institutions and institutional change in the modern epoch. He begins with the Walrasian general equilibrium model, and then releases a number of its restrictive assumptions. This, North believes, allows him to analyse institutions within a neoclassical framework. Hence, his augmented deductive model of institutions shares all the fundamental characteristics of the neoclassical paradigm, including its theory of human behaviour. Of course, if the neoclassical view of human action is wrong, then so is North’s. It is well known that the Walrasian general equilibrium model makes a number of strong assumptions. It assumes that all commodities are identical, that the market is concentrated at a single point in space-time, that exchange is instantaneous, that individuals are fully informed about exchange commodities and terms of trade, and that individuals not only possess correct conceptual models of reality but are able to process all relevant information accurately. North makes it clear he believes that some of these assumptions are unnecessarily restrictive and that the main problems with the neoclassical model can be resolved by taking institutions into account. North addresses those assumptions concerning the availability and processing of information by economic agents. By developing more realistic theories about human behaviour and the costs of processing information, he hopes to construct a neoclassical theory of institutions. Of human behaviour North (ibid.: 17) writes: ‘The motivation of the actors is more complicated (and their preferences less stable) than assumed in received theory.’ He rejects the idea that economic ‘actors possess cognitive systems that provide true models of the worlds about which they make choices’ (1990:17). Instead, he suggests, they make choices using ‘subjectively derived models’ that are unlikely to be correct; and, as the feedback from reality is fragmentary and incomplete, these incorrect models will not converge towards the ‘true’ models required to meet the neoclassical assumptions. This, North claims, is why institutions and the resulting economic performances of different nations diverge over time. On the costs of acquiring and processing information North has a great deal more to say. Because information about reality is fragmentary, individual decision-making involves significant costs. These are transaction costs which include costs both of obtaining information and of enforcing agreements. Only if information is perfect will transaction costs be zero.1 North argues that the neoclassical concept of production costs should be widened to include these costs of transaction together with the more familiar costs of what he calls ‘transformation’. North (ibid.: 34) explains: Institutions provide the structure for exchange that (together with the technology employed) determines the costs of transacting and the cost of transformation. How well institutions solve the problems of coordination and production is determined by the motivation of the 88


players (their utility function), the complexity of the environment, and the ability of players to decipher and order the environment (measurement and enforcement). North identifies a number of ‘general types’ of exchange. The first, which encompasses most of human history, is what he calls ‘personalized exchange’, characterized by small-scale production and local trade. It involves a common set of cultural values, repeated exchange dealings, and no third-party (state) enforcement. In this system, transaction costs are low (abundant information and trust), but transformation costs (limited specialization owing to small scale) are high. The second general type, which North identifies as ‘impersonal exchange without third-party enforcement’, is based upon either kinship ties, hostage exchange, or merchant conduct codes. This type is associated with larger markets, more complex production and exchange, and long-distance trade. The third general type, ‘impersonal exchange with third-party enforcement’, involves a complex system of contracting which makes the role of a coercive third party essential. This large-scale complex system generates high transaction costs but low transformation costs. North is, as mentioned earlier, concerned with informal as well as formal institutions or, as he prefers to call them, ‘constraints’. These constraints, which are adopted in order to provide structure and stability to relationships between decision-makers, reduce both uncertainty and the costs of human interaction. His interest in informal constraints focuses upon how this ‘cultural filter’ provides an important source of continuity in longrun societal change. This is achieved, North argues, because traditional values ‘will not change immediately in reaction to changes in formal rules’ (1990:45). Also, in the shortrun, ‘culture defines the way individuals process and utilize information’ as ‘ideas, organized ideologies, and even religious zealotry play major roles in shaping societies and economies’ (ibid.: 42, 44). Cultural values, therefore, allow the emergence of non-material objectives. By stressing the stability and continuity provided by custom, North has provided another point of contact with the ‘old’ institutionalism, this time with Veblen and the recent evolutionary institutional economics. Once again we see the extent of North’s shift towards an evolutionary supply-side model of change. Formal constraints emerge, according to North, as societies become more complex. Greater societal complexity raises the rate of return on the formalization of constraints, while technological change lowers measurement costs. Formal constraints include political and judicial rules, economic rules, and specific contracts. North (ibid.: 52) claims that: ‘The rules descend from polities to property rights to individual contracts.’ In other words, political rules, which hold pride of place, generally lead to economic rules, although he acknowledges that causation can run both 89


ways. These formal rules, North tells us, provide the wealth-maximizing opportunities for human actors, which can be realized through economic or political exchanges (or bargains). He emphasizes that inefficient systems of property rights may persist owing to high political transaction costs and to the inaccurate conceptual models of decision-makers. This, North claims, accounts for the absence of economic growth in some societies. The role of enforcement costs receives special consideration because North believes that ‘the inability of societies to develop effective, low-costs enforcement of contracts is the most important source of both historical stagnation and contemporary underdevelopment in the Third World’ (ibid.: 54). This is because some societies appear unable to make a successful transition from the self-enforcing contracts of ‘personalized exchange’ to the more complex world of ‘impersonal exchange’—a world that requires effective state intervention to monitor property rights and to enforce contracts. Often the problem is an inability to resolve the conflict of interests faced by those running the state. To illustrate the importance of institutions, North makes frequent reference to the apparent correlation between the degree of institutional efficiency and the level of economic performance between societies in both the past and the present. But he makes no systematic attempt to test the relationship between the two. North (ibid.: 69) merely asserts: contrasting the institutional framework in countries such as the United States, England, France, Germany, and Japan with Third World countries or those in the historical past in advanced industrial countries makes clear that this institutional framework is the critical key to the relative success of economies, both cross-sectionally as well as through time. But does it? We will return to this issue at the chapter’s end. North’s model of institutional evolution We are now in a position to review North’s dynamic theory of institutional change. North has high ambitions for this theory which, he claims, plays a central role in the dynamics of human society. North (1990:107) explains: institutions…are the underlying determinant of the long-run performance of economies. If we are ever to construct a dynamic theory of change—something missing in mainstream economics and only very imperfectly dealt with in Marxian theory—it must be built on a model of institutional change. And what this model must be able to explain is the inherently incremental process of institutional change. While North grants that wars, revolutions, conquest, and natural disasters can lead to discontinuities in institutional 90


change, ‘the single most important point about institutional change…is that institutional change is overwhelmingly incremental…a gradual restructuring of a framework in which the interconnections between formal and informal constraints and enforcement characteristics evolved over centuries’ (ibid.: 89). There is much here in common with the recent evolutionary institutional economists, although they may not welcome the comparison owing to the association with North’s neoclassical approach. North’s dynamic model is, as suggested above, a supply-side model. While North (1990) has recently introduced changes in tastes into the analysis, he focuses primarily upon relative prices. His discussion of relative prices includes relative factor prices and what I will call relative institutional prices. Relative factor prices appear to play a role only in North’s model prior to the Industrial Revolution when population change—which is an exogenous variable driven by the changing incidence of disease, war, and natural disasters—leads to a change in the land/labour ratio and thereby to a change in institutions. The second type of relative prices—transaction costs—which is endogenous to North’s model is, he claims, more important and universal in its applicability, reflecting the ongoing maximizing efforts of entrepreneurs (political, economic, and military) that will alter relative prices and in consequence induce institutional change. The process by which the entrepreneur acquires skills and knowledge is going to change relative prices by changing perceived costs of measurement and enforcement and by altering perceived costs and benefits of new bargains and contracts. (ibid.: 84) This operates through a mechanism he calls ‘adaptive efficiency’. North (ibid.: 80) explains: Adaptive efficiency…is concerned with the kinds of rules that shape the way an economy evolves through time. It is also concerned with the willingness of a society to acquire knowledge and learning, to induce innovation, to undertake risk and creative activity of all sorts, as well as to resolve problems and bottlenecks of the society through time. It is a concept associated with the interaction between institutions and organizations that operates according to the incentives contained within society’s rules. While relative prices are ‘the most important source’ of institutional change, changing tastes or preferences for cultural values sometimes play a minor role. But tastes, even then, appear to be influenced by relative prices. North (ibid.: 84) claims: We know very little about the sources of changing preferences or tastes. It is clear that changing relative prices play some role in changes in taste.’ To illustrate this point he refers to the changing structure of 91


the Western family in the second half of the twentieth century. While this is, he claims, largely due to ‘changing relative prices of work, leisure, and contraception’, it is also due, in part, to changing ideological attitudes to moral issues and to the role of women in society. This is not a fortunate illustration as elsewhere I have shown (Snooks 1994a: 85–8) that 98 per cent of the shift of women from the home to the market between 1947 and 1990 can be accounted for by changes in the gender demand for labour, which in turn is due to changes in the technological base of society. This leaves little room for institutional or ideological variables. Hence, the only demand-side variable in North’s explanation is cultural preferences, and even this is an ad hoc variable to be invoked when relative prices are unable to explain most of the observed institutional change. It is interesting that whenever North is unable to explain institutional change with his supply-side model he invokes culture or ideology. As argued in Chapter 3, cultural preference, which is merely the concept of consumer demand derived from static neoclassical theory, does not constitute the dynamic demand for institutions. That arises from society’s unfolding dynamic strategy. On its own, the ‘adaptive efficiency’ model of institution change is, as North is well aware, unable to account for the persistence of inefficient institutional systems and poor growth performance either in the past or in the contemporary world. North (1990:93) explains: Again going back to the Coase theorem: in a world of zero transaction costs, the efficient solution that produced the highest aggregate income would prevail. But because transaction costs are not zero, we could anticipate differential performance reflecting different degrees of success of institutional frameworks in reducing transaction (and transformation) costs. But why would the relatively inefficient economies persist? What prevents them from adopting the institutions of the more efficient economies? His latest answer to these questions, which have plagued him over the past thirty years, is the path-dependence of institutional change. Societies, according to North, get locked into their institutional structures owing to the nature of their evolutionary process. His argument is, simply, that in a world of increasing institutional returns and of deficient information feedback, the conceptual models possessed by decision-makers do not converge on the ‘true’ models. In this explanation, increasing returns reinforce the direction of institutional development once a society begins on a particular path, and incomplete markets, which (together with cultural values) reinforce faulty conceptual models, lead to divergence from the most efficient development path. Hence, inefficient institutional systems persist in some societies and differential growth rates are experienced. North (1990:95–6) explains: 92


if the markets are incomplete, the information feedback is fragmentary at best, and transaction costs are significant, then the subjective models of actors modified both by very imperfect feedback and by ideology will shape the path. Then, not only can both divergent paths and persistently poor performance prevail, the historically derived perceptions of the actors shape the choices that they make. North is optimistic that this path-dependence approach, which was first developed by Arthur (1988) and David (1985; 1993), will finally resolve the problem of persisting inefficient institutional systems and differential economic performance. North (1990:133) concludes his survey of different approaches to economic development with the statement: There is a different, and I think, better story. It concerns the endless struggle of human beings to solve the problems of cooperation so that they may reap the advantages not only of technology, but also of all the other facets of human endeavor that constitute civilization.

AN EVALUATION OF THE NEW INSTITUTIONALISM The dead hand of neoclassicism Most of the problems facing the new institutionalist approach to societal dynamics arise from an inability to throw off the neoclassical framework. While the neoclassical model is an excellent tool for examining shortrun static problems, it is incapable of analysing longrun dynamic issues. It cannot even be used as a foundation on which to build a more realistic dynamic theory as the new institutionalists have attempted. As I argued in Chapters 2 and 3, we need to make a new beginning by constructing existential dynamic models using the historical method. Our dynamic models must emerge from historical reconstructions, not be imposed upon them. The neoclassical foundations of North’s dynamic model are reflected in his theory of human behaviour and his supply-side approach. Although North claims that some of the assumptions in the Walrasian general equilibrium model are unrealistic, he adopts the neoclassical theory of human behaviour. Hence, he accepts the orthodox view that all individual decision-makers make a conscientious attempt to collect as much benefit— cost information as possible, to process this information using conceptual models of reality, and to correct those models when the outcomes of decisions are known. What he challenges is the neoclassical view that information is perfect, that the conceptual models are comprehensive and correct, and that all information is quickly and correctly processed. By introducing imperfection in the supply and processing of information into the classical model, North introduces transaction costs and on this he 93


constructs his static theory of institutions. He attempts to convert this static theory into a dynamic model by introducing the idea of path-dependence, which he interprets as an interaction between institutions and organizations that produces a development path shaped by increasing returns and deficient feedback. The persuasiveness of North’s model depends, therefore, upon the realism of the neoclassical theory of human behaviour. If that theory is false, the foundations for North’s models will crumble. In Chapter 2, I argued that the neoclassical theory of human behaviour is incorrect and demonstrated that, by employing the historical rather than the deductive method, it is possible to construct a more realistic theory of human behaviour. North is also attracted to the idea that institutions are constraints—rather than a means to facilitate the achievement of human objectives—because it fits into the neoclassical framework of production theory. This supply-side approach provides a curious perspective on human society. Individuals accept the limitations imposed by constraints on their individuality in order to make society work. But, apart from God, whose objective is it to make society work? Decision-makers are interested not in making society work, but in achieving their materialist objectives by using rules to facilitate their dynamic strategies and tactics. Society works as an unengineered by-product of the individual’s pursuit of survival and prosperity. This is the argument outlined briefly in The Dynamic Society and developed fully in Chapters 2 and 3. The nature of institutions and institutional change can be more convincingly explained as a supply response to strategic and tactical demand. In The Dynamic Society I argue that institutions emerge largely in response to strategic and tactical demand generated by the fundamental dynamic process. Why has North overlooked this dynamic demand? Primarily, I believe, because he is ‘constrained’ by the supply-side approach of neoclassical economics. North argues, as we have seen, that institutions are required because imperfect information and decision-making lead to transaction costs. Only formal and informal rules can reduce the risk and the uncooperative behaviour that occurs in a world where transaction costs are positive. And these rules change over time largely under the influence of supply-side forces. Apart from a short discussion of cultural tastes or preferences, demand does not play much of a role—and then only in an ad hoc way—in North’s thinking. North is a captive of the neoclassical paradigm. In order to account for matters that cannot be explained by his supplyside model, North is forced to develop separate and ad hoc theories about the role of the state and of ideology. Once again this is a legacy of the neoclassical paradigm. According to North the role of the state is to enforce constraints, and the role of ideology (moral and ethical codes) is to provide social stability. North calls upon both, in an ad hoc way, to explain the persistence of inefficient institutions. In my model, both the state and ideology are the instruments of those attempting to implement their dynamic strategies and tactics. They are, therefore, integral and endogenous elements 94


in my dynamic model rather than exogenous appendages as in North’s explanation. Finally, is it true, as North claims, that this static neoclassical approach can be transformed into a dynamic model by utilizing the concept of pathdependence? North (1990:112) asserts: ‘Path dependence is the key to an analytical understanding of long-run economic change.’ In my opinion, path-dependence is a further supply-side concept that constrains the independent action of individuals and their society: they get ‘locked into’ a particular development path. There is a strong hint of historical inevitability about this argument. If individuals are free to choose, what does pathdependent ‘lock-in’ really mean? It can only mean that there are no other more profitable development paths open to them. In this context, ‘lock-in’ has little meaning. My model provides a very different explanation. The absence of profitable alternatives in any society is demand-determined owing to the exhaustion of the dominant dynamic strategy rather than supply-determined through a deficiency of information. Foundations for a dynamic model North claims that the past can only be made intelligible as a story of institutional evolution. The institutional framework provides the changing incentives and opportunities required for decision-makers to achieve their objective. I disagree. The only way the past can be made intelligible is by focusing upon the primary dynamic mechanism that underlies both institutional change and economic performance. Incentives and opportunities in society are provided by the unfolding dynamic strategy which, in turn, depends upon changing relative factor prices and the changing competitive environment. These opportunities are realized by competing decision-makers through investment in the infrastructure and technology of dynamic strategies. These strategies drive the changes in institutions, organizations, and economic performance. Hence, the main interaction is not between institutions and organizations, as North claims, but between the unfolding dynamic strategy on the one hand and both institutions and organizations on the other. I have called this interaction the ‘secondary dynamic mechanism’. In this mechanism, while there is some feedback from institutions to the primary dynamic process, the overwhelming direction of causation is from strategies to institutions. In the dynamic-strategy model the development path of society depends not upon increasing institutional returns and deficient feedback but upon the unfolding and, ultimately, exhaustion of dynamic strategies. North sees the dynamic process as an endless struggle of human beings to achieve their objectives by solving the problems of cooperation, whereas I see it as an eternal struggle to survive and prosper by investing in, and gaining political control of, the dominant dynamic strategy. 95


The determinants of economic performance Throughout his work North associates poor economic performance with inefficient institutional structures. Differential growth rates between nations, he claims, can be explained by the different types of societal rules that these nations adopt. Favourite contrasting examples are Spain and England in the early-modern period, and today’s developed and Third World nations. This coincidence, of course, is not proof of a causal relationship between the two. It is quite possible that both the efficiency of institutional frameworks and the differential rates of economic growth are jointly determined by an omitted variable in North’s analysis. The dynamic-strategy model suggests that the differences in both institutional efficiency and growth rates in the examples North uses were a function of the different dynamic strategies chosen and of the success of these strategies. Spain, for example, adopted the conquest strategy from the late fifteenth century which, despite its initial success in both the Old and New Worlds, had less potential for longrun development than the commerce strategy adopted by England. With the exhaustion of the conquest strategy, the ruling elite in Spain and the New World colonies used the old institutional structure to shift from profit-seeking to rent-seeking as the latter does not depend so critically upon economic performance. One cannot, therefore, agree with North, or his followers (such as Yeager 1995), that ‘incorporating institutions into history allows us to tell a much better story than we otherwise could’ (1990:131). A better story can be told only if we turn away from the various deductive schools of economics and of biology and look at reality itself. CONCLUSIONS Despite the long history of institutionalism, it has yet to provide a convincing model of the dynamics of human society. The various evolutionary models that have been offered tell a story about a society raising itself by its own bootstraps. Such a story appears plausible only when considered within the very narrow confines of the old institutional or neoclassical supply-side framework. When we abandon the deductive approach and look at reality in the round, we discover how restricted these evolutionary perspectives really are. Not only is the supply-side viewpoint less than half the entire story, but the inflated role of institutions implodes when we realize that it was pumped up by an unrealistic theory of human nature. And when it can be shown that institutional change has regularly passed through complete reversals, the evolutionary model collapses. We need, therefore, to tell a more rounded story about the nature of societal dynamics—a story in which institutions are employed by decision-makers to facilitate their dynamic strategies and tactics. We need to abandon the myth of social evolution.

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5 THE ROBOTIC WORLD OF SOCIOBIOLOGY

Fate is stronger, the ordaining Lord mightier, than the mind of any man. (‘The Seafarer’ (early Anglo-Saxon poem) trans. S.A.J.Bradley) Sociobiology effectively announced its presence with the publication of a massive synthetic book bearing that title in the mid-1970s (Wilson 1975). Since then the ideas of sociobiologists have surfaced in various disciplines in the social sciences, including economics. Obvious fertile areas for these new ideas were the economics of the family (Becker 1976; 1991) and the economic theory of games (Friedman 1991; Young 1993; Bergstrom 1995). Yet the attractiveness of these ideas from biology is a reflection not of their evolutionary fitness but of the limitations of the deductive approach to economics. These limitations are the limitations of the deductive method that are unlikely to be overcome by borrowing deductive ideas from other sciences. We need to evaluate carefully these new ideas from beyond the boundaries of social science because, as shown in Chapter 4, there are dangers in importing them into economics. In particular, they maintain that the mind of man is but a slave to pre-ordained forces. We also need to study the biological evidence because it shows the importance of imitation as a decision-making mechanism which, as argued in Chapters 2 and 3, is the basis of our new strategic theory. The intention of this critical review of sociobiology is to extract positive results for our study of human society. FROM ECONOMICS TO SOCIOLOGY—A REINTERPRETATION OF DARWIN The central objective of sociobiology is to analyse the nature and evolution of society by focusing on animal and human behaviour. The key idea in this analysis is the neo-Darwinian interpretation of natural selection which, I will argue, is a subtle distortion of Darwin’s views. A pioneer and popularizer of this approach, Robert Trivers (1985:vii) explains the modern approach of sociobiology:

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Life is intrinsically social and it evolves through a process of natural selection which is itself social. For these reasons social evolution refers not only to the evolution of social relationships between individuals but also to deeper themes of biological organization stretching from gene to community. In this way sociobiologists claim to be able to provide ‘a foundation for a scientific understanding’. Edward Wilson (1975:4) is even prepared to speculate that: It may not be too much to say that sociology and the other social sciences, as well as the humanities, are the last branches of biology waiting to be included in the Modern Synthesis [neo-Darwinian evolutionary theory]. One of the functions of sociobiology, then, is to reformulate the foundations of the social sciences in a way that draws these subjects into the Modern Synthesis. It will be argued in this chapter that this is indeed far ‘too much to say’. In assuming that life is basically social rather than economic, and that the evolution of society is a sociobiological process, these scholars reinterpret Darwin’s theory of natural selection to be a process of ‘differential reproductive success’ rather than a highly competitive struggle for scarce resources. By a subtle juggling of concepts, the very substance of Darwinism has been discarded. Only his name remains to provide the authority required by sociobiology. Trivers (1985:12), for example, asserts: In Darwin’s view, evolution resulted from two factors: heritable variation and differential reproductive success. By heritable variation, Darwin meant that in each living species there is variability, some of which is inherited by the offspring. By differential reproductive success, Darwin meant that in each species some individuals leave many surviving offspring, some leave few, and some leave none at all. If these two components are coupled, we are likely to see changes in the heritable constitution of a species. What, according to this interpretation, determines differences in ‘reproductive success’ in the Darwinian model? Trivers (ibid.: 13–15) claims that there are two factors: ‘mortality selection’ and ‘sexual selection’. By ‘mortality selection’ (Darwin does not use the term!) Trivers means prereproductive mortality caused by high rates of fertility and population growth that generates ‘intense competition to survive, a competition’, he imagined, ‘that would result in non-random differential mortality’. Those with a heritable (genetic) advantage survive, the rest do not. By ‘sexual selection’ (a term Darwin did use) Trivers means intrasexual competition based upon differences in fecundity and in the ability to gain access to members of the opposite sex. 98

THE ROBOTIC WORLD OF SOCIOBIOLOGY

It is on this critique of Darwin that the sociologists base their belief that individuals strive to maximize their ‘reproductive success’ (RS) or, as claimed by Wilson (1975:4) and as popularized by Richard Dawkins (1989), to maximize their genes in the gene pool. This in turn has given rise to the further proposition that social organization is based upon the costs and benefits of reproductive success. In other words, they believe that the principal outcome of life on Earth—population increase—has become the sole motivation for animal species. Trivers (1985:20), for example, says: ‘A shorthand way of describing natural selection is to say that it favors the individual that leaves the most surviving offspring, or favors the traits that permit an individual to leave the most surviving offspring.’ This ‘summary’ of natural selection is a subtle transformation of Darwin’s meaning which becomes most apparent when it is used to explain animal and human behaviour. We need to go back to Darwin’s The Origin of Species (1859) to see what he actually did say. The contrast between Darwin and the neo-Darwinians is quite striking. Darwin’s model of natural selection is based upon the central idea of an intense ‘struggle for existence’. This struggle takes place between individual organisms that are competing for scarce resources in order to survive. The survivors pass on their superior ‘organs and instincts’ to their progeny. In Origin Darwin (1979:441–2) explains: In the preservation of favoured individuals and races, during the constantly-recurrent Struggle for Existence, we see the most powerful and ever-acting means of selection. The struggle for existence inevitably follows from the high geometrical ratio of increase which is common to all organic beings. Darwin (ibid.: 459) refers to this continuous struggle for existence as ‘the war of nature’. While admitting that a changing environment can influence biological change, Darwin argues that the dominant longrun dynamic force in evolution is the war of nature. He explicitly rejects sudden physical catastrophes, such as volcanic action and asteroidal impact, that are currently popular with physical scientists. Darwin (ibid.: 457–8) explains: species are produced and exterminated by slowly acting and still existing causes, and not by miraculous acts of creation and by catastrophes; and…the most important of all causes of organic change is one which is almost independent of altered and perhaps suddenly altered physical conditions, namely, the mutual relation of organism to organism. ‘Sexual selection’ is, for Darwin, a separate and less rigorous mechanism than ‘natural selection’. We need to pay careful attention to what he has to say on this matter. Darwin (ibid.: 136) explains the difference between these two concepts quite clearly: 99


And this leads me to say a few words on what I call Sexual Selection. This depends, not on a struggle for existence, but on a struggle between the males for possession of the females; the result is not death to the unsuccessful competitor, but few or no offspring. Sexual selection is, therefore, less rigorous than natural selection. Generally, the most vigorous males, those which are best fitted for their places in nature, will leave most progeny. But in many cases, victory will depend not on general vigour, but on having special weapons, confined to the male sex. In another place in Origin, Darwin writes: Amongst many animals, sexual selection will give its aid to ordinary [natural] selection, by assuring to the most vigorous and best adapted males the greatest number of offspring. Sexual selection will also give characters useful to males alone, in their struggle with other males. (ibid.: 170) Clearly, Darwin did not regard ‘sexual selection’ as part of his key concept of ‘natural selection’ which embodied a struggle for existence. It is this struggle— an intense competition between individual organisms for scarce resources— that is the driving force in Darwinian evolution. Those that win the struggle for scarce resources are the ‘most vigorous males’ and, in general, they will leave the most offspring. In other words, according to Darwin, reproduction is an outcome of, and therefore secondary to, the struggle for existence. It is this struggle that leads to heritable (genetic) changes in both males and females in a particular species. Sexual selection is merely an ‘aid’ to natural selection and operates only on the physical characteristics of males that improves their access to females. According to Darwin, then, the overwhelming motivation of individual organisms is to survive and, having survived, to satisfy their appetites. It just so happens that those who are most successful in the war of nature will also produce the most offspring, thereby increasing the influence of their ‘organs and instincts’ in the future generations. Darwin did not subscribe to the idea, now central to sociobiology, that the struggle of life was all about the maximization of reproductive success. Despite this clarity in Darwin, the sociobiologists have not only changed the functional definition of his concept of natural selection to include sexual selection, but they have reversed the priorities of the two. Darwin’s natural selection is demoted to ‘mortality selection’ and, in the process, becomes less important than ‘sexual selection’, which is redefined to include fecundity as well as male access to females—in other words it is redefined to become ‘reproductive success’. Trivers (1985:15) claims, quite misleading, that: ‘So important did Darwin consider intrasexual competition, that he called it by a separate name: sexual selection.’ As we have seen, Darwin called it by a separate name not because he thought it ‘so important’ but because he thought it less important (‘less rigorous’), more partial in its impact, and 100


separate from and an ‘aid’ to his key concept of natural selection. Hence the sociobiologists have replaced the economics in Darwin—the struggle for scarce resources—with sociology—the interaction, largely sexual (and hence genetic), between individual organisms. In this way the actual Darwinian driving force in evolution has been replaced with a passive genetic sorting device by which individuals are ‘selected’ to maximize their reproductive success. Sociobiology has shifted the motivational emphasis from economic process to biological outcome. And, as we shall see, sociobiologists claim that social organization revolves around reproduction rather than the attempt to optimize the use of scarce resources both organic and inorganic. Trivers (ibid.: 17) claims: ‘individuals alive today are expected to be organized to maximize the eventual number of their surviving offspring’. And Wilson (1975:4) concludes: The hypothalamic-limbic complex of a highly social species, such as man, ‘knows,’ or more precisely it has been programmed to perform as if it knows, that its underlying genes will be proliferated maximally only if it orchestrates behavioral responses that bring into play an efficient mixture of personal survival, reproduction, and altruism…Love joins hate; aggression, fear; expansiveness, withdrawal; and so on; in blends designed not to promote the happiness and survival of the individual, but to favor the maximum transmission of the controlling genes. Social organization according to this interpretation is not ephemeral, but is engraved in our genes. Whatever sociobiology is, it is not strictly Darwinian. THE SOCIOBIOLOGICAL MODEL OF BEHAVIOUR In examining the sociobiological model of animal and human behaviour we need to consider the motivating force and the process of decision-making. This model contrasts starkly with models of behaviour usually employed in the social sciences. Individuals in the sociobiological model do not make choices freely within existing environmental constraints, such as resource or budget limitations, as they do in social science models. Rather, they are genetically programmed, or ‘selected’, to act as they do, following the preordained objective of maximizing reproductive success. In the world of sociobiology, individuals are little more than automatons. Clearly this type of model raises problems of historical inevitability in human society and of mechanical predictability in the rest of nature. Motivation Work in sociobiology begins, as we have seen, with the assumption that individuals attempt to maximize their reproductive success. This has been 101


explained as an attempt to maximize the influence of their genes in the wider gene pool, or, more extravagantly, as an attempt by the immortal genes locked within ‘gigantic lumbering robots’ to maximize their survival (Dawkins 1989:19). The reason is that they were ‘selected’ to do so. It is an outcome of the evolutionary process. You will find no extended discussion of motivation in the sociobiological literature. It is merely taken as given. Its status cannot be called into question because it was borrowed, we are told, from Darwin. Wilson (1975:3), for example, writes: In a Darwinist sense the organism does not live for itself. Its primary function is not even to reproduce other organisms; it reproduces genes, and it serves as their temporary carrier. Each organism generated by sexual reproduction is a unique, accidental subset of all the genes constituting the species. And Trivers (1985:21) claims: Instead of a disorganized list of items that we may care to invest ourselves in, such as children, leisure time, sexual enjoyment, food, friendship, and so on, Darwin’s theory says that all of these activities are expected to be organized eventually toward the production of surviving offspring. While I sympathize with the attempt to view life in terms of one overriding objective—how else can life be regarded as an endogenous dynamic process?—the sociobiologists have adopted a focus that is not only nonDarwinian, but could not possibly provide the necessary driving force in life. It is hardly surprising that, having stripped Darwinism of its driving force and replaced it with a passive genetic sorting device, sociobiologists like Trivers (ibid.: 19) are forced to consider whether ‘selection was too weak a force to bring about substantial evolutionary change’. To provide his evolutionary system with some credibility Trivers introduces the concept of ‘intensity of selection’, which is inversely related to the time required for genetic change. The weaker the selection pressure, the greater the time required to effect a given amount of genetic change. In explaining this concept, Trivers (ibid.: 24) writes: The intensity of selection is a function of the variability in reproductive success. Where variability is high, selection is strong.’ The variability in reproductive success in this model depends on the social behaviour of animals, which in herring gulls, for example, involves the distance between nests, the dates of egg laying, whether camouflage techniques are used, and so on. And social behaviour is determined by genetic variation. Hence, this is a circular system in which genetic change is supposed to be driven by genetic variation, yet the ‘intensity of selection’ is no more than a measure of the range of genetic variation in a species. While in a technical sense it provides scope for genetic change when the Darwinian 102


driving force—the struggle for existence—is present, it is impotent in the absence of this force. As is the case in the sociobiological model. No attempt is made to really test the central assumption that individuals in all species are ‘selected’ to maximize the number of surviving offspring. Innumerable case-studies are employed merely to illustrate its plausibility. As we shall see, this evidence marshalled by the sociobiologists can be better explained by the materialist model presented in Chapter 2, and some of it even critically challenges their own model. I will briefly review a number of the main behavioural issues in this discipline, including parent—offspring conflict, parental investment, gender mortality rates, and female choice, which are all of interest to social scientists. The objective is to understand animal behaviour and to see if there is any relationship to human behaviour. In the process I have developed a new model of animal ‘decision-making’. Parent-offspring conflict It is well known to observers of animal behaviour that parents, particularly females, invest considerable time and effort in their offspring. This, sociobiologists argue, is a result of their genetic structure, which has evolved over very long periods of time. In the words of Robert Trivers (1985:148) who pioneered work on this subject: ‘The parent has been selected to invest in its offspring in such a way as to maximize the number eventually surviving.’ This investment is interpreted not in economic terms involving material benefits and costs, but in biological terms involving reproductive benefits and costs. Hence, parental investment generates a benefit in terms of the increased probability of survival of present offspring, but involves a cost in terms of the opportunity forgone to raise additional offspring. Also, in contrast to economic benefit-cost calculations, sociobiology does not allow for free individual choice. ‘Choice’ is genetically determined. Trivers (ibid.: 148) explains: the parent is naturally selected to maximize the difference between the benefit and the cost. In particular, it is selected to avoid any investment in the offspring for which the cost is greater than the benefit, since such investment would decrease the total number of its offspring surviving. Offspring, however, have a different ‘objective’. They are ‘selected’ to encourage parents to invest more than the parents are ‘selected to give’. This produces a conflict between parents and offspring over the amount of parental investment. Offspring are, according to this theory, ‘selected’ to use psychological manipulation—such as temper tantrums in chimpanzee infants and convulsions in pelican chicks—to induce greater investment from their parents. Trivers (ibid.: 149) explicitly rejects the idea that conflict is based on a clash of self-interest—an indication that real choice might be involved: ‘conflict does not occur because of the innate selfishness of the 103


offspring. Indeed, it would be just as accurate to say that conflict occurs because of the innate selfishness of the parent.’ Hence, Trivers believes that all the studies he describes of parent-offspring conflict—mammals (monkeys, baboons, and chimpanzees) and birds (pelicans and herring gulls)—support his genetic hypothesis of behaviour rather than any alternative hypothesis. But he does not attempt to refute his beliefs or test the materialist alternative. Parental investment When sociobiologists refer to parental investment in offspring they usually mean female investment. As Trivers (1985:237) says: In general, males invest little or nothing parentally in their offspring, but instead compete among themselves for access to females.’ Why, if males are ‘selected’ to maximize their reproductive success do they, in the main, take no interest in helping their offspring to survive? This question is ignored. Instead we are told that males, who invest little or nothing in their offspring, spend a great deal of energy competing amongst themselves for access to the females. In this way, it is argued, they are ‘selected’ to maximize the spread of their genes. Once again a variety of animal studies—including pigeons, seals, red deer, reptiles, and a variety of insects—are employed to illustrate the way the reproductivesuccess hypothesis is supposed to work in reality. Needless to say, Trivers does not consider whether this evidence provides a more persuasive case for the alternative argument that males are competing with each other for territory in order to survive and, only then, to gratify their other appetites including sexual desires. As they take little or no interest in what happens to their offspring, the desire to maximize the number of their progeny cannot be one of these desires. In particular, Trivers (ibid.: 357–8) does not appear to recognize that the high positive correlation between longevity and the size of harems in red deer can be explained by the competing materialist model. Sociobiologists appear to have serious problems in explaining the sexual behaviour of individuals in species where males do invest significantly in the upbringing of their offspring. Human males join a select and strange company of species—sea spiders, butterflies, birds, and wolves—in which males invest in their offspring. Curiously, this is not something we share with our closest relatives the great apes, nor with the monkeys closest to them. And, we are told, where there is bonding of a sort between males and females in baboons and chimpanzees, it involves ‘trading, in effect, grooming and protection from others for increased sexual access’ (Trivers 1985:239). This, I would have thought, can be explained more persuasively by the materialist hypothesis rather than the reproductive-success hypothesis. Unperturbed, Trivers attempts to explain the contrast between the parental investment of human males and great ape males in the following way: ‘human male parental investment is an example of convergent evolution’. Is it not more 104


likely to be the result of a self-interested response to different economic circumstances? ‘Choice’ of sexual partners The sociobiological position on mate selection in species where males invest in their offspring is particularly problematical. The main case-studies focus on bird behaviour. Of interest here are those cases where females ‘choose’ males on the basis of the quality of the nests they build and their physical attractiveness. Where male birds build nests in order to attract the opposite sex, as in the case of weaver birds, the females carefully inspect the nest and either reject or accept its maker. If rejected, the male bkd demolishes the deficient nest and builds another. Sociobiologists argue that each female is ‘selected’ to choose a male who is most likely to invest in her offspring. Trivers (1985:252) claims: ‘females at the time of pairing may be able to choose males who will later strongly invest’. But exactly what is the relationship between the nest-building skills of males and the ability of females to maximize their genes in the gene pool? It appears very tenuous. Trivers (ibid.: 254) appears to recognize that there is a problem here when he says: ‘Even when females choose according to ability to invest, they may also choose according to genetic criteria.’ A similar problem exists in the case of female birds, such as finches, that seek out attractive mates. Trivers (ibid.: 259) expresses some uncertainty when trying to explain why this might be so: ‘Our best guess is that physical attractiveness usually correlates in nature with superior genes. Just how this is true in any given case is usually a mystery.’ It is a problem compounded by the evidence that female birds with an attractive mate are willing to take on a higher proportion of the workload in raising their young and in turning a blind eye to his sexual involvement with other females. The explanation given by Trivers (ibid.: 260) is particularly unconvincing: ‘If attractiveness indicates genetic quality, then each individual will want to match higher investment to higher genetic quality.’ Far more convincing is the hypothesis that female finches seek out attractive males who excite them sexually and who appear to be able to offer protection and material goods (a nest and food) in return for sexual favours. It is not surprising that, if they are free to choose, they invariably select healthy attractive, males who are likely to possess the qualities they require to satisfy both their desire to survive and their other appetites. Nor is it surprising that females with attractive mates take on a greater share of family work. Such females need to offer greater inducements to persuade their mates to stay when they are in much demand elsewhere. In other words they need to compete for male attention, just as in other cases males compete for female attention. What is involved is an active trade in goods and services required to satisfy the primary needs of individual animals. It is difficult to see that this evidence has 105


anything to do with investment in the genetic quality of a female’s offspring. Genetic quality of offspring is just a fortuitous outcome of the health (and hence attractiveness) and vigour required by individuals to survive the intense competition for scarce resources. Differential gender mortality This issue provides a direct confrontation between the reproductive and materialist hypotheses. It is well known that the mortality rate in humans is higher for males than females from conception to old age. While the male/ female ratio is at least as high as 120:100 three months after conception, by the time of birth it has fallen to 106:100. Thereafter the annual death rate is substantially higher for males than for females, so that by seventy years of age the male/female ratio is 84:100. This phenomenon is also common in other species. Why? It must be disappointing for sociobiologists to find that the answer is not directly related to our chromosomes but is the result of male hormones: castrated male mammals have the same life-span as females. This has not deterred sociobiologists from attempting to explain gender mortality differences in terms of the genetically based reproductive-success hypothesis. According to Trivers (1985:311–12): For species with negligible male parental investment the key predisposing factor is the high potential reproductive success of a male. Imagine that an animal is trading mortality rate prior to adulthood for an increase in its reproductive success at adulthood, assuming survival. Such an animal will be selected to suffer a one-half reduction in survival if this is associated with more than double the reproductive success in adulthood… In effect males pursue a high-risk-high-gain strategy, and the high potential gain selects for any traits that give the gain, even at a cost of high mortality, as long as this mortality is not so great that it cancels the gain. But he admits that there are no data to test this hypothesis. And even if such data were available they could not be regarded as proof that males who do not invest in parenting are ‘selected’ to trade mortality for reproductive success. A positive correlation would also be compatible with the hypothesis that males compete with each other not for females but for the territory they need to survive. Those who win this battle not only survive, owing to their access to scarce resources, but are also able to satisfy their other appetites such as sexual gratification. Those who lose either die prematurely or live deprived lives. A more persuasive explanation of the higher mortality rates in males is the materialist hypothesis presented in Chapter 2. Owing to their hormones, male sexual cells, as well as male individuals, exhibit much greater vigour and aggression than do females. This leads both to higher ratios of males to females 106


at conception and to higher death rates for males—because of more reckless action, physical conflict, stress, and suicide1—throughout life. As the sociobiologists themselves admit, this is not a direct response to chromosomes (that is, genes) but to hormones. Clearly, no individual who has any choice in the matter, as humans certainly do, is going to trade years of life for reproductive success. Certainly this will not be the average response. There is abundant evidence in human society that whenever there is a choice between life, or even the quality of life, on the one hand, and children on the other, vibrant human societies take steps to limit the size of their populations through contraception, abortion, and/or infanticide. Are individuals in other species any different? The answer to that question is, I believe, no, not in kind, only in degree. This will be taken up later in the chapter. The model of ‘choice’ In practice there is no sociobiological model of choice. At least not of choice in the same sense as is normally employed in the social sciences, where individuals operating within the usual environmental constraints are able to choose between a variety of alternatives. ‘Choice’ for the sociobiologist is something that individuals make because they are ‘selected’ to do so. A number of examples of this view of choice have already been given, but one more will focus our attention on this choiceless form of choice. Trivers (1985:353), for example, asks us to: ‘Imagine a gene in a female leading her to choose a male whose genes improve her daughter’s chance of surviving by 10%…’ (I find this difficult to imagine.) As animals are genetically programmed to do what they do, they have no real choice. Sociobiology has constructed a world of robotic inhabitants. In attempting to reach a lay audience, Richard Dawkins deals in The Selfish Gene (1989) with the relationship between genetic structure and animal behaviour in a more explicit way than most of his colleagues. Consider the following extract (Dawkins 1989:60): animal behaviour, altruistic or selfish, is under the control of genes in only an indirect, but still very powerful sense. By dictating the way survival machines [that is, individual animals] and their nervous systems are built, genes exert ultimate power over behaviour. But the moment-tomoment decisions about what to do next are taken by the nervous system. Genes are the primary policy makers; brains are the executives. Dawkins attempts to illustrate this idea using the digital computer— particularly when programmed to play chess—as a metaphor. As the different combinations of chess moves are virtually endless, the chessplaying software establishes a set of general rules and tactics, together with a feed-back instruction to increase the weighting given to those tactics leading to success. But it is up to the programmed computer to ‘decide’, in the light of 107


those general principles, which is the most appropriate move. Hence the control of the programmer is indirect, but it is also powerful because the computer has no choice but to play the game according to the guidelines dictated via the software. It is inconceivable that the computer could, in an emotional lapse, override its instructions and play recklessly and suicidally like some of its human opponents. In other words, the chess-playing computer has no real choice; it must follow the guidelines provided by its programmer. This is the sociobiological view of animal behaviour. What is of interest here is that Dawkins compares animal behaviour with the chess-playing computer. He explains (ibid.: 55): ‘Like the chess programmer, the genes have to “instruct” their survival machines not in specifics, but in the general strategies and tricks of the living trade.’ And again: ‘Every decision that a survival machine takes is a gamble, and it is the business of genes to program brains in advance so that on average they take decisions that pay off.’ In other words, while genes do not directly manipulate the actions of animals, they determine the nervous system that does. Like the programmed computer, animals can respond only to immediate challenges within the predetermined genetic guidelines. In this sense they do not make free choices—if they did, the sociobiologist would need a non-genetic model to explain it. This genetic determinism becomes even more evident when Dawkins moves from metaphor to the real world. In dispensing with the metaphors, Dawkins (ibid.: 60) tells us: But now we must come down to earth and remember that evolution in fact occurs step-by-step, through the differential survival of genes in the gene pool. Therefore, in order for a behaviour pattern—altruistic or selfish—to evolve, it is necessary that a gene ‘for’ that behaviour should survive in the gene pool more successfully than a rival gene or allele ‘for’ some different behaviour. Although Dawkins warns against a simplistic, literal interpretation of the idea that there is a gene for altruism or a gene for selfishness, in the final analysis behaviour in the sociobiological model is genetically determined. A number of his colleagues are more explicit in this respect, arguing that there is a direct connection between genes and behaviour. For example, Charles Lumsden and Edward Wilson (1981) claim, as we shall see, that there are ‘epigenetic rules’ that determine the influence of genes on behaviour through the mind. And Robert Trivers (1985:95) claims: genes can affect the transmission of neural impulses and can, in principle, have minute and specific effects on behavior. We are still largely ignorant of how most of these effects come about, but evidence from breeding experiments in animals leaves no doubt that many behavioral traits have a genetic basis. 108


Throughout his book Trivers (ibid.: 107) operates from the unchallenged assumption that ‘genes control development of traits’. While admitting that evidence for this alleged link between genes and behaviour is scarce, Dawkins appears to pin his hopes on a study of bees by W.C.Rothenbuhler (1964). This study investigates the differential susceptibility of bees to ‘foul brood’ disease which attacks bee grubs in their wax cells. Interestingly there is an ‘hygienic’ strain of bees that uncap the wax cells and throw out the infected grubs, and an ‘unhygienic’ strain that does not and is decimated. In this famous study, Rothenbuhler crossed a queen of one strain with a drone (male) of another in order to observe the behaviour of the workers (daughters). The cross produced only unhygienic hives. He then ‘backcrossed’ the first-generation hybrids with a pure hygienic strain. The daughter hives fell into one of three groups, displaying behaviour that was either hygienic, unhygienic, or intermediate (where workers uncapped the wax cells but left the grubs in their cells). Guessing that there might be two separate genes involved, one for uncapping and one for discarding, Rothenbuhler intervened and uncapped cells in the hives of the unhygienic group and found to his satisfaction that the workers then discarded the infected grubs. At first sight this does seem like persuasive evidence that animal behaviour is determined by the presence or absence of a particular gene, no matter how complex the connection. But there are two problems, both mentioned by Dawkins in the spirit of disinterested intellectual discourse. First, in the endnotes to the second edition of The Selfish Gene he reports that Rothenbuhler’s results were not unambiguously clear—there was one case that in theory should have been unhygienic but was in practice hygienic. This suggests that other influences can, at least on some occasions, override the genetic. Second, and more importantly, Dawkins suggests that the uncapping bees may have a taste for infected wax (and, presumably, the throwers-out have a distaste for the smell of infected grubs). Dawkins (1989:62), however, claims that: ‘Even if this is how the gene works, it is still truly a gene for “uncapping” provided that, other things being equal, bees possessing the gene end up by uncapping, and bees not possessing the gene do not uncap.’ I do not agree. What the evidence suggests is that the bees possess genes that influence their tastes or preferences, not genes determining their behaviour. This involves a fundamental distinction that will be explored later in the chapter. Even more problematical is the sociobiological view of human behaviour. While one can detect a difference in attitude between individual sociobiologists, the mainstream view is that there is no fundamental difference between animal behaviour and human behaviour. The reason scholars such as Wilson and Trivers are interested in animal behaviour is for the light it casts on human behaviour and human society (Trivers 1985:ix). Some (Wilson 1975:4) even claim that sociobiology will ultimately 109


reformulate the foundations of the social sciences. The link between animal and human behaviour is explicitly made by Trivers (1985:98) who claims that ‘behavioral traits are no different from other traits in having genetic components. Nor is this conclusion different for human beings.’ This conclusion leads Trivers to survey the results of studies of identical and fraternal twins in our own species. These studies show that the physical characteristics of identical twins are highly correlated, with correlation coefficients (r) on height and weight being 0.93 and 0.83 respectively; that the physical traits of identical twins are twice as highly correlated as their general personality traits (r=0.41 to 0.52); that the personality and physical traits of identical twins are twice as highly correlated as those of fraternal twins; that the tastes of identical twins are similar even when separated at birth and raised in very different environments; and that the phobias—such as claustrophobia and dislike of escalators and sea-bathing—of identical twins are similar. But what does this really tell us? Only that the tastes and general personalities of human individuals appear to be influenced by their genetic structure. Certainly they are not as strongly influenced as physical characteristics. And there is no suggestion in these studies that the day-today actions of human beings are genetically determined. Few observers of human behaviour would accept the argument of sociobiological fundamentalists that our actions are programmed genetically. Some less mainstream sociobiologists, namely Richard Dawkins, recognize that, while animal behaviour is genetically determined, human behaviour is far less constrained. How can this difference be reconciled? Dawkins (1989:59–60) answers by arguing that with the emergence of man came a rapid expansion of ‘consciousness’ which has led to the emancipation of survival machines as executive decision-takers from their ultimate masters, the genes. Not only are brains in charge of the day-to-day running of survival-machine affairs, they have also acquired the ability to predict the future and act accordingly. They even have the power to rebel against the dictates of the genes, for instance in refusing to have as many children as they are able to. But in this respect man is a very special case. This attempt to bridge the gap between what we know about our own behaviour and what sociobiologists believe about animal behaviour leaves many unanswered questions. First, what evidence is there for this evolving emancipation from the dictates of genetic structure? There is none. Indeed, there is ample evidence to show that the real influence of genetic structure, which operates on the desire to survive and to satisfy the appetites, is just as strong in the human species as in animal species. Second, the concept of Darwinian evolution as espoused by Dawkins operates by many small steps over vast periods of time. How could it be that modern man is ‘a very special 110


case’ in being able to rebel against the dictates of our genes when we have only existed for 100,000 years, during which time the size and complexity of the human brain have not changed significantly? If nature has really evolved the ability to rebel against genetically determined behaviour, and if evolution does take place very slowly, then we would expect other animal species also to possess this ability in varying degrees. If this were true, it would make nonsense of sociobiology as we know it. Third, if the ability to throw off our genetic shackles is the product of civilization, why are we no less subject to the effect of desires now than we were 10,000 years ago before the emergence of civilization? Why do we fight as savagely against our own kind today as did the Romans, or the Greeks, or the Assyrians, or the Sumerians? Why are we, with all our education and sophistication, just as intolerant as we were in the ancient world? Fourth, if there is a major behavioural gap between the animal world and human society, why bother to study animal behaviour except as a curiosity? Clearly Dawkin’s suggestion cannot bridge the gap that he perceives between the animal and human worlds. I will suggest that there is no gap, not because the mainstream sociobiologists like Trivers and Wilson are correct, but because animal behaviour, like human behaviour, is not genetically determined. Animal behaviour can, therefore, cast light upon human behaviour, and vice versa. While not compiled for this purpose, some of the case-studies of animal behaviour assembled by sociobiologists suggest how a model of choice in non-human society could operate. When discussing a detailed case-study, Trivers (1985:352) tells us the lek-breeding system of the black grouse allows females to choose males whose sons are expected to be successful at attracting the daughters of other females. Females can easily choose in this manner by (1) watching male-male interactions, (2) watching male-female interactions, and (3) watching the skill of each male’s courtship. (my emphasis) Clearly this cannot be a model of choice, because all ‘choice’ in sociobiology is programmed by the genetic structure of individuals. Females are ‘selected’ to respond to these signals in order to maximize their reproductive success. It would be a model of choice only if individual animals—with only their desires, tastes, and personalities influenced genetically—were able to respond freely (apart from environmental constraints) to these signals. Such a model is developed towards the end of the chapter. What is interesting about the behaviour of black grouse, and of other animal species—such as chaffinches, starlings, baboons, monkeys, and schools of small fish (Wilson 1975:51–2)—is that individuals gather information in order to make what appear to be choices. And what is particularly interesting is that the type of information they gather focuses on those individuals who are successful and popular, and on why this is so. This 111


information, which is gathered by individuals watching the actions of others, includes what mate will satisfy their desires, what new food sources can be safely eaten, and what systems of communication are useful (Davis 1973). This involves, therefore, the imitation of the successful actions of others. If a member of the opposite sex is clearly popular with members of one’s own sex, then he or she is worth pursuing. If other members of your group are happily feeding on a new food source without suffering any ill effects, then follow their lead (Wilson 1975:51). It saves time, economizes on limited mental abilities, and helps to avoid disastrous mistakes. Following the leader comes naturally to animals, and to humans, because the outstanding characteristic that we have in common is mimicry. This is seen in its most amusing form in talking parrots and in human comedians. Imitation, therefore, appears to be the basis of choice in the animal world—imitation of action or behaviour that leads to success in survival and social relationships. Obviously it is not an intellectual exercise. Given the intellectual limitations of most forms of life, it could not be so. But neither is it a mechanical response to the dictates of genetic structure. What is even more interesting is that the human world is no different. As suggested in The Dynamic Society (1996:212–13), and as developed further in Chapter 2 in this volume, human decision-making is also only a limited intellectual exercise. In a similar way to animal species, we make decisions by gathering information not about the costs and benefits of material investments, but about which individuals and investments have been successful and why. We are capable of making complex intellectual calculations but, on average, we find this difficult and costly. That is left to a tiny proportion of intellectuals. We prefer to make choices that economize on the most scarce resource in nature—the intellect. SOCIAL ORGANIZATION Social organization in the animal world is, according to the sociobiologists, genetically determined through natural selection. This is a logical outcome of their genetic explanation of animal behaviour. The sceptic, however, might ask: If individuals are not able to make genuine choices, how is it possible to explain ‘institutions’ and organizations in the non-human world? We know that institutions in the form of informal rules and conventions, and organizations in the form of family groups, exist in the animal world. Sociobiologists argue that these institutions and organizations emerge from the genetic basis of kinship and from ‘reciprocal altruism’. Trivers (1985:84) claims that: ‘Kinship and reciprocity…provide bases on which selection can mold larger cooperative units.’ We will examine what sociobiologists have to say about these two key issues.

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Kinship What sociobiologists mean by kinship is not the economic bonds between members of the extended family, but rather their ‘genetic relatedness’. This concept of kinship, which was first developed by W.D.Hamilton (1964), made possible the study of sociobiology. While it has long been known that an individual is genetically related to all members of his or her extended family, Hamilton argued that the social relationships of the individual depend on the degree of the ‘genetic relatedness’ between them. It is claimed that the probability of this genetic relationship can be measured by the ‘generation distance’ (Dawkins 1989:92). In the case of identical twins who share the same genetic structure, the genetic relatedness is equal to unity. For siblings it is, on average, 1/2 because half the genes possessed by one sister will be found in her sibling. It is also 1/2 between parent and child, and 1/4 for grandparents and grandchildren, aunts/uncles and nieces/nephews. And to complete the scale, it is 1/8 for first cousins, 1/32 for second cousins, 1/128 for third cousins. By the time we get to third cousins, Dawkins (ibid.: 92) tells us, ‘we are getting down near the baseline probability that a particular gene possessed by A will be shared by any random individual taken from the population’. With perfect information and a copy of this index of genetic relatedness, individuals can attempt to maximize the spread of their genes. They do this, we are told, by assisting other individuals according to the degree of the genetic relationship between them. This behaviour is called ‘altruism’. An identical twin would be treated as oneself; one would be indifferent as between parents, children, and siblings; and all of these would be more important than grandparents, grandchildren, aunts/uncles, and nieces/ nephews, all of whom would be treated equally. But as this is clearly not the case, a qualification, which takes the average life-span of individuals in any egalitarian category into account, is usually introduced. An individual’s children will receive more care and support than his or her parents, because they have longer to live. This is an awkward qualification for the sociobiologist because it is economic rather than genetic in nature—it implicitly recognizes the variation in material rates of return on investment in time and effort. And, of course, all this makes the complex calculations of neoclassical economic man (discussed in Chapter 2) seem so much more achievable. An obvious problem with this genetic approach to family relationships is that the mate of any individual making these calculations should be no more important than any other member of the opposite sex selected at random from the population. In some species, including our own, genetically unrelated mates or spouses are generally more important than our closest genetic kin. This is a critical flaw in kinship theory. There are other problems. It is highly improbable that one would treat an identical twin as 113


oneself, or treat a sibling as one’s child (even if both were the same age). In order to resolve some of these difficulties, Dawkins (ibid.: 105) introduces a further index—the ‘index of certainty’—arguing, not very convincingly, that although the parent/child relationship is no closer genetically than the brother/sister relationship, its certainty is greater. It is normally possible to be much more certain who your children are than who your brothers are. And you can be more certain still who you yourself are! This uncertainty about close genetic relationship leads to ‘selfish’ rather than ‘altruistic’ individual behaviour, we are told, even when the degree of genetic relatedness is the same. This argument is unconvincing and unnecessarily complex. To recapitulate, Dawkins advocates Hamilton’s ‘genetic relatedness index’, which cannot be usefully applied until it is qualified by another, and this time economic, measuring stick—the average length of remaining life. But even this adjustment is not enough. It is necessary to combine the mortalityqualified genetic relatedness index with a further index of certainty. In other words, the genetic-relatedness hypothesis, which is based on perfect information, can only be regarded as operational in a world in which information is imperfect. But even then it cannot explain the care that individuals in some species devote to their sexual partners, or to adopted children. It would be a hopeless practical guide for those wanting to know how to treat those around them, assuming they were permitted this degree of freedom of choice. This does not seem to be a problem for sociobiologists. Trivers (1985:109), for example, argues that we expect mechanisms of choice to evolve that reflect differential degrees of relatedness. Each individual will seem to value the reproductive success of others, compared to its own, according to the r’s [i.e. degrees of relatedness] that connect them. In other words, individuals will act towards each other as if they know what the underlying genetic relatedness is because they are ‘selected’ for that purpose. Trivers (1985:116) asserts that it is not proximity that is causing the kinship effects we observe in nature; on the contrary, kinship [genetic relatedness] causes animals to be near each other, presumably in order to enjoy an increase in altruism and a decrease in selfishness. Nevertheless, Trivers does feel compelled to discuss some possible ‘mechanisms of kin recognition’ in various species such as sweat bees, Belding’s ground squirrels, monkeys, and birds. He claims that these studies suggest the possibility that kin recognition is based upon smell and learning through early association. But, as Trivers admits, there is no firm evidence 114


for a genetic basis in these relationships. Indeed, it is more likely, as I will argue below, that family relationships are based upon economic bonds developed at an early stage in life. The kinship model leaves unresolved a number of important puzzles in the evidence. These include the positive relationship between ‘mild aggression’ and the intensity of personal relationships, the willingness of females to ‘adopt’ unrelated children, and the devotion of mating couples in some species. First, the problem of mild aggression. In reporting the behaviour of monkeys, Trivers (ibid.: 119) is puzzled by the observation that: Mild aggression is much more frequently directed toward unrelated individuals than toward relatives, but when the aggression is directed toward relatives, closer degree of relatedness does not reduce frequency of threat or attack. Quite the contrary, there is a steady, though non-significant, increase in mild aggression with increasing degrees of relatedness…close association permits more altruism but also throws individuals into closer competition, thus engendering more opportunities for selfishness. This is a major problem for kinship theory, which predicts greater ‘altruism’ rather than greater ‘selfishness’ as the ‘generation distance’ is shortened. Because Trivers is unable to explain the tension in close family relationships using the genetic-relatedness model, he introduces an economic argument— competition for scarce resources. This ‘explanation’ is a confusion of genetic ‘altruism’ and economic ‘selfishness’. Compare this with what I wrote (Snooks 1994a: 50)—before I had read any sociobiology2—regarding my materialist concentric-spheres model discussed in Chapter 2. There is always tension between the centre and the periphery no matter how short the economic distance may be, because all personal relationships are built up by the central individual during his or her lifetime in order to maximize his or her utility…the degree of tension appears to be inversely related to the economic distance, with most conflict and violence occurring between people who are closely associated with each other. Second, Trivers acknowledges the problems of the kin-selection model in explaining the observation that females in some species—he mentions Japanese monkeys, and we could add human beings—‘adopt’ unrelated infants and care for them as if they were their own. Trivers (1985:120) discusses the incidence of ‘alloparenting’ in Japanese monkeys: Kurland [1977] began his work assuming that alloparenting was altruistic. He expected it to be preferentially directed toward close relatives. Sometimes it is, as when older siblings babysit younger siblings…but in general, Kurland found, alloparenting was common 115


by females who had not yet given birth, and in 122 of 140 cases was directed at unrelated individuals. How does the sociobiologist respond to these most inconvenient observations? By simply, but inconsistently, arguing that those species that contradict kinship theory are acting selfishly. In Trivers’ words: ‘by taking kinship theory as true, we are able to infer that in Japanese macaques, alloparenting is usually a selfish act that prepares the young female to be a better mother when her chance comes’. Once again an economic argument—maximization of individual utility—is employed when the genetic-relatedness model fails to explain reality. As will be argued in the final section of this chapter, my materialist model provides a far better explanation of social organization in the animal world than the kinship model. ‘Reciprocal altruism’ Kinship theory is seen as the cornerstone of the sociobiological explanation of social organization in the animal and human worlds. Trivers (1985:135) tells us that: ‘Kinship is critical to distinguishing the various levels of organization.’ He goes on to argue: There is a kinship structure in every social group, and this kinship structure selects for biased exchanges in which individuals tend naturally to favor those to whom they are related by higher degrees of relatedness. Thus there is a fundamental change as we pass the level of the individual and go on to higher levels of organization: degrees of relatedness fall below 1 [less important than the self] and social conflict is expected. This, however, does not take us very far. There are many higher levels of social organization that cannot be explained by kinship theory, apart from the fact that greater social conflict can be expected. There is even an internal inconsistency here, because evidence shows that we can also expect social conflict within the family group. The desire to explain higher levels of social organization has led some sociobiologists to develop group-selection theories (Wynne-Edwards 1962), by which individuals evolve to devote themselves to the higher good of the group or species. This widespread genetically determined altruism would provide a basis for explaining wider forms of social organization. Unfortunately for its supporters, it has been shown by Dawkins (1989:7–10) and Trivers (1985:67–86), amongst others, that this ‘fallacy’ is based upon an ignorance of evolutionary theory. It would take only one selfish rebel determined to exploit the altruism of the rest of the group to provide the genetic basis for his progeny eventually to overwhelm the entire group. Hence, sociobiologists like Trivers have developed the concept of ‘reciprocal altruism’ to fill the vacuum. 116


Robert Trivers (1971) developed the concept of ‘reciprocal altruism’ to extend the theory of natural selection into a broader range of social relationships. It was an attempt both to build upon Hamilton’s work on kin selection and to fill the void left once group selection (favoured by some economists such as Friedrich Hayek) had been demolished. Trivers argues that, although two strangers do not possess a close genetic relationship, if an altruistic act by one of them is followed by a reciprocal act of altruism by the other, then both will have gained by substituting a lower risk of death for a higher one. The example he employs to illustrate this idea is that if the risk of dying on the part of a drowning man is one-in-two, and that on the part of the rescuer is one-in-twenty, and if they both attempt to save each other when one is in danger of drowning, then each individual will have traded a one-half chance of dying for about a one-tenth chance. If the entire society adopts reciprocal altruism, it will increase its genetic fitness. Natural selection, Trivers argues, will ‘favour’ a situation in which reciprocal altruism emerges as a permanent response, operating through an emotional system involving friendship, moralistic aggression, gratitude, sympathy, guilt, and a sense of justice. In response to the claim (Wilson 1975:120) that, while human society abounds with this type of reciprocal behaviour, the animal world is largely devoid of it, Trivers (1985: Chapter 15) details examples in the animal world of ‘reciprocal altruism’. This includes vampire bats sharing blood with those neighbours unable to find any; birds that respond less aggressively to near neighbours than to strangers, provided they do not violate the territory of the ‘owners’; baboons that support their neighbours in fights with more distant individuals, provided there is reciprocation; chimpanzees that develop alliances within small social groups based on mutual support; dolphins and whales that appear to provide assistance to others; and, of course, humans. As I shall argue, while these examples are intriguing, they merely indicate the tendency of animals to cooperate with one another whenever this is in the best interest of the individuals concerned. There are a number of problems with this attempt to explain social relationships in the animal and human worlds using the genetic model. In the first place it is entirely misleading to employ the term ‘reciprocal altruism’ to refer to social relationships based on mutual gain. The only acceptable meaning of the word ‘altruism’ is: ‘regard for others as a principle of action; unselfishness’ (OED). An altruist, in other words, is one who unselfishly assists other individuals even if he/she must suffer a net loss in utility. This is the very opposite of the principle of action—self-seeking individual materialism—embodied in the neoclassical concept of economic man. It is important to realize that the attempt by individuals to maximize their own utility by cooperating with each other cannot under any circumstances be regarded as altruism, even reciprocal altruism. Why? Because the end result is, if their expectations are fulfilled, that all individuals will gain more 117


through cooperative action than if they battled on alone. There are many circumstances in which an individual can only maximize his or her utility by cooperating with other maximizing individuals. This cooperative action, which does not preclude competition between co-workers, is motivated and sustained by self-interest, not by altruism. By using the term ‘reciprocal altruism’ to embrace cooperative behaviour that is aimed at maximizing the individual utilities of all parties, the sociobiologists have been responsible for creating considerable confusion in the minds of those not party to the specialized debate over the genetic basis for family and social relationships. The word ‘altruism’ in this debate should be replaced with the word ‘cooperation’. Failure to do so has clouded the more general issue of whether individual action is motivated and sustained by selfinterest or by genuine altruism. Those who believed the latter to be true have used this specialized debate in sociobiology and, more recently, in ecbnomics to support the more general proposition that mankind is driven by altruistic impulses. It amounts to a confusion of ends and means (Snooks 1994a:42–6). An individual can maximize his or her material advantage through either individual or cooperative action depending on prevailing circumstances. Consider the set of criteria employed to detect the presence of ‘reciprocal altruism’. Trivers (1985:362) tells us: In searching for reciprocal altruism in nature, we look for evidence that (1) degree of association is positively correlated with degree of altruism, and that (2) individuals tend to direct altruism toward those that direct altruism toward them, and to discriminate against non-reciprocators by failing to extend to them additional altruism. The frequency of interaction between individuals is critical, because when this is low, individuals that extend altruism will have insufficient opportunities to direct this beneficence only to others who tend to reciprocate, so that losses from non-reciprocators may outweigh the occasional gains. The meaning of this sentence is not changed, indeed it is enhanced, by substituting the word ‘cooperation’ for the word ‘altruism’. In fact, by doing so we will eliminate the semantic inconsistencies and the confusion of meaning. Also we will more easily recognize the fact that these criteria provide a framework for recognizing the degree to which individuals in nature cooperate to achieve their own ends. There is absolutely nothing altruistic about this behaviour. And we will notice how similar this framework is to the structure of economic game theory based on economic rationality. This Trivers (ibid.: 389–92) underlines with his attempt to place ‘reciprocal altruism’ within a game-theoretic framework. The second major criticism of the concept of ‘reciprocal altruism’ is that it is not at all persuasive. How is this genetic model ever to become operative? As fellow sociobiologist Edward Wilson (1975:120) has said: ‘Granted a mechanism for sustaining reciprocal altruism [a ‘selected’ emotional 118


systern], we are still left with the theoretical problem of how the evolution of the behavior gets started.’ like economic game-theorists, Trivers emphasizes the importance of repeated exchanges. But to explain these repeated cooperative actions we need a non-genetic theory; and if we can construct a persuasive economic theory, then the genetic model of Trivers is irrelevant because of its severe limitations. Finally, exactly what are the limitations of the genetic explanation of social organization? First, apart from the use of the word ‘altruism’, there is little connection between the kinship and ‘reciprocal altruism’ models. There is no encompassing model. Second, it is hard to see that there has been enough time for natural selection to operate on cooperative behaviour. Third, more consistent and broad-ranging alternative economic models can be developed to explain social institutions and organizations in both the animal and human worlds. In particular, human culture is so varied and complex that these simple genetic models will never do them justice. The ‘genetic view of social life’ (Trivers 1985:138) is severely circumscribed. SOCIAL EVOLUTION Social evolution to many sociobiologists is just another way of viewing the evolution of species. While ‘learned’ behaviour in animals can be passed down from generation to generation it does not evolve unless new and more developed species emerge. In the animal kingdom social evolution is dependent upon biological evolution. The pioneering sociobiologists, including Wilson (1975) and Trivers (1985), believe that this basic sociobiological approach can also be applied to human society where behaviour can, and sometimes does, change between generations. And, as we have seen, some even believe that sociobiology will eventually absorb the social sciences and humanities. Not surprisingly, social scientists have been slow to share this vision. Eager to demonstrate that they can contribute to an understanding of the evolution of human society, a number of sociobiologists have modified their initial position on the determination of human behaviour. Edward Wilson has made a number of steps in this direction. Initially taking a fundamentalist position on the role of genetic structure, Wilson (1978) later conceded that, while genes were the main influence upon human behaviour, they were not the only one. While it was conceded that learning and culture might have a modest influence in certain ‘culturally sensitive categories of behavior’, such as language and dress, Wilson (ibid.: 63) insisted that genes are still in control. In a well-known passage he (1978:167) asked rhetorically: Can the cultural evolution of higher ethical values gain a direction and momentum of its own and completely replace genetic evolution? I think not. The genes hold culture on a leash. The leash is very long, but 119


inevitably values will be constrained in accordance with their effects on the human gene pool. Since the late 1970s there have been a number of attempts by sociobiologists and anthropologists to model the role played by human genes in the evolution of society. These works focus upon the nature of the interaction between two sets of influences on human behaviour—one genetic, the other cultural. And parallels are drawn between biological and cultural evolution involving, respectively, genes and cultural units called variously ‘memes’, ‘culturegens’, ideas, and so on. The most notable of these studies are by Charles Lumsden and Edward Wilson (1981), Luigi Cavalli-Sforza and Marcus Feldman (1981), Robert Boyd and Peter Richerson (1985), and William Durham (1991). These theories are unusually complex and abound with impenetrable jargon, none of which is standardized. Hence I do not intend to go into any detail here. Not surprisingly, the Lumsden and Wilson thesis, which attempts to follow the alleged connection from genes through the mind to culture, is the one that most closely approximates the animal sociobiological model. It is largely concerned with the development of ‘epigenetic rules’, or ‘genetically determined procedures that direct the assembly of the mind’. These rules, which concern both cognition and its translation into choice and behaviour, are the restraints that genes impose upon human beings. They reflect the probability that one set of behaviour rather than another set will be adopted. Cultural evolution in this model is the outcome of an interaction between the epigenetic rules and the societal patterns that they influence (if not determine). At the other end of the range of this work is William Durham (1991), who argues that the main, but not exclusive, determinants of cultural evolution are cultural values that operate on decision-makers wanting to improve their ‘reproductive fitness’; and that there are two processes of evolution, one genetic and the other cultural, that interact in a variety of ways. He calls it a model of ‘coevolution’. These models have not been popular with social scientists, largely because they are both very general and deal only with simple social structures. In particular they treat the decision-making process in a very general and unsatisfactory way, and they focus on simple gene-like cultural units rather than on complex social structures such as legal and political institutions and modern economic and social organizations (Nelson 1995). And as far as I am concerned, they fail to capture the very core of the dynamic process. They focus upon elements at the very extremes of the continuum of causal influence—the genetic building blocks of individuals and the cultural diversity of human society—and attempt to draw them together into a model of social evolution. What they leave out is the dynamics of both the fundamental nature of society—which I call the primary dynamic mechanism—and the way this shapes our institutions and 120


organizations—the secondary dynamic mechanism. Also, they have no sense of exactly what they are attempting to explain. What is the nature of the dynamic process of human society? We must know what it looks like before we can model it. This is the fatal flaw of the deductive approach to societal dynamics. Little wonder that models are so diverse, complex, and impenetrable. Reality is, as we saw in The Dynamic Society and as we shall see here, so much simpler and straightforward than the ingenious, but totally unrealistic, deductive theories of sociobiology. THE SOCIOBIOLOGICAL APPROACH EVALUATED Sociobiologists employ an essentially deductive approach to animal behaviour and social evolution. They claim that this model has been adopted from Darwin. What they do not say is that they have completely transformed the Darwinian model of natural selection. They have stripped away the driving force in Darwin’s model, which was the life-and-death struggle for scarce resources, and have replaced it with a passive genetic sorting device, which they call ‘reproductive success’. Darwinian fitness for the ‘war of nature’ has been redefined: ‘fitness refers to reproductive success, or the production of surviving offspring’ (Trivers 1985:69). They have, in other words, converted Darwin’s economic model into a sociological model. Something very similar happened to Marx’s economic model when it fell into the hands of sociologists. Sociobiologists have transformed Darwin’s model in another way. They have converted it from a dynamic to a comparative-static model. This is why they have been able to dispense with the economic driving force in Darwin’s theory. What they do not realize is that genetic change is, as argued in The Dynamic Society, just one of the dynamic strategies that life-forms can ‘employ’ in pursuit of their blind desire to survive. They have little practical interest in dynamics because the data they employ are cross-sectional rather than temporal. They are compelled to observe and explain the behaviour of animals at a given point in time—their own era. Their discipline does not, indeed cannot, have an historical focus. Essentially their work involves testing the predictions of their models—such as kin selection and ‘reciprocal altruism’—against contemporary observations. When it comes to explanations of dynamics—of social evolution—they adopt a purely theoretical stance. Their dynamic model is, as we have seen, a sociological form of Darwinism. The only data available come from a comparison of social behaviour in different species at a single point in time. I have already suggested that this model of social evolution ignores the very substance of societal dynamics by focusing on the extremities of the range of causal influences—genes and social relationships. The data employed by sociobiology pose a number of critical difficulties for their model. Most of these data problems challenge the central 121


assumption that individuals in all species attempt to maximize their reproductive success. First, much of the data presented by Sociobiologists suggests that the forces driving social relationships in the animal world are more direct and immediate than those required for the maximization of an individual’s genes in the gene pool. One need only recall the examples of baboons and chimpanzees, where males trade grooming and protection for sexual favours, or of territorial mammals and birds that trade food and protection for sex. Most of these males show no interest in the survival of their offspring. A strange way to maximize reproductive success. Second, the role of physical attractiveness presents an awkward problem for sociobiologists. Trivers (1985:260), for example, is unable to answer his own question satisfactorily—Why should an individual be willing to increase the level of its parental investment when its mate is attractive?’—because the answer is economic rather than genetic. Third, similar problems are encountered over central issues of why reproduction largely occurs sexually rather than asexually, and why there is a high correlation between male longevity and the size of their ‘families’ (as in deer). These are problems that cannot be resolved while it is assumed that individuals are ‘selected’ to maximize their reproduction. Once again the resolution is to be found in an economic approach. Finally, sociobiological models of kinship are unable to explain either the attention that individuals devote to genetically unrelated spouses and adopted children, or the increase in mild aggression as the generational distance declines. None of these issues, however, presents any problems for the materialist model discussed below. The materialist model developed in Chapter 2 to explain human behaviour can be adapted here to explain the biologists’ observations of behaviour in the animal world. This materialist model provides a more comprehensive explanation of behaviour than the genetic model. This model is discussed under the three headings: the role of genetics; a new model of animal behaviour; and social organization. The role of genetics The genetic structure of animals has been determined, as Darwin argued, through the struggle to survive and reproduce in a competitive and hostile world. Those physical, emotional, and mental traits that assisted in this struggle became general throughout the population of each surviving species. The key question is how this genetic change influences the actions of individuals in any species. My understanding of human society, together with my reading of the evidence concerning animal behaviour, lead me to believe that genetic structure influences animal behaviour in the following ways: • It determines the basic drives, or ‘desires’, of animals to survive and, having survived, to satisfy the appetites for food, sex, and physical comfort. 122


• It determines the range of possible physical and ‘intellectual’ responses to stimuli. • It influences, along with the physical and cultural environment, tastes and personality. • It influences, along with the physical and cultural environment, the ways animals learn. Yet even where genetic structure determines the range of desires and capacities to respond to environmental stimuli, there is scope for non-genetic manipulation. Even fundamental desires can be controlled, redirected, and in rare instances even transcended. And inborn physical and intellectual capabilities can be extended through the acquisition of physical (strength, flexibility, agility) and human capital (learned) skills. What the genetic structure of animals does not do, I believe, is to programme the actions of individuals in the way that sociobiologists claim. It clearly does not do this for humans, and the evidence presented by sociobiologists and others inadvertently suggests that it does not do so for other animals. Recent experiments on animals such as chimpanzees, monkeys, dolphins, sea lions, and parrots suggest that animals possess not only cognitive skills but also a conceptual grasp of the symbols and words taught to them by scientist trainers (Linden 1993). Not surprisingly, the capacity of individuals to do so varies with species. For example, chimpanzees display far greater perception and understanding than rhesus macaques, in a similar way that 4-year-old human children do in comparison with 3-year-olds. Indeed, it is now clear that chimpanzees can formulate plans and make tools to achieve their objectives. They also employ elaborate tactics to manipulate and even deceive those around them to achieve social dominance and preferential access to food or sexual partners. In any case, why should we be any different to the rest of nature from which we have evolved? Just like other animals, we exercise choice within our genetic, physical, and economic constraints. Obviously the genetic parameters within which individuals operate vary across species. Humans have a wider range of physical and intellectual options than all other animals. While there is a hierarchy in this, the evidence suggests that all animal life exercises some real choice, a situation highlighted by the many examples of animal behaviour that cannot be explained by the genetic model. A new model of animal behaviour If there is choice in animal behaviour, how does it work? What would a nongenetic model of animal behaviour look like? It is a model in which motivation is characterized, as Darwin claimed, by an overwhelming desire to survive in the great competition for scarce resources and, having survived, 123


to satisfy the appetites. In a model of behaviour possessing some freedom of choice, it is not realistic to assume that individuals wish to maximize the number of their surviving children. Such ‘motivation’ can be justified only in a genetically determined model where there is no genuine choice—where individual behaviour can be compared to chess moves taken by a programmed digital computer. It is a model in which choice is exercised not by calculating the costs’and benefits of any investment of time and effort, but by imitating those who appear to be materially successful in life. Young males will imitate older successful males who battle with each other to gain control of economic resources, or territories, and who monopolize the attention of females by trading food and protection for sexual and other favours and for social status. Females, on the other hand, will select their mates by observing their strength and other skills (food gathering and sexual) in male-male and malefemale interactions. Their choice will depend on the attractiveness, vitality, and popularity of the males, and they will trade sexual favours, support, and companionship for food and protection. They will be attracted to those males to whom other females are attracted. Imitation is the major shaping force in life. In this process of decision-making, enterprising individuals will lead and, of these, the successful will be followed by the rest. This process does not involve more than a minimal amount of intellectual capacity. All animals, including human beings, have a remarkable ability to mimic those about them. And mimicry is all that is required. We have already highlighted evidence from animal studies to show how mimicry is employed in finding both new food sources and new mates. In similar life-forms this ‘decision-making’ procedure is simplified by the more narrow boundaries of their existence. The narrower the genetically programmed parameters of existence, the less ‘intellectual’ energy is required. None the less, animals do make non-programmed choices. They are not genetically determined automatons. Social organization We have seen how sociobiologists have attempted to explain the social interactions between both related and non-related individuals using their genetic model. Even if we assume, momentarily, that their model is correct, sociobiologists are not at all persuasive once they move away from the extended family. By contrast, the materialist model introduced in this book can explain, as we shall see, social organization at all levels of animal society. While the family is of central importance in human society, it is of even more significance in the animal kingdom. Just as in human society we can explain the family in economic terms (Snooks 1994a), this is also possible for non-human species. There are a number of key issues that need to be considered briefly. First, the relationship between males and females is based 124


on an exchange of food, shelter, and protection in return for sex, support, companionship, and even status. Both partners contribute to a cooperative relationship by specializing according to their comparative advantage. In other words, males and females seek out each other because, through this type of cooperative relationship, they are better able to maximize their individual probability of survival and appetite satisfaction. This is a relationship that cannot be explained using the genetically based kinship model, because, in the main, sexual partners are not closely related genetically. While this is one of the great failures of kinship theory, there is no such problem for my materialist model. Why, one might ask, if the relationship between males and females is economic, do they decide to raise children? Children are, except in human families, an unavoidable by-product of the satisfaction of sexual desires. They are not a matter of choice. What needs to be explained, however, is why one or more of the parents decides to feed and protect their offspring. Typically this is undertaken by females rather than males, who are largely occupied in the life-and-death struggle for scarce resources. My view is that females choose to invest time and effort in maintaining children largely as a physical reminder to male partners of their economic relationship. As females cannot join in the battle for scarce resources, they must encourage the victors to share their spoils. Children are continuing evidence of past successes in this respect. In the animal kingdom they are a substitute for a formal contract. Even in human society, where females wish to follow the traditional path of housewifery (and hence avoid direct involvement in the struggle for scarce resources), childless couples regularly adopt genetically unrelated children and raise them as if they were their own. They are physical symbols of the economic relationship between husband and wife and, if the relationship does fail, these symbols are (in a traditional setting) allocated by the courts to the female so that she continues to receive payments either from her former spouse or from society. It is interesting to observe changes in family relationships in Western society since the Second World War. With the growing market demand for, and hence the growing economic independence of, married women, there has been a significant decline in the number of children demanded by Western families (Snooks 1994a:65–7). Material goods and services have been substituted for children increasingly over the past half-century. In part this is due to the difficulties of working in the market and raising children, but more importantly, and as far as I am aware this is suggested here for the first time, the demand for children as a symbol of the economic relationship between women and their mates has declined as the economic independence of women has increased, which in turn is a result of the impact of technological change on the gender demand for labour. In modern Western society women have joined men in the market place in the struggle for scarce resources. Accordingly, female demand for children has, for the first time, 125


declined. This has nothing to do with the level of education of females as demographers often argue. But what is the basis for relationships in the extended family? I have already suggested that the genetic relatedness of kinship theory is not only mechanical and impossibly complex, but also unable to explain the evidence. Instead I have proposed a materialist model in which the strength of family relationships depends upon the relative importance of other family members in helping a given individual achieve his or her objective of maximizing the probability of survival and material advantage. This relationship is measured by the economic distance between a given individual and all other individuals. This model, which I have called the concentric-spheres model, can be applied not only to the extended family but to all relationships in human society. Why, then, are many of our closest relationships with family members? Basically, because it is with family members that we form our first associations. Because we begin our lives in a close association with our parents and siblings—and a less close relationship with other members of the extended family (less common today than in earlier generations)—and, as we need to cooperate with others to achieve our individual aims, we tend to invest time and effort in individuals to whom we are genetically related. This happens before we are able to make independent judgements, and by the time we are able to do so we have invested heavily in economic relationships with family members. In these relationships we specialize according to our comparative advantage and trade surplus goods and services. To change these relationships at a later date is both costly, because of the need to invest time and effort all over again, and difficult, because strangers are not readily accepted into new groups. Hence, in traditional societies new investment tends to follow old. But in modern society, where the economic benefits of relocating are often large, old relationships are abandoned and new ones formed. It is all a matter of economics. The same is true, I believe, in animal societies. The materialist model outlined above has no peer in sociobiology in explaining wider forms of social organization. As with the extended family, the bond between individuals can be explained in terms of the ‘economic distance’—the degree to which other individuals are required to maximize one’s material advantage—between them. It can explain both the competition between individuals for dominance of their own social group, and the cooperation between them when being threatened by outsiders; and for human society it can explain the various layers of economic, social, and political organization at the neighbourhood, local, regional, national, and international levels. This model is explained fully in Chapter 2. The important point, which requires emphasis, is that none of these social relationships has anything to do with genetic relatedness. Indeed, we can speculate that if these two explanations emerged in the same academic discipline, the less persuasive would be abandoned. But, owing to the barriers between disciplines, even unpersuasive theories are perpetuated. 126


CONCLUSIONS Biology has much to tell us about the role of genetics in shaping the deskes, tastes, personality, and learning abilities of all forms of animal life. Clearly all animal life is driven by biological desires. But the actions of individuals are not, despite the claims of sociobiologists, determined by their genes. Animal behaviour is not genetically programmed. Accordingly, there is scope for choice within the biological parameters of individual animal life-forms that have evolved over the past 700 million years, and that scope is at its widest in our own species. In human society choice is clearly based on economic considerations, and there are good reasons for believing that this is also the case in non-human society, even though the scope for genuine (i.e. non-genetic) choice will vary from species to species and in some will be severely constrained. Life is not matter of robotics.

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Part II HISTORY

Part IIA: Conquest society 6. Rome: sanctuary of the wolf 7. Tenochtitlan: citadel of the sun Part IIB: Commerce society 8. Greece: jewel of the Aegean 9. Venice: apparition of the Adriatic Part IIC: Technological society 10. England: Albion awakening 11. The United States of America: Phoenix rising

CONQUEST SOCIETY

The fortunes of human civilisation have been determined largely by war and conquest. For most of the past eleven thousand years conquest has been the dominant dynamic strategy of leading societies. Only since the Industrial Revolution has it been displaced by the technological strategy. The working out of the conquest strategy in human society has had a characteristic impact not only on the nature of economic outcomes but also on its institutional structure. In the pre-modern world it led to the eternal recurrence reflected in the rise and fall of mighty civilizations. The objective here is to show how this defining longrun strategy has shaped the institutions and organisations of pre-modern civilisation in both the Old and New Worlds. To do so we must be selective both because there are few ancient societies for which comprehensive information is available, and because, none the less, this subject alone could fill a series of books. Our focus in this section is on the Roman and Aztec societies. There is considerable misunderstanding about the nature of the conquest society. Instead of viewing systematic warfare as an integral part of the ancient economy, many see it as an irrational and entirely negative activity. On the contrary, conquest is the dominant sector in the ancient economy, and it is the central institution around which all other institutions are constructed. As can be seen from Figure II.1, the conquest society comprises four main sectors: the conquest economy, the household economy, the private economy, and the public economy. Of these the conquest economy is the largest and strategically the most important. It consists of institutions associated with both the planning and prosecution of conquest campaigns and the systematic extraction of tribute goods and slaves from conquered territories. It plays the major role in shaping and changing all other institutions by generating the strategic demand for inputs of labour from the household economy together with goods (both agricultural and industrial) and services from the private and public economies. As shown in Figure II.1, there is a reverse flow of income, tribute goods, and slaves from the conquest economy to the other three economies. The relationship between the other three economies is similar to that in any other society. 131

CONQUEST SOCIETY

Figure II.1 Diagrammatic model of the conquest society Source: Model developed from discussion in text.

Hence the conquest economy is like any other income-generating economy. Within this sector there is an application of labour and capital to risky activities aimed at providing supernormal profits. This should be seen as an income-generating process—similar in many respects to hunting in a palaeolithic society—and, hence, as an integral part of the conquest society. War for a conquest society, therefore, was neither an abnormal nor irrational economic activity. It was the main means of survival and prosperity in the pre-modern world. Only a fortunate few societies were able to depend instead upon the commerce strategy.

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6 ROME Sanctuary of the wolf

On the shield the God whose Might is Fire had wrought Italy’s story and the triumphs of Rome, for he had heard the prophets and knew of the times to come. (Virgil, The Aeneid (first century BC), trans. W.F.J.Knight) There were numerous conquest societies before Rome, including the Akkadian (2330–2230 BC), Egyptian (1575–1224 BC), Hittite (1600–1200 BC), Assyrian (911–612 BC), and Macedonian (338–323 BC). What we know of these conquest empires suggests that their experiences were similar to those of the Roman Empire. Their economic, political, and legal institutions, together with their various public and private organizations were shaped and driven by the unfolding conquest strategy. The way in which this occurred can only be fully observed in the case of Rome from 500 BC to AD 476. As Keith Hopkins (1978:8) explains: ‘Rome provides one of the few well-documented examples of a pre-industrial society undergoing rapid social change in a period of technical stagnation.’ This account begins by sketching the unfolding of the Roman dynamic strategy of conquest, and concludes by analysing how this shaped its economic, political, and social institutions. It shows how we can ‘know of the times to come’. THE RISE AND FALL OF ROME

Break-out by the wolves of Rome Rome’s origins go back to about 800 BC when people of Latin stock settled in simple villages on the steep sides of Palatine Hill. Here they could protect themselves from marauding tribesmen, were close to a good crossing of the River Tiber, and were safe from its periodically rising waters. The initial success of the Romans in a hostile environment can be seen in the spread of the small settlement into the lowlands between the Palatine and Capitoline Hills (see Figure 6.4). By the late sixth century BC this primitive settlement 133

HISTORY: CONQUEST SOCIETY

had grown into a vital city that, having steeled itself over the past few centuries through continual tribal warfare, was capable of defending itself and of making inroads into the surrounding countryside. At this time Rome was ruled by kings who, because of the need for effective military leadership, were elected from among the small ruling elite. These kings were advised by a body called the Senate, which consisted of representatives of the wealthier landowning warriors or patricians. There was also a popular assembly which represented the freemen of the city who were organized into thirty wards. This assembly could discuss only matters raised by the king and only by men nominated by him. While the assembly voted on these matters, it had no independence. It was the king and his Senate that controlled Rome’s conquest strategy. Roman legend tells us that the last kings of Rome were Etruscans who, in 509 BC, were expelled by the patricians and were replaced by a republic dominated by the aristocratic Senate. For the next five centuries, Rome’s dynamic strategy was determined by an oligarchy of aristocratic equals. From the establishment of the Republic, Rome’s military success increased dramatically as its armies fought their way out of their valley. Down to the mid-fourth century BC, Rome’s conquests were confined to the narrow coastal strip between the Apennine Mountains and the Tyrrhenian Sea, and their main opponents were the hill tribes of the Aequi and Volsci, the Etruscans and, after 390 BC, the invading Gauls, who defeated the Roman army and sacked Rome. The Roman response to these Celtic invaders was to fortify the city and to reorganize the army, replacing the Greek-inspired hoplite phalanx with a sword-wielding infantry. During this 170-year period, Roman territory (ager Romanus) doubled. But the major break-out into the rest of Italy occurred after 340 BC. In the three generations of continuous warfare to 264 BC, the Romans conquered the rest of the Italian peninsula, beginning with their rebellious Latin allies and ending with the Greek cities in the south. This rapid success, which led to an increase in Roman territory by a factor of twelve, was the outcome of centuries of intense struggle with the surrounding hill tribes, Etruscans, and Gauls. After 264 BC the Romans turned their attention to the rest of the Mediterranean. The first major campaigns were the Punic Wars against the Carthaginians between 264 and 241 BC and 218 and 1 BC. With the defeat of Carthage, Rome became master of the western Mediterranean and the extent of Roman territory quadrupled. Thereafter they turned eastward to the Greek world and by 146 BC they ruled the Greek peninsula, effectively doubling the extent of their territory. Continuing their eastern push the Romans had by 74 BC extended their influence into Asia Minor, along the western edge of the Black Sea, into Egypt, and along the North African coast as far as old Carthage. This involved a further doubling of Roman territory. Still the Republic drove relentlessly forward and by 44 BC, following the 134

ROME: SANCTUARY OF THE WOLF

Table 6.1 Net public conquest returns, Republic of Rome (million denarii)

Notes: 1. Data are fairly complete down to 167 BC, but sparse thereafter. 2. Does not include profits from captured mines—e.g. the silver mines of New Carthage brought in 9.0 million denarii p.a. Source: Jones (1974:114–15).

great campaigns of Pompey in Spain and in the east, and of Caesar in Gaul, Rome had extended its influence throughout the Mediterranean world and much of Western Europe. In the process the Roman Republic increased its territory by another 50 per cent. The returns to the Republic’s conquest strategy were extremely remunerative both to the state and to private individuals. After financing the conquest campaigns, booty paid into the treasury by the triumphant commanders was huge, as can be seen in Table 6.1; and private profits— earned by the army and its suppliers, by senators receiving bribes from foreign societies, by governors and their staffs exploiting the provinces, by the equites farming provincial taxes, and by equites and senators making loans to provincial communities and client kings—‘greatly exceeded public revenue’ (Jones 1974:114–19). Under the Principate, or the Roman Empire, Augustus and his heirs pushed the frontiers back even further into Western Europe until they reached their zenith in about AD 138. Once again this involved a doubling of the size of empire. But by this time the conquest strategy was exhausted and thereafter the frontiers became largely static and even contracted from time to time. Only the brilliance of Diocletian (AD 284–305) and Constantine (AD 306–37) restored the frontiers of empire and delayed the inevitable invasion of Rome by the barbarians (Visigoths) in AD 410 and the final removal of the emperor in AD 476. After some twelve centuries, the independent story of the Roman people had finally come to an end. No other people in human history had exploited the dynamic strategy of conquest with such consummate skill over such a long period of time. Rome finally fell, not because of any deficiency in Roman determination and skill, but 135


because the conquest strategy had been totally played out and because there were just no strategic alternatives. Hence, while the inflow of wealth was impressive under Augustus it began to decline thereafter, finally ceasing in the second century AD (Jones 1974:124–5). Also, with the growing sophistication of the state apparatus, the scope for private gain through campaigning and corruption was greatly diminished. More efficient systems of taxation replaced the booty of conquest. An unfolding dynamic strategy This chapter will show that the creation of the Roman Empire was due to the unfolding—the adoption, expansion, exhaustion, and collapse—of the dynamic strategy of conquest. As the conquest strategy develops and changes, so too does the resulting strategic demand for those institutions required to carry it out. To demonstrate this relationship we need to explore changes in Rome’s conquest strategy more closely.1 But first we need to outline briefly how the dynamic-strategy model for Rome worked. The conquest strategy is driven by a group of enterprising decision-makers—called dynamic strategists—who are determined to survive and, having survived, to maximize their material advantage. On their evaluation, the best dynamic strategy—determined by an intuitive benefitcost approach—in a Mediterranean crowded out by commercial interests is conquest. The broad conquest strategy which was pursued relentlessly for a millennium consisted of a number of substrategies: tribal defence, 800 to 509 BC; break-out from the Tiber Valley to the coastal regions, 509 to 340 BC; conquest of all Italy, 340 to 264 BC; the first overseas campaigns (Punic Wars), 264 to 201 BC; turning to the east, 201 to 146 BC; expanding on all fronts, 146 BC to AD 180; and, finally, defending an exhausted strategy, AD 180 to 476. In the Roman Republic the dynamic strategists are the senators, a landowning aristocracy, who grew in number from 300 to 900. They are supplemented and supported by the equestrian class (equites), who are involved in trade, business, tax farming, supplying war materials, and funding the political campaigns of some senators. They have a vested interest in supporting the war aims of the senatorial class (Harris 1979:97). Both the state and the elite invest in the conquest strategy in the expectation of supernormal profits. The state invests in military expeditions, military transport and communication networks, and an imperial bureaucracy; and the ruling elite invests in military and imperial skills, fame, and lobbying to attain high office so as to ‘get rich quick’. The return on this investment is high, with the state extracting booty and taxation from the conquered provinces, and the elite also grabbing booty and the high returns from imperial office. Even the common people support the dynamic strategy because they too have much to gain both as soldiers and citizens: as soldiers 136


they share in the spoils of conquest (Harris 1979:102–3), which can transform their lives (like winning the lottery today); and as citizens they enjoy subsidized consumption of necessities and entertainment. The Roman Senate is, in effect, a corporation possessing a form of limited liability and institutional longevity as the risks are shared by the elite families of Rome and are supported by the larger equestrian class. Until 30 BC, the Senate is in control of Rome’s conquest strategy, and thereafter it is in the hands of the emperor who invites the participation of the leading families. The ruling class invests in the conquest strategy and takes the major share of the profits, which it is able to translate into regular income through the acquisition of land. In the conquest strategy land is a financial asset as well as a productive resource. The dynamic pathway of Rome’s unfolding conquest strategy is charted in Figure 6.1. Here we see the expanding territory of Rome from 260 BC to AD 476 as the army—the major instrument of the dynamic strategists in the Senate and, later, the emperor’s palace—fought their way around the Mediterranean and into Asia Minor, the Middle East, and Europe. This territorial expansion went through four great steps: the early second century BC, the late second century BC, the second half of the first century BC, and the first century AD. Each major conquest was followed by a period of consolidation during which the gains made were digested and the institutional structure of society was extended to provide a basis for the next major conquest initiative. In absolute terms these territorial steps got bigger as the conquest strategy unfolded, but in relative terms they actually got smaller. This can be seen in Figure 6.2, a semi-logarithmic graph in which the slopes of the line indicate the rate of growth of territorial expansion. The great steps are still quite obvious, but it is clear that progressively from the mid-second century BC the rate of territorial expansion fell until after AD 138 it became negative. Nevertheless, the Roman achievement was remarkable. Table 6.2 shows that Rome achieved high and sustained rates of territorial expansion over very long periods of time. It also shows that the rates of expansion rose progressively from 510 BC to 190 BC and then declined gradually thereafter. This suggests that 190 BC was the watershed year that saw the transformation of the Roman conquest strategy from increasing to decreasing returns. None the less, for over seven centuries, between 340 BC and AD 420, Rome’s rate of expansion was about 2 per cent per annum, and if we limit our calculations to 340 BC–AD 120 the rate increases to 3.5 per cent per annum. This compares more than favourably with the longrun rate of expansion of the modern world as measured by real GDP, a comparable measure in this case. For example, real GDP for England over the six centuries to AD 1700 was 0.5 per cent per annum; for the world economy over the five centuries to 1992 it was 1.0 per cent per annum; and for both 137


Figure 6.1 Roman territorial expansion, 300 BC–AD 1200 Source: Based on data in Taagepera (1988:171).

the Western European and the world economies between 1820 and 1992 it was 2.2 per cent per annum (Snooks 1993a:247; Maddison 1995:19–20). And there were shorter periods when the rate of Roman expansion rose much higher than the rates that the modern world has been able to achieve. How would we describe the dynamic pathway of the Roman conquest strategy? Our data suggest two different ways for two different purposes. Figure 6.1 tells us that the task imposed on Roman society by the conquest strategy was growing in absolute terms over time. This suggests that the burden placed upon institutional arrangements by strategic demand was increasing. Figure 6.3, which presents the same data in percentage terms, suggests that the development path is a damped cyclical process around a downward sloping trend (at least after 190 BC). In terms of rates of change, therefore, the explosive beginning of Rome’s dynamic strategy of conquest on the world stage was followed every two generations with a further burst of conquest activity although with declining relative energy. This suggests that after the first three centuries Rome’s conquest strategy experienced diminishing marginal returns. This placed a further burden on Roman institutions to achieve greater efficiency in the extraction of resources from Rome’s conquest territories. 138


Table 6.2 Rates of Roman territorial expansion (% p.a)

Source: Calculated from Figure 6.1.

Figure 6.2 The rate of expansion of the Roman Empire, 300 BC–AD 1200 Source: Calculated from Figure 6.1.

The rapid overall expansion of the dynamic strategy of conquest, therefore, set the pace for institutional and organizational change in Rome. This expansion was driven, as we have seen, by a wealthy landowning aristocracy that established a corporation with limited individual liability 139


Figure 6.3 Economic fluctuations in the Roman Empire, 300 BC—AD 470 Source: Calculated from Figure 6.1.

and considerable longevity—a corporation they called the Senate—to enable investment in war and the reaping of the handsome returns from that investment. The continuous nature of this strategic investment led to a growing demand for a range of inputs including facilitating institutions and organizations. This was a demand-led process of institutional change. The unfolding of the conquest strategy involved qualitative as well as the above quantitative considerations. As strategic investment grew, the demand it generated was not just for more institutions but for different and better institutions. The changing structure of strategic demand helps to define the various phases in the development of Rome’s conquest strategy. The defining characteristic of Roman warfare is its continuous nature. Rome was a society committed to war and conquest as a business. It is a characteristic that emerged early because it was the only dynamic strategy available to Rome in the overcrowded Mediterranean world (Snooks 1996:291–2). And it is a characteristic that is well known. William Harris (1979:9, 10) says of the early Republic: ‘The Roman state made war every year, except in the most abnormal circumstances’, and even after the 140


seasonal nature of war declined in the third century BC (particularly after 218) ‘war continued to be an utterly normal feature of Roman public life’. Stephen Oakley (1993:14) also tells us: Thus it was in the fifth century [BC] that many of the classic structures leading to Roman expansion were born: the use of allied manpower, the need for land, the hope of profit from war, and above all the expectation that one would have to fight almost every year… For one factor will always be apparent in an account of Roman expansion in Italy: these were years in which the Romans were almost constantly at war. Before the Punic Wars, which marked the first phase of Rome’s conquest strategy, continuous war expressed itself in annual campaigns of conquest against its Italian neighbours. The record suggests that Rome had begun a systematic and professional conquest strategy by at least the mid-fifth century BC. We know that, for at least fifteen of the twenty-five years from 440 to 416 BC, Rome was in deadly conflict with its neighbours. And for the following 150 years, from 415 to 265 BC, there were only thirteen (or less than 10 per cent) when no fighting occurred. The temple of Janus, which admitted worshippers whenever Rome was at war, was only rarely closed. Also, in the 92 years for which records are available between 367 and 264 BC, some 67 triumphs were celebrated (Oakley 1993:29). Hence, within two generations of the establishment of the Roman Republic, war had acquired an annual rhythm with campaigns being embarked upon each summer when the demands of agriculture were minimal. This annual operation of the conquest strategy led to a regular demand for military, government, and support organizations that provided military leadership, and administrative skills, together with a range of formal institutions, such as a political oligarchy, a warrior elite, a legal system, and a system of property rights—and informal institutions—such as social and military conventions. Not only was there a continuous demand for facilitating institutions, but this demand became more complex as the conquest strategy unfolded. We shall see how the structure of the political system, the army, the justice system, and the system of education changed to accommodate these growing demands. With the Punic Wars of the second half of the third century BC, which ushered in the second phase, the nature of the conquest strategy changed significantly. The relatively small annual wars in Italy were replaced by much larger, less frequent, but still regularly launched overseas wars. The conquest strategy was still being pursued continuously even if not annually. As we have seen from Figures 6.1–6.3, overseas conquest pulsated to a reasonably regular rhythm: each century between 264 BC and AD 138 Rome initiated two major conquest pushes or, on average, one every fifty years. In addition, wars of defence were being fought all the time. 141


The longer duration between conquest offensives was a function of the much larger scale of operations of Rome’s dynamic strategy. It took a generation or so to digest the returns from the last big push and to develop the economic and institutional structure required for the next one. Hence, we cannot agree with a recent evaluation—a reaction to the arguments of Harris (1979) and Hopkins (1978:25–37) that war was a ‘continuous’ activity during the last two centuries of the Republic—that ‘Roman expansion was a patchy, untidy business, and we must take full account of this when seeking to explain the processes which were at work’ (Rich 1993b:53). Conventionally, supply factors such as ‘manpower limitations’ and ‘aristocratic rivalry’ are invoked to account for this alleged patchiness. The evidence in Figures 6.1–6.3 shows that conquest was regular rather than ‘patchy’ and this can be explained on the demand side as the outcome of the unfolding of Rome’s conquest strategy. Hence the resulting strategic demand for new and more effective institutions involved a systematic mechanism rather than a more random response. An important part of the process of consolidation following each large overseas offensive was the investment of conquest profits in land. As will be shown, this was a financial mechanism by which periodic conquest profits were converted into relatively secure assets that would generate a steady and predictable annual income. This is similar to the way windfall gains today are invested in securities such as government bonds, debentures, and other secure income-generating property in order to ensure the maximization of material advantage over one’s lifetime. While the investment of conquest profits in land is well described by Keith Hopkins (1978: Chapter 1), he interprets it as a sociopolitical mechanism that generates class conflict over land and leads to the displacement of a free yeomanry by the inflow of slaves. In contrast, I see it merely as a financial mechanism to ‘launder’ the profits of conquest. The central economic mechanism involves the unfolding of the dynamic strategy of conquest which generates demands that are responsible for transforming not only the real economy but also the institutional structure. In the case of Rome it was the demands of the dynamic strategy for labour and supplies for the conquest army that led to citizens leaving their small properties and to the landowning aristocrats reorganizing their rural properties on the basis of slave labour. The conflict in Roman society was not primarily over land but over who would control and benefit from their dynamic strategy. Those who controlled the dynamic strategy had the resources to control the land, which in a conquest system is the equivalent of a financial asset. The third phase in the conquest strategy emerged in the first century BC when Rome’s unfolding dynamic strategy required conquest investment on an entirely unprecedented scale. We can think of the scale of warfare required by the developing conquest strategy as a function of the length of the Empire’s frontier. As the frontier expands, the Empire is brought into 142


conflict with a multiplying number of societies. It is a geometric relationship. In this period of Roman history, strategic demand challenged the entire fabric of the sociopolitical structure of the Republic, and found it wanting. If Rome’s dynamic strategists were to continue pursuing the conquest strategy to its logical conclusion, they would need to mobilize resources, both finance and labour, on a scale hitherto not contemplated. As it transpired, Rome’s decentralized, power-sharing system could not cope with these demands and had to be replaced, after great difficulty, with a more centralized system of decision-making. Naturally, such a momentous change could not occur without considerable internal conflict because it meant that only one of the entire 900 or so senators, who represented the elite families of the Republic, would end up controlling Rome’s dynamic strategy. The rest could not be expected to give up without a struggle. Hence, within the context of an unfolding conquest strategy, the civil wars of the first century BC were inevitable. Needless to say, the overall situation was not seen this clearly by the participants. But, with all the senators struggling to maximize their individual material advantage—which meant attempting to exercise control over a conquest strategy that was changing rapidly—a solution eventually emerged. This solution, as we shall see, was the Principate, in which one man, Augustus, and later his heirs, took over the dynamic strategy and used it to drive Roman society forward for a further 170 years until it was finally exhausted. The civil wars of 88–82 BC and 49–31 BC, therefore, were a struggle for control of Rome’s dynamic strategy. And the struggle was acted out between the Senate and its great generals who had to be given extraordinary powers if the conquest strategy was to be continued. These great generals included Sulla and Marius during the first civil war, and Pompey, Caesar, Anthony, and Octavian during subsequent civil wars. In their pursuit of material advantage the Roman senators unleashed forces that ultimately they could not control. While they feared that their great generals might not lay down their arms at the conclusion of their conquests, they were prepared to take the risk because the potential rewards were great. The Senate gambled and lost. The final phase began with the exhaustion of Rome’s dynamic strategy in the early second century AD. The mechanism of decline and collapse has been discussed in The Dynamic Society (1996:397–9). What concerns us here is how the end of the dynamic strategy influenced Rome’s sociopolitical structure in its remaining three centuries. Basically, with the cessation of the profits of conquest, Rome attempted to fashion an institutional structure that would minimize the cost of defending the Empire and would maximize the amount of revenue that could be extracted from individuals within the boundaries of empire. As it turned out, these two objectives were in conflict. The attempt to extract as much revenue as possible, for example, led to the development of a vast bureaucratic structure that became a law unto itself and that indulged in its own form of empire-building within the Empire. 143


With the exhaustion of the conquest strategy, therefore, rent-seeking replaced profit-seeking. At the same time the main economic activity of the Empire reverted to farming, but it was a new type of farming. As we shall see, the large estates moved from large-scale farming using slave gangs to scattered-strip farming using free and slave family tenancies in exchange for the payment of some combination of rent and labour services to work the home farm. This change, which occurred over some three centuries, was gradual but sustained, and was brought about by the cessation of both conquest demand for labour and materials and conquest supplies of plunder and slaves. A ‘feudal’ agricultural system was, in the existing economic circumstances, the best way to extract as much surplus as possible from the population now that the profits of conquest had dried up. And the landowning elite were assisted in this by an absence of other forms of demand for labour and the growing uncertainty of life, both of which encouraged citizens to exchange freedom for security. As always in a society that has exhausted its dynamic strategy, rent-seeking comes to the fore in both the private and public sectors. This is not a longrun growth-inducing dynamic strategy, but rather a shortrun redistributive tactic. In a similar way the vast military structure had no choice but to adapt to new circumstances in which resources and income could be extracted only from within the Empire rather than from barbarians through conquest. As other sources of income were not available, the garrison army of about 300,000 men—which together with their families probably numbered 1.5 million—literally had to live off the land. To do this they became committed to the defence of their own province, and could rarely be persuaded to assist in the defence of other provinces. Constantine’s solution, as we will see, was to create a mobile army of about 100,000 men funded from taxation and, increasingly, from army requisitioning. In the end this rent-seeking tactic by the army was self-defeating because it generated growing opposition and hastened the shifting allegiance of the population from the central government to regional warlords. Hence, even in the final phase of a conquest society, the changing organizational and institutional structure is determined by the dynamic strategy—or, more precisely, by its sudden cessation in a world for which it had been the architect. In the case of Rome, this involved a long slow process of adjustment to an economic, political, and social form that was compatible with the prevailing neolithic technology. The process by which institutions had developed to the second century AD was now thrown into reverse—a reversal that cannot be explained by evolutionary models. Conceptually the outcome could take one of a number of alternative forms, but the one that emerges—in the case of Rome, a system that formed the basis of European feudalism—depends on what I have called relative institutional prices. In other words, the form that emerges will tend to be the most cost-effective 144


institutional response to the demands generated by the newly emerging dynamic system in those historical circumstances. And, as relative institutional prices change as the dynamic strategy unfolds, the reversal of this process will never replicate earlier institutional forms exactly. THE CHANGING STRUCTURE OF ROMAN SOCIETY The early Republic Before the Roman Republic embarked upon its remarkable imperial journey, it was based upon a self-sufficient peasant economy in which surpluses were small, trade was limited, and monetization was virtually non-existent. While the evidence is not extensive, it would appear that the central economic figure of the early Republic was the peasant farmer-warrior who, operating from his family farm, provided his own armour and weapons and engaged, under the leadership of consuls elected by the people, in annual battles against his neighbours (Hopkins 1978:19–20). War was not a deadly game played by the elite as in Greece, but was a regular business activity that involved the entire adult male population. It arose from the realization that they had a comparative advantage in raiding activities, owing not to any complex benefit-cost calculation but to the imitation of successful raids that eventually led to a major conquest strategy. While the yeoman was the mainstay of the early Republic, there were others above and below his station in life. There was an upper class which owned larger estates that were either rented out to tenants or worked by agents of the owner using a combination of free labour and slaves. Yet even those men were not particularly rich. The rents received by the elite, together with the taxes raised by the state, often paid in the form of food rather than money, exhausted most of the surplus generated by the Roman peasantry (ibid.: 16–18). Even after 167 BC, when Romans in Italy were no longer required to pay land taxes, peasant circumstances were little changed as landlords merely increased their rents. Below the yeomen was ‘a significant minority of dependent peasants who got some of their livelihood by working for those who were better off’ (ibid.: 22). But this wage work, paid in kind, was intermittent rather than regular and restricted rather than widespread. And it is thought that many of these dependent peasants were endlessly in debt owing to the variable nature of Mediterranean agriculture and the imposition of sudden emergency taxes. The vicious cycle of bad harvests, high interest rates, debt bondage, and sale into slavery (before the practice was outlawed in 326 BC) characterized the lives of the poorer peasants (Finley 1985:69–70). What of the sociopolitical structure of the early Republic? Hopkins (1978:19) tells us that before the early third century BC ‘there was little superstructure, no institutions such as a professional army or permanent 145


bureaucracy which depended upon the regular delivery of a large surplus’. Why? We are told that the area governed directly by Rome in the early third century BC was not large and rich enough to support sizeable concentrations of wealth. The political system reflected the widespread obligation to bear arms and the widespread ownership of land; although far from democratic, it effectively limited the extent to which most citizens were exploited. The nobles collectively probably owned much of the best land, but typically had only modest estates. Few of the farms were large enough to require the employment of non-family labour throughout the year. (ibid.: 24) Yet we need to examine the institutions that did exist at this time in order to understand how and why they later changed. First the political structure. In the early Republic various popular assemblies had power over legislation, but it was the Senate that exercised effective political control. While the Senate could not make laws it could pass decrees (senatus consulta), it dealt with security crises, it controlled treasury expenditure and the activities of financial officials, it allocated funds to censors (who took the census, controlled petty corruption and public morals, and supervised government contracts and leasing of public property), sent and received embassies, appointed provincial governors, supervised magistrates and the state religion. Before the end of the third century BC only male representatives of the upper class, the patricians, could be considered for membership of the Senate, which numbered 300. And within the Senate a member could only be elected to public office if he had served for ten years in the army, because all office-bearers had to be able to command a large army when called upon to do so. The objective of the Senate was to share power between members of the ruling elite, and to do so they manipulated (through bribery and client relationships) the popular annual elections of consuls and praetors to deal with major strategies such as war. By rotating power the ruling elite maintained control over the chief executives and prevented the emergence of potential tyrants. While the early Republic was, in theory, a democratic polity, in reality it was run by the patricians through the Senate. There were three major assemblies of the people—the comitia centuriata., the comitia tributa, and the concilium plebis— that were supposed to guarantee democracy (Bradley 1990:64–77). The comitia centuriata, which met outside the city in the Field of Mars (god of war), was the most important of these, as it elected the consuls and praetors (higher magistrates) who essentially controlled the dynamic strategy of conquest. The two consuls commanded the army, conducted the main elections, presided over the Senate, and implemented Senate decisions; while the six praetors controlled the judiciary, sometimes commanded armies, could summon the comitia centuriata, could introduce legislation, and could issue 146


edicts that were an important source of Roman law. The comitia tributa, which could be summoned by the higher magistrates, elected the four aediles (who controlled economic and urban affairs) and the eight quaestors (who were in charge of financial and administrative matters), made laws, and acted as a court of appeal. Finally, the concilium plebis, which consisted only of plebeians, elected plebeian officials such as the ten tribunes, who defended the lives and property of their electors and could veto the election and action of magistrates and the laws and decrees of the Senate. The tribunes were at this time members of the ruling elite who controlled the assembly for the benefit of the patricians. Only later did they use their position to advance causes not in the interest of the Senate. In the early Republic the Senate had firm, if indirect, control over Rome’s dynamic strategy. And it was able to do so without a professional bureaucracy. Much of the business of the state—including responsibility for public property, the undertaking of public works, the raising of some revenues, and the provisioning of the army—was delegated to private agents called ‘publicans’ (Levi 1988:73). The second major organization was the Roman army. As suggested earlier, it was based on self-financing peasant-farmers, and was raised annually under the direction of the consuls (sometimes a consular tribune or a ‘dictator’). During the early Republic the number of troops recruited was usually 8,000, enough for two legions. As Rome began to overrun the Italian peninsula, the army was divided into legionarii (Roman citizens) and socii (allies) who fought on the wings of the legions. Each legion, consisting of 4,000 men, was divided into three lines of ten ‘maniples’ (divided into two ‘centuries’). The first line consisted of light-armed soldiers (velites), the second of javelin and swordwielding hastati, and the third line of principes. This organization remained unchanged until the reforms of Marius around 104–103 BC. Directed at highly competitive neighbours, Roman wars were based on short summer campaigns, generally of a few months in duration, after which the army was disbanded to enable the warrior-peasants to resume farming. Roman warfare, we are told, ‘had an annual rhythm’ (Harris 1979:11–12; Rich 1993b: 44). These summer military activities, which were underwritten by small farming surpluses, were financed from the spoils of conquest. The object of the exercise was to extract plunder from the surrounding tribes in order to supplement the income generated by agricultural activities. Needless to say, the larger investors in this dynamic strategy, the ruling elite, received the greatest return, but the warrior-peasants also received a share that by the early second century BC amounted to the equivalent of three months’ subsistence for a rural family. Payments made to centurions were about twice that of a common soldier. And the state claimed booty and land confiscated from neighbouring Italian tribes (Hopkins 1978:38,40). War was a lucrative business. The other major institution was religion. While the dynamics of the state religion of Rome will be discussed in more detail later, its institutional 147


structure will be outlined here. While household gods (Janus, Vesta, Penates, Lares, and Genius) were worshipped privately, the state had firm control over public worship (Ogilvie 1969). The state religion centred on a triad of gods: Jupiter (protector of the state), Juno (protector of women), and Minerva (patroness of craftsmen). As the influence of Greek culture increased, these gods were associated with their Greek counterparts: Jupiter with Zeus, Juno with Hera, and Minerva with Athena. I will argue later that religion was used by the state to support its dynamic strategy of conquest, and that it rose and fell (to be replaced by Christianity) with that strategy. To achieve this end, the state established a number of colleges for priests and priestesses—the Pontiffs, the Augurs, the Fetiales, the Flamens, and the Vestal Virgins—that were responsible for different aspects of Rome’s official religion, particularly the rituals of war and conquest. As religion was an important branch of state administration, it is not surprising that the priests, nominated for life, were also active politicians and included senators and magistrates. In addition to uniting the citizens of Rome in the celebration of the conquest strategy, the state religion also played an important role in the making of political and economic decisions by consulting omens of various sorts from the gods. This is not, as it may appear at first sight, an irrational process. As argued elsewhere (Snooks 1993a:95–104), the priests who interpreted the omens were only using the apparatus of religion to provide their advice with authority. The advice itself was based upon the priest’s knowledge of history and current affairs. They did no worse than economists do today. The middle Republic Structural change in the Roman economy appears to have accelerated by the end of the third century BC (Hopkins 1978: Chapter 1; Levi 1988:75). Increasingly, small grain-producing peasant holdings were amalgamated and transformed into larger estates, or latifundia, producing sheep, cattle, olives, and wine. To allow this, it was necessary to import grain (often in the form of taxes) from Rome’s provinces, particularly Sicily and Africa. Hence Roman agriculture was transformed from small-scale peasant subsistence to largescale production for expanding urban markets, particularly in the city of Rome. How do we account for this structural change? Clearly it was a complex process, but the fundamental force was the dynamic demands of Rome’s strategists—a term more relevant than ‘entrepreneurs’. As the Senate’s conquest business grew and Rome’s influence spread throughout Italy, it was deemed necessary to establish colonies and garrisons of permanent soldiers. The ruling elite opted, in other words, for a territorial conquest strategy rather than a hegemonic conquest strategy (as employed by the Aztecs) that does not require permanent garrisons. The reason was that, owing to the rugged terrain of the Apennine Mountains, hard-won conquests could be 148


retained not by the threat of retaliation as on the Mesoamerican plateau, but only by a permanent Roman presence. But to meet this growing strategic demand for families for colonization and professional soldiers for permanent military garrisons, it was necessary to liberate Roman peasants from the land. This could be achieved only by consolidating peasant holdings and by working these larger estates with capital and slaves that could be obtained through conquest. The Roman nobility—the strategists of Roman society— were quick to respond to these forces expressed through the market. Accordingly, between 338 and 218 BC some 100,000–250,000 Romans emigrated to the Italian colonies, and between 194 and 177 BC, a further 100,000 were settled in some twenty colonies in north and south Italy (Hopkins 1978:21; Patterson 1993:100–8). Hence, this central change in agricultural organization was the result not of the inflow of slaves forcing peasants from the land as Keith Hopkins (1978: Chapter 1) has argued, but of the changing demands generated by an unfolding conquest strategy. From the late third century BC to the emergence of powerful tribunes in 133 BC, the Senate remained the major policy-making institution in Rome. The larger scale of political activity was underwritten by a transformation in the state’s financial basis from plunder to revenue raising. And, as Margaret Levi (1988:77–94) shows, revenue could be raised more efficiently by tax farming, undertaken by the equestrian class (equites), than by developing a professional bureaucracy. Even though Roman territorial influence expanded more rapidly in the middle Republic than in any other period—as Rome broke out of Italy into the lands surrounding the Mediterranean—the Senate proved equal to the task. The ruling oligarchy was able successfully to pursue its conquest strategy and fully to exploit the opportunities it presented. It was Rome’s military institutions and organizations that changed most rapidly during those expansionary years. The army, which became increasingly professional for reasons discussed above, changed its basis from the warrior-peasant who fought only for a few months each year to the landless citizens who agreed to serve for at least seven years (Hopkins 1978:32–4). Hence, citizenship rather than landownership became the prerequisite for entry into the Roman army. This was a fundamental transformation that was never achieved in the Aztec army of the New World. Also, the size of the Roman army increased enormously. For the thirty years after the wars against Carthage, the size of the army did not fall far below 50,000 men (ibid.: 33). Within the Roman Republic, the important support institutions of education and law became more specialized. Once again this was in response to the changing demands of the conquest strategy. In the early Republic, children received instruction in the home from their parents—boys were taught by their fathers to read and write, to understand the political system and the law, to farm, and to be warriors; and the girls were taught domestic skills by 149


their mothers. Certainly by the second half of the third century BC, and probably long before, primary schools for both boys and girls were established in Rome by Greek ex-slaves. Even secondary schools for boys (for ages 12–15 years), which taught Greek and Latin literature (including Homer’s Odyssey), history, philosophy, and rhetoric, were also flourishing at this time. By the end of the Republic there were more than twenty grammar schools in the city of Rome (Hopkins 1978:76–7). None the less, formal education was limited to the children of the ruling elite—those who would take charge of Rome’s dynamic strategy of conquest. Even fewer boys, at the age of 16 years, would have enrolled in tertiary institutions which taught rhetoric, at first in Greek and then in Latin. Interestingly, as Hopkins (ibid.: 78–9) shows, this training in rhetoric was attacked by more orthodox elements in the Senate and was actually banned in both 161 and 92 BC on the grounds that it was a waste of time, a slick way of presenting arguments, and that it diverted attention from the military arts. In this, however, the Senate was unsuccessful. Hopkins (ibid.: 78) tells us that repression failed; rhetoric flourished. Rhetoricians developed complicated rules on rhythm, on style, on the organisation of arguments; they taught advocates how to plead in court, and would-be politicians how to sway the electorate; all were taught how to expatiate on moral problems, and how to eulogise the dead. This requires further investigation. Why did the Senate really oppose rhetoric and why did the elite young ignore their elders? Plutarch, in Cato the Elder, tells us that Cato ‘was afraid that the younger generation might allow their ambitions to be diverted in this direction [to Greek culture], and might come to value most highly a reputation that was based on feats of oratory rather than upon feats of arms’ (Plutarch 1965:145). In other words, Cato was mindful of the essential fact that Roman dominance depended on its military prowess and was concerned that if the young were seduced away from military pursuits by this Greek fashion called rhetoric, the Republic might be endangered. On the face of it this concern seems reasonable. Why then was he ignored? Was it a matter of culture changes transcending the economic basis of Roman ascendance? The short answer is no. By the middle years of the Republic the conquest strategy required, in addition to military prowess, political and administrative skills to rule and manage Rome’s rapidly expanding empire and its increasingly complex society. The unfolding of Rome’s dynamic strategy generated a changing demand for skills and, hence, for support organizations and associated institutions. Education played a materialist role rather than the cultural role ascribed to it by Hopkins (1978:79) or the simple imitative role embedded in what he calls the ‘conventional diffusionist view’. Similar developments occurred in the institutions of the law. Once again Hopkins (ibid.: 80) tells us: ‘New institutions were created, and they were staffed by new personnel, specialised lawyers (iuris consulti) and advocates 150


(advocati, causidici, patroni), who not only filled new roles but also talked and wrote in a specialised language, the language of Roman law.’ These developments saw a transformation from religious ideas and practice, controlled by patrician priests, to a secular body of knowledge dominated by professional lawyers. In the process, Roman law became more flexible and capable of handling rapidly changing situations and organizations. In the second century BC, for example, the strict formula in litigation was replaced by a procedure in which statute law could be adapted to rapidly changing conditions. What was the objective of Roman law and why did it become more flexible and professional from the middle Republic? ‘Roman law,’ Hopkins (ibid.: 85) tells us, ‘was not merely a means of expressing and therefore of controlling political conflict within the ruling class, it was also a mechanism for protecting upper class property.’ This conclusion supports my central thesis that institutional change is driven by the dynamic strategy. In the first place, the law had to take a more flexible approach to conflict resolution as the unfolding dynamic strategy provided new opportunities for those outside the elite, such as the equites, who grew rich on tax farming and from the acquisition of large estates. These men were becoming essential to the successful pursuit of the conquest strategy and their position and relationship with the patricians required formal recognition. Second, greater flexibility of legal institutions was required to cope with the changing property rights resulting from the development of the conquest strategy. Something of this is reflected in the following evaluation by Keith Hopkins (ibid.: 83): As the sphere of Roman influence widened, Romans had extensive legal dealings with foreign nationals; they also faced the new problems of governing a complex state. These changes must have encouraged corresponding developments in Roman law; but obviously, there was no neat fit between imperial expansion and increasing legal sophistication, only an observable trend in substantive law and in legal procedures. In fact there is, as we shall see, a reasonably ‘neat fit’ between the demands generated by the unfolding conquest strategy, on the one hand, and institutional change, on the other. Somewhat more problematical is the institution of publicly staged state violence. It is usually argued that state violence is part of the exercise of political control (Hopkins 1983:29) or of the attempt to gain control over economic resources (North 1981:21). This, of course, views violence as an instrument used by the ruling elite to control less powerful individuals or groups in society. It ignores those regular displays of violence in which large numbers of spectators are voluntarily involved. When addressed, this is usually explained as serving some psychological purpose at the community level (Hopkins 1983:30). 151


While I have no reason to doubt that there is some validity in these conventional explanations, when we are dealing with conquest societies it becomes clear that systematic public displays of violence perform an even more significant function. They involve a symbolic acting out of the dynamic strategy of conquest in order to encourage strategic conformity, to exorcize fear, and to engender the strategic confidence necessary to pursue conquest to its logical conclusion. In Rome this function was performed by gladiatorial ‘games’, and in Tenochtitlan by religious ritual centred on largescale human sacrifice. Gladiatorial combat is first recorded in Rome in the same year that the Republic began its great break-out into the Mediterranean. The timing coincides with the beginning of Rome’s empire. In 264 BC, we are told (ibid.: 4), the ex-consul D. lunius Brutus Pera and his brother held a small gladiatorial ‘show’ involving three pairs of combatants given in honour of their dead father. Over the next two centuries as Rome’s conquest strategy unfolded, this type of event grew in popularity and was used not only to honour the dead but also to celebrate the growing number of overseas military triumphs. In 46 BC Julius Caesar staged games, dedicated to his dead daughter and to his recent victories in Gaul and Egypt, which involved hundreds of pairs of gladiators, condemned criminals, prisoners-of-war, and exotic animals such as elephants, together with pitched battles between opposing forces of infantry and cavalry. By the late Republic, what had begun as private celebrations had become public performances closely associated with the conquerors and conquests of Rome. Aristocratic families vied with one another to stage, and even to participate in, the most spectacular games in order to enhance their prestige so as to promote their political influence. Gladiatorial combat became so popular that it was substituted for chariot races—the earliest celebration of war and conquest—in official games staged by officers of the state. Before the Colosseum was opened in AD 80, official games were held in the forum (see Figure 6.4). When he became emperor, Augustus also presented largescale games and even attempted to restrict the competition between aristocratic families. The accepted explanation of Augustus’ intention is that it was ‘part of his general policy of limiting aristocrats’ opportunities to court favour with the Roman populace’ (Hopkins 1983:6). While there is probably some truth in this argument, it does not go far enough. Augustus, and subsequent emperors, saw gladiatorial games as a way of dramatizing, and involving the entire populace of Rome in, the dynamic strategy of conquest. Naturally, as the supreme dynamic strategist in Rome, Augustus attempted to gain control over these war-games, just as he did over other instruments of the conquest strategy such as religion. Clearly, he did not wish to ban aristocratic war-games because it was in his interests to promote aristocratic participation, both actual and symbolic, in the conquest strategy. It was only necessary to subordinate aristocratic games to his own authority 152


This he did quite cunningly by acting as patron of aristocratic games through the provision of state subsidies. Augustus, and all subsequent emperors, led the way by staging the most spectacular games in Rome. Hopkins (1983:9) gives details of the games provided by Emperor Titus at the dedication of the Colosseum. These games continued for 100 days, with each day involving up to 3,000 gladiators and 5,000–9,000 animals, pitched battles, and even a naval battle fought in the flooded amphitheatre. If that was not enough to attract good crowds, the emperor also promised the distribution of food, clothes, silver, and slaves to lucky spectators. While games on this scale were unusual they were not unique, as shown by the games Trajan staged in AD 108–109 to celebrate his conquest of Dacia. Trajan’s games were on an equally lavish scale and lasted 123 days. While the regular games may have been on a smaller scale, they had a great appetite for gladiators, criminals, and exotic animals from all parts of the empire. These animals included lions, tigers, leopards, bears, elephants, crocodiles, giraffes, lynxes, hippopotami, rhinoceroses, and ostriches, and they were slaughtered in large numbers. It was an effective if brutal demonstration of the brilliant success of the conquest strategy and of its strategists. And it comes very close to the large-scale human sacrifice of the Aztecs. Clearly, the extravagant costs of these war-games could be financed only by the returns of conquest, and could be justified only as an instrument of the conquest strategy. If the state had been concerned only to demonstrate its power or to provide diverting entertainment, it could have achieved its objectives more directly and much more cheaply. This was not political theatre as some have claimed (Hopkins 1983:14–20), but strategic theatre to glorify and promote conquest; theatre in which aristocrats and emperors took an active part. It is recorded that eight emperors—Caligula, Titus, Hadrian, Lucius Verus, Commodus, Didius Julianus, Caracalla, and Geta—either practised or fought as gladiators. This was not mere entertainment—although it was that too—it was part of the dynamic materialism of the Roman world. It was used to promote strategic confidence. Only when the conquest strategy was exhausted did this theatre turn from drama into farce. The late Republic Further institutional change can be detected in the late Republic. From the late second century BC, the Roman economy became increasingly dependent on the operation of market-oriented large estates using slave labour. This system was controlled by a relatively small ruling elite, while the great majority of citizens formed a landless proletariat that was employed either in the fully professional Roman army or in the city of Rome. A small proportion of citizens still operated subsistence farms, but their numbers 153


were declining and their tenure was insecure, particularly in the face of returning armies that expected to be paid in land. Until Julius Caesar began developing overseas colonies from 45 BC, returning armies could only be rewarded with land by dispossessing existing occupants. The power of the Senate was progressively eroded from the late second century BC by powerful consuls and tribunes. Tiberius Gracchus, who was elected tribune by the concilium plebis in 133 BC, issued the first major challenge to the Senate’s power. Gracchus, who was of Roman nobility and had served in the army in Spain, was concerned about the decline in the role of the free peasantry who, in the early Republic, had been the mainstay of the Roman conquest strategy. To reverse this trend, Gracchus, as tribune of the people, decided to introduce land reforms by which state land would be redistributed from their present wealthy occupiers to the landless poor. He also wanted to use revenues from conquests in Asia Minor to finance the costs of establishing the poor on this land. As this intended redistribution of land would have reduced the wealth of the ruling class, the majority of senators were opposed to it. Of course their opposition, apart from being totally self-interested, was also justified by the state of development of the conquest strategy. The only way to restore the role of the landed peasantry was by abandoning the overseas empke, a move which would have reduced average living standards and led to the collapse of Roman society. Gracchus was a hopelessly irrational romantic. And in his passion for a lost world, Gracchus bypassed the Senate and appealed directly to the people through the tribal assembly to pass the necessary enabling laws. Naturally this infuriated the Senate and when Gracchus attempted to extend his period of office, in violation of tradition, he was openly assassinated by a deputation of senators, thereby restoring the supremacy of the Senate. Although Gracchus held power for less than a year, he had shown that the power of the Senate could be challenged merely by an appeal to the people. Clearly the Senate’s position would be far more vulnerable in the face of a challenge from someone who commanded the support of Rome’s professional army. Later and more effective challenges to the power of the Senate emerged in the last century BC. Essentially this was a function of the changing scale and nature of the overseas empire of the Roman Republic as the conquest strategy was pursued to its logical conclusion. In the early second century BC, when Rome’s territories were limited to the northern part of the western Mediterranean, it was still possible for a member of the warrior elite to lead relatively large armies and to administer new territories. But as their territories continued to expand, this became more difficult. By the early first century BC, the ruling elite was faced with an overseas empire that included the entire Mediterranean and which had to be efficiently administered if potential revenues were to be maximized. This led to a growing number of young patricians foregoing military experience in favour of political and 154


legal training. In these circumstances military skills in the Senate became increasingly scarce. Hence, in a world where the patricians began to specialize according to comparative advantage, it became more difficult for an oligarchy of equals to monitor the development of the conquest strategy. The majority had to place their trust in the hands of the few who still possessed military skills. At the same time the very scale of the conquest expeditions, which increased in proportion to the length of the empire frontier (that is, geometrically rather than arithmetically), made it necessary to place immense power for prolonged periods in the hands of the few great military men. This aspect of my argument is well expressed by Keith Hopkins (1978:92) who writes: ‘The conquest of a huge empire repeatedly confronted the Roman state with military problems which required more comprehensive and longer lasting military commands than could be comfortably tolerated by a power-sharing and egalitarian (among peers) oligarchy.’ He cites Pompey the Great and Julius Caesar as examples of what he calls super-generals who had to be given supernormal powers in the face of extraordinary circumstances. Pompey, who derived his authority from popularity with the assembly, was given powers greater than those of other senatorial generals in order to clear pirates from the eastern Mediterranean, and Caesar was given command over a large army for a decade in order to conquer Gaul. Both these men had to overcome considerable hostility in the Senate, which they did with the support of the people. Further, Hopkins (1978:93) argues: Thus Romans repeatedly created super-generals in the interests of imperial expansion, and then waited in fear and anxiety, wondering whether the super-generals, like generals of old, would subordinate themselves, when their victories were won, to the state. Sometimes they did; at other times, they unleashed their forces against the city of Rome, or against the senate’s hastily appointed defenders. The mere fact that Roman generals and soldiers were willing to attack the city of Rome was index enough of deep-seated political instability. The reason the Roman generals were willing to attack the city of Rome, I would argue, is an index not of political instability but of the presence of materialist man. The unfolding dynamic strategy of conquest required the concentration of vast resources and military power in the hands of the Republic’s greatest military commanders. And the possession of such power is a great temptation because it can be used to acquire immense wealth. As these great military commanders were faced merely by men trained and experienced in law, politics, and administration—men who did not command the respect of professional armies—there was little to stop them. The long struggle between the Senate and its generals in the late Republic led to the civil wars of the first century BC. I will argue that this struggle—a 155


contest between the forces of order and chaos—was a logical outcome of the unfolding of the conquest strategy. By the early first century BC the conquest strategy had reached a stage beyond which it could be successfully continued only if investment in new campaigns could be conducted on a massive and a sustained scale—a scale beyond the scope of the Republican Senate. An alternative to this relatively small group of competing individuals had to be found. Otherwise the Roman state would collapse. For two generations the struggle for a successful resolution to this impasse continued at great cost to the fabric of Roman society, until a political solution was finally found—the Augustan Principate. Only such a highly centralized system could mobilize the resources required to pursue the conquest strategy to its ultimate conclusion, which was strategic exhaustion. As we have seen, the Romans had rejected a similar form of centralized control some five centuries previously because, at that stage, it was not essential. The outlines of this struggle can be briefly sketched. Towards the end of the second century BC the Roman success in northern Africa was largely due to the unsuspected talents of the general Marius, who was rushed back to Italy to deal with invasions in the north by two Celtic tribes, the Teutones and the Cimbri. He defeated each in turn in 102 and 101 BC. While Marius was supported by the populist faction (populares) in the Senate and had clearly saved the overstrained Republic from destruction, the dominant conservatives (optimates) feared his growing popularity and conspired to keep him out of any further military action that could further increase his power relative to their own. Accordingly, Marius played only a minor part in the misleadingly named ‘Social War’ of 91–88 BC in which the Italian allies (socii) rebelled over the issue of citizenship. Instead the Senate gave their support to Sulla, who sent Marius into exile in Africa before heading east to drive an invading army under Mithridates from Pontus. In Sulla’s absence, Marius returned to Rome, overthrew the conservative faction in the Senate, and established a popular dictatorship. But, as Marius prepared for Sulla’s return, he died from natural causes, making the restoration of optimate rule in the Senate an easy, if bloody, matter. Yet, despite the Senate’s restoration under Sulla, its power was severely restricted by the subsequent emergence of strong military leaders (Levi 1988:77). So here, in the first civil war, we see the Senate struggling to control its dynamic strategy by placing its destiny in the hands of various military strongmen, and playing one off against the other. It was a highly dangerous game that was bound to end badly. But the stakes were high because the dynamic strategy of conquest still had considerable potential. With the death of Sulla, his second-in-command, Pompey, inherited the role of senatorial protector. Pompey was decisive. He quickly eliminated ‘populist’ elements in Spain in 76–71 BC, cleared the eastern Mediterranean of pirates in 67 BC, finally drove Mithridates from Pontus in 66 BC, and annexed the eastern end of the Mediterranean in 64 BC (Plutarch 1972:183–4). Predictably, this considerable success led, in Pompey’s absence, to opposition 156


in the Senate. And once he had disbanded his troops, the Senate rejected his demands for their payment and for ratification of his eastern settlements. At the time (60 BC) Pompey was struggling unsuccessfully against the conservatives in the Senate, Julius Caesar was being frustrated by the same faction in his ambition to stand for the consulship in absentia (as he was in Spain fighting for the Republic), and Crassus, spokesman for the equestrian tax-farmers in Asia, was also being blocked. Caesar, leader of the populares, saw an opportunity in combined action with both Crassus and Pompey (A. Snooks 1995). The First Triumvirate was born. They moved quickly, neutralizing the Senate, installing Pompey as military leader in Rome, and providing Caesar and Crassus with the authority to push back the frontiers of the Republic in Gaul and Parthia respectively. As is well known, Caesar, between 58 and 51 BC, finally conquered Gaul and frustrated a German offensive from beyond the Rhine, whereas Crassus perished at Carrhae in 53 BC in a short but disastrous campaign against the Parthians. In the death of Crassus and the brilliant victories of Caesar, the optimates thought they saw an opportunity once again to play off one tyrant against another. They had little difficulty in persuading Pompey to subject Caesar to a number of impossible demands. While they knew that Caesar would reject the demands, they failed to realize how quickly he would act against them. By a forced march Caesar was able to take Rome against an unprepared Pompey, who fled to the Balkans in 50 BC; and in a short follow-up campaign in the following year to defeat Pompey’s forces in Spain. In August 48 BC Caesar finally defeated Pompey in Greece and between 47 and 45 BC proceeded to clear out all opposition in the east, Africa, and a rebellious Spain. Returning triumphantly to Rome in 46 BC, Caesar arranged to have himself made dictator for ten years and, in 44 BC, for life. His great error was not to follow the example of Sulla and ruthlessly eliminate his opposition in the Senate for, on the eve of his departure for war against Parthia (March 44 BC), he was assassinated by a conspiracy of conservative senators. The assassination of Caesar led to a second round of civil wars as the supporters of Caesar and of the Senate struggled for control of Rome’s conquest strategy. Octavius and Anthony, after an initial struggle for primacy in Caesar’s cause, joined forces with Lepidus and quickly dispensed with the Republicans led by Brutus and Cassius at the battle of Philippi in Macedonia in 42 BC. The Second Triumvirate then did what Caesar had failed to do—it eliminated the opposing senators (300) and equites (2,000) on a scale even greater than that of Sulla (Starr 1991:544). Following this victory the possessions of Rome were divided into three, with Anthony taking the east, Octavius (now called Octavian) the west, and Lepidus Africa. Although Anthony successfully won control of Armenia, Atropatene, and Transcaucasia from Parthia, Roman casualties were heavy. With the failure of replacements to arrive from Rome, Anthony and Octavian, who had swept Lepidus aside in 36 BC, fell out and Caesar’s former lieutenant 157


sought solace in the arms of his master’s former mistress, Cleopatra, in Egypt. Here Anthony restored the empire of the Ptolemies and waited for the inevitable clash with Octavian who had already begun his push into Germany. The forces of Caesar’s two heirs finally clashed at Actium in Greece in 31 BC, with Octavian achieving a resounding victory. Retreating to Egypt, Anthony was defeated again in the following year, and this time he, and later Cleopatra, committed suicide. This finally opened the way for the major institutional change required to pursue the dynamic strategy of conquest to its logical end—the shift from an aristocratic oligopoly to an absolute monarchy. In a world where the prime mover in society was conquest, what role was played by the more narrowly economic institutions associated with commodity and factor markets? In a word, their role was a subordinate one. Markets had a positive role to play in Roman society, but they were not central to its success. Unlike the cities of ancient Greece, Rome was not built around a commercial market-place. Men came together in the forum not to win the profits of commerce through economic exchange, but to garner the spoils of conquest through political exchange (see Figure 6.4). The central objective of Roman society was to pursue and distribute the rewards from the dynamic strategy of conquest. Markets emerged and developed to facilitate that objective. And as fat forum was the centre of Roman society, commerce was conducted there, but only as part of the political, religious, and social activities associated with war (Grant 1970; Romanelli 1971). Of course the citizens of Rome did gather at the market-place to buy and sell commodities. But they did so mainly to exchange the profits of war for consumer and capital (including land and slaves) goods, and to make the plunder of war, as well as the commodities of trade, available to the populace of Rome. Unlike the Greek agora, the market-place of Rome was not the door to a dynamic system of international commerce. ‘Trade and manufacture’, we are told, ‘played a very minor part in the economy of the Roman empire’, but not for the reasons usually advanced (Jones 1974:30, 37–60). Nevertheless, the emergence of market institutions made exchange more efficient and, thereby, had a marginal impact on Roman living standards. An important institution of exchange is the supply of money. In Rome this was limited to the use of coins, as it appears that there was no fiduciary money or negotiable paper (Finley 1985:141, 196). Indeed, owing to the subsidiary role of commerce, a true money economy emerged rather late. In the early Republic, commodity exchange took place through bartering and was only gradually facilitated by the use of foreign coinage as trading contacts with Greek colonies increased. Roman coinage was not introduced until the mid-third century BC, just before the beginning of overseas conquest. The famous silver denarius, which was set equal to ten asses of bronze, was introduced to facilitate not exchange but the prosecution of the 158


Figure 6.4 The Roman Forum Source: Drawn from data in Bradley (1990).

second Punic War (Starr 1991:505). And it was not until Rome had conquered the western two-thirds of the Mediterranean, including Athens at the centre of commerce in the civilized world, that Roman coinage became the standard medium of exchange. Thereafter, Roman mints produced bronze coins for local transactions and gold, silver, and electrum (gold plus 159


silver) coins for larger and international transactions. If Finley (1985:141) is to be believed, almost all payments were made in coin, and only rarely by book transfers within a particular bank or a tax-farming corporation. Money was adopted late, and was restricted to hard currency, precisely because the prime mover in Roman society was conquest and not commerce. What of capital markets? As with all dynamic strategies in the premodern world, conquest was largely self-financing. Investment in conquest infrastructure was financed by the profits of past conquests. The only role for financial institutions was the provision of short-term credit at high interest rates to fill the gap between individual expectations of the spoils of conquest and their realization. And this role was played by moneylenders rather than banks which restricted their activities to the acceptance of noninterest-bearing deposits and the payment of transactions with coins. Romans, we are told, made use of moneylenders ‘on a stupendous scale’ in order to meet ‘the demands of polities’ rather than business (ibid.: 53, 196– 8). We are also told that, in order to pursue political careers, members of the nobility borrowed large sums of money because: Electoral bribery, an expensive life-style, extravagant public games and other forms of public largesse had become necessary ingredients of political careers. For men whose wealth was in land, the pressures were exacerbated by a shortage of liquid assets, of cash. In consequence much political maneuvering included a complicated network of loans and guarantees. To borrow created a political obligation—until one was assigned a provincial governorship and recouped. (ibid.: 53) We are told, in other words, that ambitious members of the nobility borrowed extravagantly to pursue political careers, and that they paid off these debts by exploiting political office in the provinces. In contrast, my argument is that Roman nobles pursued political careers to participate in the management of, and possibly even to control, the dynamic strategy of conquest with the objective of maximizing their access to the spoils of war. To do so they had to purchase political advancement. And this meant borrowing from wealthy relatives, friends, political colleagues and, in the last resort, lowly moneylenders. As the prizes in this strategic game were extremely attractive, the rates of interest paid to moneylenders were high— anything up to 48 per cent (ibid.: 54). Once they had achieved control of the conquest strategy, they used the spoils of war to secure their income through the purchase of productive land, and to invest further in conquest. The two most brilliant exponents of this strategic game were Julius Caesar and Augustus. The role of financial institutions, therefore, was to meet the demands of the dynamic strategists. The labour market was not very extensive. In agriculture, labour was supplied in the early to mid-Republic by peasant-warriors; in the late Republic 160


to early Empire by slaves and subsistence farmers who typically owned about 3 to 6 acres of land and supplemented their income by working for wages on larger neighbouring properties; and in the late Empire by bonded peasants (coloni), ex-slaves, and subsistence peasant farmers (ibid.: 107–8). And in the urban centres labour was provided in the early to mid-Republic largely by selfemployed craftsmen, traders, and moneylenders, together with unskilled/semiskilled men working on a casual basis for wages in building, public works, and transport; in the late Republic to early Empire by the above together with increasing numbers of slaves working in the larger industrial establishments and public utilities; and in the late Empire by impoverished free artisans and unskilled labourers who manned the private factories in the cities and on the villas, and by a declining workforce of slaves who were restricted to the imperial factories and wealthy households (ibid.: 73–6, 93–4,185–6). Finley (ibid.: 85) makes the interesting observation that the employment of free and slave labour in Rome passed through a marked cyclical pattern from the early Republic to the late Empire. The proportion of slaves employed in rural and urban areas increased rapidly with Rome’s expansion into the Mediterranean from the mid-third century BC, reached a peak in the early Empire, and then declined from the third century AD to reach its lowest point in the mid-fifth century AD. And the role of citizen labour in the economy changed in an inverse way. Some argue that this cyclical relationship was supply-driven: that overseas conquests led to an increased supply of slaves that drove the free peasantry from the land and the factories, and that this was reversed when large supplies of captives ceased (Hopkins 1978:1–8). Finley (1985:85–6) is unhappy with this argument about the decline of the slave economy, both because the timing does not work—there is an unaccountable lag between the cessation of mass captives and the fall in slave employment—and because slaves were available from other sources, particularly home-breeding. Finley’s explanation is sociological rather than economic and descriptive rather than analytical. Basically, he believes that freemen were substituted for slaves in rural and urban areas after the late third century AD because Roman society reverted from a more liberal classical world to an ‘archaic’ world in which the status of freemen was forcibly eroded until they could be compelled to do the work of slaves. Why this happened we are not told. My argument, which is consistent with the evidence, is that the cyclical relationship between freemen and slaves in rural and urban areas was determined by the unfolding conquest strategy. With the Roman break-out into the Mediterranean it became necessary to create a full-time and permanent army. This required a major structural change in agriculture, involving the formation of large estates worked by slave labour, to release citizens for military service. The remarkable success of the conquest strategy supplied the slaves required for this structural transformation. With the exhaustion of the conquest strategy in the mid-second century AD and the 161


accompanying change in the nature of the Roman army from an offensive to a defensive force (with barbarian mercenaries and local frontier military/ agricultural families replacing civilian volunteers), the demand of the military for free labour declined significantly. This took a few generations to work itself out. It was strategic demand that drove this cyclical relationship. Hence the supply of free labour in the economy rose, and its bargaining power fell, at a time when slave labour was becoming increasingly scarce and expensive (there is no timing problem here). From the third century AD it became cheaper to use bonded tenants rather than slaves, either purchased or bred. The Roman slave economy, therefore, rose and fell with the expansion and exhaustion of the conquest strategy. Finally, we come to the market for land. In Roman society land was acquired in a number of ways: through purchases; by paying a nominal rental to the state for access to land (ager publicus) confiscated from conquered peoples; by small grants (3–6 acres) made to common soldiers by victorious generals; and by leasing land from individuals and institutions (Hopkins 1978:1–8; Finley 1985:92–122). The conventional wisdom concerning the nature of the land market is rather odd and appears to have arisen by argument from silence in the evidence. As usual Finley (1985:117) attempts to convince us that the ancient world had a primitive institutional structure that defied economic rationality. He admits that land sales and land rentals were common, particularly after the Punic Wars, but he claims that there were no professional real-estate agents, that land was not used as equity for borrowing, that there was no ‘recognizable real-property market’, and that Romans did not acquire land for investment purposes (ibid.: 117–18,120–1). Quite clearly he is wrong about the lack of a real-property market because real property was bought and sold on a regular basis (Jones 1974:30). And the notion that land did not provide a competitive return on capital has been attacked by C.R.Whittaker (1983:173) as ‘quite simply absurd’; while I have attempted to show above that land was used to convert irregular windfalls from conquest into a regular stream of income equivalent in the modern world to investing in gilt-edged securities. It is highly likely that Finley is also wrong about market institutions. It would be most surprising, in view of the regular sales of land, if there had been no professional intermediaries to facilitate this exchange. There must have been an opportunity for attractive commissions in bringing buyers and sellers together. More importantly, and this has been completely overlooked, land was used in the Roman world as a type of financial asset to launder the profits of war. Land, in other words, was a facilitating institution for conquest. The Principate Octavian in 30 BC was master of the Roman Empire, but an empire seething with discontent. With the removal of all opposition in the Senate, together 162


with the other two members of the Second Triumvirate, Octavian instituted a monarchy, changed his name to Augustus in 27 BC to reflect his new status, and then set about changing the shape of the Empire. Quickly Augustus conquered the rest of Spain and went on the offensive in central and eastern Europe, finally (by 12 BC) pushing the Germanic tribes back beyond the Danube. But his attempt to force the Germans back to the Elbe came unstuck in AD 9 when a Roman garrison of three legions involving at least 15,000 men was attacked and destroyed. At this point Augustus, who was becoming old (72 years) and tired, decided that benefits from further expansion in Europe were not worth the cost to him personally. In the east, however, he reasserted control over areas resumed by Parthia, forced the return of the Roman standards lost by Crassus at Carrhae, and focused upon developing an effective system for extracting surpluses. By the time of his death in AD 14 Augustus had convinced himself that the Empire had been taken to its limits (Tacitus 1989:40). The triumph of Augustus brought with it a resolution of the difficulties that senatorial rule had been experiencing for a century in coping with the unfolding conquest strategy. It was a resolution that would not have been necessary had die ruling elite in Rome not abandoned the elected monarchy in 509 BC (something the Aztecs did not do). By overriding the limitations of an oligarchy consisting of competing ‘equals’, Augustus was able to direct the resources required in pursuing the conquest strategy to its logical conclusion. In the process, he brought the Roman ‘revolution’—the attempt of the populists to overthrow the conservatives—to an end. In doing so, Augustus fashioned order out of chaos. Yet, ultimately, this very order produced an inflexibility that made adjustment to the final exhaustion of the conquest strategy such a painfully protracted affair. Augustus, who was an even greater politician than he was a general, was able to achieve a delicate balance between central political and economic control, on the one hand, and decentralization of decision-making both in the Senate and in the provinces, on the other. This led not only to the active participation of the upper classes in the prosecution of the conquest strategy and in the administration of the Empire, but also to the elimination of counterproductive competition between members of the aristocracy, through the guidance of the supreme dynamic strategist—the emperor. This solution emerged from a process of extensive experimentation by Augustus over his long public career. He had begun in November 43 BC as triumvir by purging the republican ranks; in 36 BC, with the removal of Lepidus, he stood as defender of law, order, and the old republican virtues; in 33 BC he relinquished the title of triumvir in order to be chosen consul each year (except 32 BC) down to 23 BC; and, finally, in January 27 BC he offered to give up his powers but the Senate refused (as he had prearranged) and granted him both the proconsular imperium over Spain, Gaul, Syria, Cyprus, Cilicia, and Egypt for a ten-year period, and the title of Augustus. From this 163


time the ‘normal’ operation of the Senate and magistracies was reestablished with Augustus as princeps (or ‘first citizen’). This was the beginning of the Roman Principate. According to the Augustan fiction, the republican government continued as before, with societal authority emanating from the people through the ancient assemblies which granted power to the princeps. In reality, Augustus derived his power from the military forces which owed their allegiances directly to the emperor. Augustus not only controlled admission to the Senate, which increasingly admitted members of the equestrian class, he also purged its ranks from time to time, and had power to convene the Senate, to speak first, to veto its deliberations, and to present legislation to the tribal assembly. Further, he controlled the provinces personally by appointing governors of the ‘imperial’ provinces, and by approving (or not) the proconsuls nominated by the Senate to rule the ‘senatorial’ provinces. Yet these new institutional arrangements defined a partnership between Augustus and the landowning aristocracy— even if he was the senior partner—which was effective in diverting the competitive energy in Roman society from the destructive process of civil war to the constructive process of driving the conquest strategy forward. The aristocracy cooperated in this new venture—which was really a new multinational corporation—because it was the most effective way of exploiting Rome’s traditional dynamic strategy. Augustus also had complete control over the administration of Rome, Italy, and the Empire/The Augustan bureaucracy began with the emperor’s personal staff, consisting of educated Greek slaves and freedmen, but it soon developed into a state bureaucracy. This bureaucracy, which was directly responsible to Augustus, was charged with extracting surpluses as efficiently as possible in order to pursue the conquest strategy and to maintain the Empire. To achieve this Augustus reorganized the coinage to provide an effective medium of exchange in the already commercialized Empire, developed a fair and effective tax structure based on land and rural population (outside Italy) and other property—the iugatio and capitatio (Jones 1974:35)—revised the tax base regularly, and established a collection system based on equestrian tax farmers in imperial provinces and quaestor collectors in senatorial provinces. As we shall see, a large proportion of these revenues was employed to maintain a huge standing army and navy (Goldsmith 1987), together with the civil service, Rome’s first police force (the urban cohorts) and fire brigade (the vigiles), the imperial arms factories, public works, and the imperial postal service. Rome’s fiscal policy was carried out by local elites in cities and tribes throughout the Empire, and Augustus only intervened when the local agents failed to prosecute their duties effectively (Starr 1991:555–6). Under Augustus major changes were made to Rome’s strategic organizations and institutions. These changes were greater than usual because, while the 164


dynamic strategy had been continually pushed forward during the last few generations of the late Republic, the limitations of the Roman oligarchy had prevented an appropriate reshaping of the facilitating institutions. In particular it was necessary to reorganize the military forces. For the first time a permanent navy was created, based on the fleets built up during the civil wars. The main fleet was based at Misenum and Ravenna in Italy, while minor fleets were maintained in the Black Sea, Egypt, Syria, and on major European rivers. A significant benefit from this new strategic instrument was the elimination of piracy from the Mediterranean, which had formerly interrupted the supply of goods and taxes. Of greater consequence was Augustus’ great permanent army consisting of twenty-eight legions, each possessing 5,500 infantry and 120 cavalry (ibid.: 559), suggesting a total force of more than 150,000 men. Of these legions—after subtracting the three destroyed by the Marcomanni—eight were stationed along the Rhine, seven along the Danube, four in Syria, three in Spain, two in Egypt, and one in Africa. The need for this high concentration of troops in die west is clearly the reason that Augustus did not wish to reopen hostilities with Parthia. Associated with these legions of Roman citizens was an equal number of auxiliary units, each of between 500 to 1000 men, consisting of light infantry and cavalry recruited from provincials and barbarians. This was a truly professional army in which legionaries served for twenty years, at the end of which they received a bonus of more than thirteen years pay funded from tax revenue (Hopkins 1978:75; Starr 1991:560). Auxiliaries served fof twenty-five years and, from the middle of the first century AD, received Roman citizenship on retirement. Clearly the cost of such a huge standing army, which had to be supplied, garrisoned, and transported around the frontiers, was a great burden on the Empire, and could be justified only if it brought in at least the same amount of income from conquest. Which it certainly did (Jones 1974:124–9). This was certainly the case under Augustus and his immediate heirs, but once the conquest strategy had been exhausted by about AD 138 the cost of empire exceeded its material benefit. For Rome this was the beginning of the end. Augustus relied not only on formal and secular institutions but also on tradition, religion, and literature to secure and to promote his regime and his dynamic strategy. We have seen how he appealed to the ancient republican values by grounding his Principate in the traditional institutions of the tribal assembly and the ritual of the Senate. This, of course, was done to make the new political institutions based on military power seem less radical. In addition, Augustus revived the old religious rites, rebuilt some 82 temples, constructed many new temples, and in 12 BC became High Priest (Hopkins 1978:206; Starr 1991:555). For the same reason he usurped a place in the pantheon of Roman gods. This helped to reinforce the order and compliance of the Principate. It was not an evolutionary process but rather a deliberate 165


tactic to keep chaos at bay as Augustus opened a new phase in Rome’s conquest strategy. The introduction of religion raises the important question about the role played by apparently non-economic institutions in the rise and fall of Rome. I have in mind the rise and fall of the ancient cult of Jupiter and its replacement as the state religion by Christianity by AD 325 (Council of Nicaea). I will argue that the religious form adopted by the Roman state was both an expression of the driving force in the dominant dynamic strategy and a mechanism by which individual citizens were brought together publicly in the acknowledgement and support of that dynamic strategy. This was necessary because, while all citizens benefited from the conquest strategy, the ruling elite extracted the lion’s share of these returns. The symbolic acting out of the dynamic strategy through religion, secular games, and the arts encouraged conformity, exorcized fear, and provided the strategic confidence necessary to carry it out. For some nine centuries the patron god of the Roman city-state was Jupiter, a warrior-god who was also monarch of the Roman pantheon. The rites associated with the cult of Jupiter, who formed a triad with Juno and Minerva, were carefully followed by state priests in order to gain divine support for their conquest initiatives. One of the most solemn prayers offered up to Jupiter was ‘to increase the empire and majesty of the Roman people, the Quirites, in war and at home, and that the Latin may always obey’ (Harris 1979:120–1). We are also told that it ‘was under the aegis of the Capitoline Jupiter that the senators assembled to declare war. Generals appeared before him prior to setting out to war and after victory returned to offer him a crown of gold and part of the booty’ (Guirand and Pierre 1968:203). In fact Roman conquests were celebrated with triumphal processions that wound through the forum to the Temple of Jupiter on Capitoline Hill (see Figure 6.4). And on the roof of this temple was a terracotta chariot, symbol of war. Further, the annual Roman games, or ludi romani, were celebrated in the circus in Jupiter’s honour. These games were games of war—chariot races and, later, gladiatorial combat. The state religion both supported and benefited from continuous Roman conquest. There is also a link between the state religion of Rome and the driving force underlying the dynamic strategy of conquest. We are told that Roman religious thought contained ‘that belief in a superhuman, abstract force which anthropologists call manct (Starr 1991:462). And one of the roles of Jupiter was the representation of the creative force in Roman society (Guirand and Pierre 1968:203). This creative force or supernatural power can be interpreted as a ritualized identification of the driving force underlying the conquest strategy. Through the old religion, therefore, the citizens of Rome were brought together publicly in a recognition and celebration of the dynamic materialism of their society. In other words, the

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cultural forms of Roman society embodied the spirit of the dynamic strategy of conquest—the vital principle of the age. Not surprisingly the Roman Republic and Empire were hostile to, and attempted to restrict, all alien cults that were considered dangerous. It was thought that these imported religions, which flourished after Rome’s conquest of the eastern Mediterranean, might distract the people from the central objective of Roman society and, even worse, might foment ‘revolutionary unrest’ (Starr 1991:508). These eastern religions included the Dionysian, Eleusinian, and Orphic mysteries, together with the cults of Isis, Cybele, Osiris, and Mithras. A number of instances of religious repression by the state can be cited. In 186 BC there was an inquisition into the worship of the god Bacchus (or Dionysus) with the result that its societies were banned and individuals could only attend to the god with permission from the praetor; in 139 BC astrologers and Jews were expelled from Rome; and from the first to the third centuries AD the followers of the cults of Isis and of Jesus were persecuted. Throughout this entire period state policy was consistently opposed to foreign religions. It is interesting that renewed calls to war and conquest during the Principate were accompanied by state-inspired revivals of the old religion. As we have seen, Augustus, who pursued a new round of world conquest, also made considerable efforts to revive and streamline the ancient cults. Quite clearly he wanted to focus the attention and energies of the people publicly on the conquest strategy. Similarly, at a later time Diocletian, in attempting to reverse the barbarian incursions between AD 284 and 305, also restored the old faith in Jupiter—referring to himself as ‘Jupiter conservator’—and moved harshly against alien cults including Christianity. Indeed, this was the worst persecution that the followers of Jesus of Nazareth ever experienced. Not only did Augustus revive the old pantheon of Roman gods as we have seen, he also took his place amongst them. While Julius Caesar was the first Roman to be accorded the public status of a god after his death, Augustus and the emperors who came after him ‘were the first Romans to be widely acknowledged as gods during their life-time’ (Hopkins 1978:203). What is interesting is how widely emperor worship was practised, involving not only the lower classes but also the educated elite in the city of Rome. Clearly this practice fulfilled an important need in Roman society. During his lifetime Augustus not only had temples, altars, and sacred rites dedicated to himself, but also had his statue placed in the entrance to the Pantheon and in the temples of other gods. Indeed, he was widely associated with almost all Roman gods through synthesis, as reflected in the names Apollo Augustus, Mars Augustus, and so on (ibid.: 230). Roman citizens widely and regularly sacrificed to Augustus and the emperors that succeeded him. Assisting Augustus in this were the leading authors of his time, particularly Virgil, Horace, Livy, Ovid, and Propertius—authors whom Augustus and his friends, Gaius Maecenas and M.Valerius Mesalla Corvinius, patronized and 167


encouraged. We are told that: ‘through their literary works they bolstered Augustus’s pre-eminence in the state by glorifying him and his achievements and reinforced his legitimacy by linking him through past heroes with the gods’ (A.Snooks 1994:1). The intriguing question is: Why was the emperor regarded as divine? Obviously Augustus’ peers knew he was a man and not a god, but they sacrificed to him as if he were a god. Keith Hopkins’ (1978:242) explanation is predictably political: The unity of a political system rests not only in shared institutions, taxes and military defences, but in shared symbols, in the minds of men. Emperor cults, and all that they involved…provided the context in which inhabitants of towns spread for hundreds of miles throughout the empire could celebrate their membership of a single political order and their own place within it. But this is a political explanation that leaves all the interesting issues unresolved. Hopkins’ argument begs two important questions: Why was a single political order desired by ruler and ruled alike; and why would this require, for the first time in Roman history, emperor worship? He answers neither. I have already answered the first of these fundamentally important questions. Political unity was not an objective in itself, but rather an outcome of the widespread desire to pursue the dynamic strategy of conquest on which the survival and prosperity of emperor and people alike depended. Public worship, as we have seen, was a dramatization of the acceptance and pursuit of the conquest strategy. Second, emperor worship, which began with Augustus and ended with Constantine, had nothing to do with political unity at all. Apart from the relatively short period of the Roman revolution, political unity was already a characteristic of Roman society. Emperor worship was not needed for this. My answer to this key question is that when the conquest strategy was in the hands of an oligarchy of equal aristocrats, the spirit of the dynamic strategy could reside only in a divinity above and beyond mankind; but when the dynamic strategy had been taken into the hands of one man, the emperor, his unique association with conquest enabled him to embody the spirit of the divine. The supreme strategist became god. This was impossible in the earlier society of competing equals. When the people expressed their public unity in the dynamic strategy of Rome, they sacrificed to its embodiment in heaven and on earth in the form of the emperor. With the exhaustion of the conquest strategy, however, the emperor lost his divinity in the eyes of himself and the people precisely because he, and the old gods, no longer embodied the dynamic strategy of Rome. Hence, the ruler and the ruled looked for a new divinity through which they could transcend this earthly chaos. They found it, during the reign of Constantine, in the god proclaimed by Jesus of Nazareth. 168


Over the century and a half following the death of Augustus, his heirs consolidated these institutional achievements. This was the pax Romana of AD 14–180. Yet while peace existed at the heart of empire there were still a few hot spots, in Judaea (the Jewish revolts of AD 66–70 and AD 132–135) and in Egypt; and the frontiers continued to be pushed back, notably in Britain (from AD 43), in German territory (AD 69–79, 81–96), in Dacia (AD 101–102, 105–106), and temporarily in Armenia and Parthia (AD 113–117, 161–168). Only after AD 138 did the Empire’s frontiers become well defined and stable. Only then did the dynamic strategy of conquest finally grind to a halt with Rome passing, after some six centuries, from the offensive to the defensive. The great achievement of the Roman peace was to refine the system of imperial government established by Augustus (Jones 1974:1–34). The emperors who followed kept a tight rein over the central administration, both military and civil. Because of the growing complexity of Roman society forged by an unfolding conquest strategy, and of the decelerating inflow of resources from conquest, it was essential for the survival and wellbeing of the ruling elite to make the central administration more efficient. To this end, Claudius, the first great systematizer of the imperial bureaucracy, consolidated the existing structure into a number of large departments, including the departments of ‘correspondence’, ‘petitions’, ‘judicial matters’, ‘finance’, and ‘records’ (Starr 1991:583). And these departments, which were hierarchically organized by title and salary, were increasingly staffed by equites rather than freedmen. In other words, the public service was becoming increasingly respectable and professional, with public servants receiving appropriate education for their specialized tasks and responding to a professional code of ethics and efficiency. The central departments had their local counterparts in the provinces, thereby creating an empire-wide bureaucratic network. What began as a genuine attempt under Claudius to improve the efficiency of the now static Roman Empire, increasingly became an instrument of rentseeking by the emperor and his supporters (Jones 1974:132–5). It was also used as a tool of order to stem the growing tide of chaos that emerged once the conquest strategy had been exhausted. The former strategists reinvented themselves as antistrategists. Increasingly government departments interfered in local affairs and increased the size of their operations beyond what might be considered an optimum size (ibid.: 584). In the process the bureaucracy absorbed the educated and able classes, thereby providing them with a stake in the antistrategic tactic of rent-seeking which, in consequence, led to the empire lasting longer than otherwise would have been the case. Long day’s journey into night Towards the end of the Roman peace there were signs, for those that could read them, of impending doom. These signs included the growing financial 169


difficulties of Roman cities, the decline in population following the peak achieved in the mid-second century AD, the decline in production, the fall in real wages and land rentals, and the increase in taxes (Jones 1974:82–9; Muth 1994). Some scholars (Starr 1991:591) have expressed puzzlement over the causes of these reversals, the first in the entire history of Rome; others (Gunderson 1976) have devised theoretical models to (unsuccessfully) explain them away. Elsewhere I have argued that these signs were all predictable outcomes of the exhaustion of the conquest strategy (Snooks 1996:291–300). With the cessation of the resource flow from outside the Empire, Roman society was thrown back on its neolithic technological base, which could not support such a large, affluent, and highly urbanized population. It had nothing to do with the nature of Rome’s military technology as some scholars have claimed (North 1981:59, 66). The only response to this frighteningly new situation was ‘downsizing’: a massive reduction in the size, urbanization, complexity, and prosperity of Roman society. Rome had to live within its much reduced means. The probability of achieving this without collapse was, according to my model in The Dynamic Society (Snooks 1996:397–9), very low. The Eastern Empire was able to survive in one form or another until 1204 because, being at the centre of east—west trade in the Mediterranean, it was able to turn from the conquest to the commerce strategy (ibid.: 359–60). It was the pursuit of commerce that made it possible to develop a new military technology rather than the other way around as some institutionalists have argued (Dudley 1990). The ominous signs in the second century AD are only obvious in retrospect, but those in the third century should have been clear to everybody. Population, decimated by recurrent plagues, declined abruptly and failed to recover as it usually did once the disease had died down; the production of goods and services dived sharply; inflation became rampant after AD 250; the state interfered increasingly in economic and social life, particularly through heavier taxation (to compensate for the cessation of tribute), confiscations, and compulsory state service without pay; the army requisitioned food, clothing, and transport from defenceless Roman citizens; and the barbarians began pressing in earnest on the northern (Germans) and eastern (Persians) frontiers. In order to meet the growing cost of defending the Empire, the Roman state had to extract as much as possible from its own citizens. These costs included building fortifications, often for the first time, around Roman cities. The third century AD witnessed a growing role for the army in Roman politics. Its officers determined who would rule Rome and even what the emperor’s policies would be. Indeed, in AD 235 Maximinus Thrax, a man who had risen in the army from the ranks, became emperor. And from then until AD 284, a period of fifty years, some twenty emperors were appointed and removed by the army. While the Senate still existed and consuls were 170


chosen each year, this ancient body no longer had even the pretence of power. In these circumstances there was an unprecedented degree of political instability and social chaos as the barbarians broke into the Empire and as the defending armies plundered the very people they were supposed to protect. While the barbarian incursions of the third century were repelled, the cost of doing so was very high. Just as Roman society seemed to be slipping into terminal chaos, two skilful emperors emerged to stabilize the situation for a further century. These were the emperors Diocletian (284–305) and Constantine (306–337). Basically they attempted to shore up Roman society to make it resistant to the forces of change. Change which had been the life-blood of Roman society was now seen as its enemy, because change no longer meant growth but rather decline. The Roman state, therefore, attempted to stand still in a dynamic world—an attempt that has parallels with the demands of the ecological engineers of our own time. While remarkable, the attempts of Diocletian and Constantine merely delayed the inevitable. Diocletian appears to have been the main architect behind restructuring the civil administration. At the head of this administration was the emperor whose power was now regarded as absolute. He was called lord (dominus) and took advice only from his privy council (sacrum consistorium) and was treated like an eastern king. The Senate had no imperial role and was reduced to the status and function of a town council. It was really an exclusive club for the wealthy landowning aristocracy of Rome. The emperor presided unchallenged over a very large rent-seeking and oppressive bureaucracy divided into military and civil sections, each with a multitude of departments. These departments in turn supervised a vast network of regional administration, passing through levels that included prefectures, dioceses, and provinces that covered the entire Empire. This vast structure, riddled with spies at every level, raised taxes and recruits for the army, and it imposed the will of the emperor. Inevitably it also pursued its own interests as this was a time for rent-seeking rather than profit-seeking at all levels of society. In attempting to extract as much commodity surplus and labour service as possible for the government and the army, this institutional structure was a response to a collapsing conquest strategy. The new army, largely organized by Constantine, was a response to the crisis of the third century. It was divided into two parts, the frontier or garrison army and the mobile army. The old legions and auxiliaries created by Augustus had literally dug themselves in all along the northern and eastern frontiers, clustering around stone fortifications. Their descendants had taken up farming to support themselves and gave only grudging support to areas outside their own province. In effect they were protecting not the Empire but their own property. This was a response to the growing difficulty experienced by the state in paying for such a large army once conquest had ceased. To overcome the problem of a static frontier force, a new mobile 171


army consisting of legions containing cavalry and infantry was formed. There were five such legions scattered around the Empire ready to move quickly over a recently reconstructed road system to any garrison. The garrison army was as large as the entire force under Augustus, while the mobile army comprised an additional 100,000 men (Starr 1991:675). The total army, therefore, was in the vicinity of 400,000 men. Hence, while the army under Constantine was 25 per cent larger than that under Augustus, it now had to be entirely self-financing as it no longer received any conquest income. No society relying solely on a neolithic technology could hope to maintain such a large empire for long. This was the last great attempt by a remarkable society to resist the forces of change that would inevitably bring about its destruction. The only possible alternative was for Rome to contract in size, complexity, and prosperity to levels compatible with a neolithic technological base—way back to the Italian peninsula where it had started from some six centuries before. Had this even been contemplated it would not have been acceptable to the various vested interests in the Empire, or even possible to achieve as it would have provided the resources the barbarians required to pursue a conquest strategy of their own against a much smaller, less urbanized, and poorer Rome. In the absence of an Industrial Revolution, which was out of the question in the fourth century AD on benefit-cost grounds (Snooks 1996:405–10), Rome had no choice but to make a last hopeless stand on its far-flung frontiers. This was a drama of tragic proportions. To add to their problems, this attempt to prevent change at all costs exacerbated the conflict between the forces of order and of chaos. As Chester Starr (1991:675–6) has astutely concluded: Since change meant decay, the Empire was resolved to stop change. The Theodosian Code, which is in the main a collection of fourthcentury edicts, contains provision after provision by which the state sought to lock men in their places and organize the population according to its professions into hereditary classes. Only thus could it secure from every subject his due service and due contribution to the coffers and granaries of the Empire. For this reason the peasants were tied serf-like to the land, and public servants and members of the guilds were ‘chained’ to their urban positions. While the fourth-century edicts stress moral values and piety, the emperor and his agents were quick to use mutilation if they were ignored. And quite naturally this oppression, heavy taxation, enforced service, and punishment led to rebellion, recalcitrance, violence, and subversive religious activity in return. It was a period of great conflict between the forces and the institutions of order and of chaos, a conflict in which chaos ultimately triumphed as the attempted oppression became less effective and the administrative machinery ground to a halt under the weight of its own 172


inefficiency and corruption. In the end, the citizens of the Empire sought the protection of the great landlords against both the barbarian and the emperor. What role, if any, did religion play in this process of disintegration? It is highly significant that once the conquest strategy had been exhausted, the old religion became neglected by the state and the people and was only periodically revived when war became necessary to throw back the barbarian. Also, emperor worship became more perfunctory. With the driving force in Roman society extinguished, a growing ‘spiritual uneasiness’ emerged and the philosophers expressed scepticism about the old religious forms, while the people turned to alien cults. This is a common response—it also occurred in Greece—once a society’s dynamic strategy has been exhausted. From Egypt came the Hellenized cult of Isis and from Iran came Mithraism. Both celebrated annual renewal and gave a promise of eternal life. They expressed, in other words, the hopes and fears of a people cut adrift from their ancient purpose of seeking security and wealth through conquest. In compensation they sought reassurance concerning the possibility of renewal in this life—that the glories of the past might be reborn—and of eternal security in the next. Some also turned to the obscure Nazarene cult that came from the Jewish heartland. The reasons are not difficult to find. Individuals felt deep insecurity and fear in a society where the emperor and his gods could no longer guarantee peace; indeed, the emperor was acting increasingly as a predator against his own people. Christianity, in contrast, held out the offer of a close personal relationship with a heavenly king for all eternity, and his church provided a close and comforting community in a disintegrating society. It provided a purpose and meaning that had been lost in Roman society when the flame of conquest flickered out. Christianity was a more exclusive, secret, and potentially more subversive, cult than all the others. The followers of Christ rejected the old gods completely, they refused to sacrifice to the emperor and his gods, and they established an empire-wide network of secret cells practising strange rites. Not surprisingly, this cult attracted suspicion and hostility from the Roman state, particularly when its members refused to worship publicly the emperors and the gods of war. Christians attracted, therefore, sporadic imperial persecution in the second century AD which became more systematic and determined in the third and fourth centuries, particularly under emperors from Diocletian to Galerius, AD 284–311. Their crime was not that they believed in other gods, but that they openly and symbolically rejected the old dynamic strategy of Rome. This was sacrilegious, particularly at a time when the worn-out conquest strategy was showing signs of collapse. What surprised many at the time was the willingness of many Christians to suffer martyrdom to gain eternal life. Christianity promised eternal order in the midst of earthly chaos. 173


The fortunes of this minority religion, which by the end of the third century probably included about 10 per cent of the Empire’s population, changed remarkably from 313 when the Emperor Constantine gave it his support, and from 325 when it became the state religion of Rome with financial subsidies from the state. Official worship of the old gods and of the emperor was finally swept aside. It is not surprising, therefore, that from the early fourth century the Christian church grew rapidly. How do we account for this major reversal of fortune? Once it was generally realized that the former glory of Rome had passed and that it would never recur, increasing numbers of Romans placed their faith in regional warlords rather than the army and in a heavenly rather than an earthly king. A heavenly reward became a safer bet for most than earthly prosperity. Jupiter was abandoned by individuals and the state when it was clear that his creative force had been extinguished and that he could no longer guarantee material prosperity. The Christian god could at least offer security in the next life and consolation in this. Hence, with the exhaustion of the dynamic strategy of conquest by the early second century, and the failure to find a replacement, the creative driving force in Roman society was extinguished. The institutional expression of this force thereby lost credibility, and those seeking reassurance and security in a time of internal violence and uncertainty turned to an ideology that promised eternal life and heavenly rewards. The emergence of Christianity was timely. Had this sect appeared earlier, say during the middle Republic when the ancient gods presided over the successful pursuit of the dynamic strategy of conquest, it would have quickly perished from lack of purpose, just as it is in danger of doing in the contemporary world driven by the dynamic strategy of technological change. CONCLUSIONS The central principle in the institutional change of Rome was the unfolding of the dynamic strategy of conquest. This strategic change passed through four major phases that had a characteristic impact upon Rome’s institutional structure. The first phase, from earliest times to the mid-third century BC, was characterized by a continuous seasonal cycle of war on the Italian peninsula that led to an increasingly complex demand for facilitating institutions. Extending from the Punic Wars of the second half of the third century to the end of the second century BC, the second phase, which involved the first large-scale overseas conquest, led to a growing demand for more sophisticated imperial institutions and for a new agricultural system of large-scale, slave-run estates. The third phase, from the first century BC, saw conquest raised to an unprecedented scale which required the transition from a republic to a monarchy. And the final phase, from the early second century AD, which was the result of an exhausted conquest strategy, 174


witnessed the construction of a vast rent-seeking bureaucratic apparatus and, later, the emergence of a countervailing ‘feudal’ structure as Roman citizens fled from a predatory state to regional warlords. In effect, the exhausting conquest strategy forged an institutional structure that made the Roman Empire obsolete. While the eternal recurrence of ancient society and its institutions can be explained by the dynamic-strategy model, it cannot be explained by any of the evolutionary models.

175

7 TENOCHTITLAN Citadel of the sun

Not forever on earth, but briefly here. Even jades are shattered. Gold, broken. Ah! plumes, splintered. Not forever on earth, but briefly here. (Cantares Mexicanos (16th century), trans. J.Bierhorst) The centre of the Aztec Empire was the great city of Tenochtitlan. Like Venice, its contemporary in the Old World, Tenochtitlan shimmered in the summer sun like an apparition hovering above the waters. Like Venice, it drew its sustenance from the lives of others, but unlike Venice it was the product of conquest rather than commerce. The first, and last, Europeans to see it were overawed by its majestic beauty. All that is left of that once proud city are the written perceptions of those like Bernal Díaz, a footsoldier in Cortés’ army: When we saw all those cities and villages built in the water, and other great towns on dry land, and that straight and level causeway leading to Mexico, we were astounded… These great towns and pyramids and buildings rising from the water, all made of stone, seemed like an enchanted vision from the tale of Amadis. Indeed, some of our soldiers asked whether it was not all a dream. (Clendinnen 1993:17) Like all dreams it has vanished—‘not forever on earth, but briefly here’—but it has left a remarkable account of its brief existence. In some ways it is more remarkable than the account we have of Rome because it is the only ancient conquest society that has been directly interrogated by our modern world. In 1519 when visited for the first time by Cortés and his small band of Spaniards, Tenochtitlan was inhabited by some 200,000 Mexica in a basin occupied by between 1.1 and 2.4 million people (Hassig 1988:59). The imperial city was large, not only by Mesoamerican standards, but also in comparison with European cities of the time. (Mesoamerica’s second-largest city in 1519 was Tetzcoco with a population of about 30,000 (Clendinnen 1993:18).) In Europe only Paris had a comparable population of about 225,000, while the population of Venice was 100,000, Lisbon about 65,000, 176

Source: Department of Library Services, American Museum of Natural History (negative no. 326597; Rata, Feb. 1970). Reproduced with permission.

Figure 7.1 Tenochtitlan—the city centre


Rome merely 55,000 (it had been 1 million in its heyday), and London about 50,000. In Spain, from which the invaders came, the population of Granada was 70,000 and of Seville merely 45,000 (Bairoch et al. 1988). Little wonder the Spaniards were astounded by what they saw. Here was an urban culture that far excelled their own in magnificence (see Figure 7.1). Nothing like it had been known in Europe since the collapse of Rome. EXPANSION OF THE AZTEC EMPIRE Aztec society was the last in a series of great conquest empires that emerged, flourished, declined, and collapsed on the highlands of Mesoamerica. It was a pattern familiar to the Old World. The first of the New World empires was the Olmec which, flourishing between 1200 and 400 BC, had passed away before Rome had passed far beyond its town limits. While the evidence is sparse, we know that it possessed a sophisticated political system, a structured urban society ruled by an elite warrior class, a complex religion, an extensive system of long-distance trade, and a well-developed culture employing writing, a numerical system, and a calendar. The next great civilization was based at Teotihuacan, just 40 kilometres to the north-east of Tenochtitlan (see Figure 7.2). It flourished between AD 200 and 900, and the city’s population may have reached a level as high as 250,000. Teotihuacan dominated central Mexico for almost as long as Rome dominated the Mediterranean and its influence spread as far as southern Guatemala. Like the Olmecs before them they possessed a sophisticated economic, political, religious, and military system (Snooks 1996:324–30). Despite the collapse of this great city about AD 750, its distinctive culture was carried forward by the Toltecs centred at Tollan (modern Tula) between AD 900 and 1200. While the Toltec Empire collapsed before its population exceeded 40,000, they were the direct source of the sociopolitical organization and the military technology adopted by the Aztecs (Davies 1987:20). Following the collapse of Toltec society a number of tribes migrated from the north-west towards the Valley of Mexico. One of these tribes, which called itself the Mexica, brought with it memories, probably inflated, of the splendour of Tollan. After a number of temporary settlements the Mexica finally established themselves, traditionally thought to be in 1325, on a small island devoid of natural resources but offering good protection, near the western shores of Lake Tetzcoco (see Figure 7.2). Their beginning was not auspicious, however, as the settlement was a miserable collection of mud huts huddling together on a swampy island and occupied by a group of unfortunate refugees who were under the domination of the small imperial city of Azcapotzalco, a short distance to the west (Clendinnen 1993:37). The contrast at this time between Tollan and Tenochtitlan could not have been greater. While the Mexica’s prospects of ever rivalling the Toltecs were 178

Source: Drawn by Cartography Unit, RSPAS, Australian National University.

Figure 7.2 The civilization of Mesoamerica


extremely small—like Rome’s prospects of rivalling their Etruscan overlords —they never lost sight of their objective. We are told that ‘Mexica men strove’, and that, throughout its brief but brilliant history, their society was characterized by: endless striving, the endless, anxious, making of self and then the reversal: the sudden, massive, physical assault by one’s peers in punishment for some perhaps unintended, possibly involuntary delict; the merchant, all payments made, deprived of his reward; the priest cast out; the great warrior shamed. For the elevated those reversals may have happened only rarely, men in authority usually knowing how to protect themselves. But the threat was always there, as was the most telling evidence for its reality, in the lines of captives—warriors yesterday, victims today—going to their deaths on the killing stone. (ibid.: 145,147) The rising Aztec sun Tenochtitlan began as Rome had begun, a small tribe struggling for survival in a fiercely competitive environment composed of larger war-like neighbours. In the beginning it sought protection from the Tepanecs of Azcapotzalco, although it had little choice in this, paying tribute to and fighting the enemies of its overlord. For a century, Tenochtitlan shared in the success of the Tepanecs. They adopted the kingship system of their masters in 1372, and they grew expert in the ways of war. As they became more powerful and confident in their destiny, the Mexica waited and watched for their opportunity. It came, finally, in 1427. A struggle in Azcapotzalco for kingly succession gave rise to general unrest throughout the Tepanec Empire, an unrest that Tenochtitlan under its fourth king Itzcoatl (1427–1440), together with two allies, Tetzcoco and Tacuba, skilfully exploited. With a number of military manoeuvres the dominance of the Tepanecs was broken and cast off, and the Triple Alliance took control of the Valley of Mexico. But only after a hard fight as the former tributaries of Azcapotzalco did not welcome new masters. Following from their success on the battlefield the Mexica inherited a share of the land and tribute once claimed by the Tepanecs. With this new wealth Itzcoatl created a warrior aristocracy as a basis for further imperial expansion. This consolidation of what had been gained and the preparation for further imperial expansion, which was marked by a grab for land by the nobility, took about a generation to complete (Davies 1987:40). When the Mexica finally broke out of the basin of Mexico they had become the dominant power in the Triple Alliance that we know as the Aztec Empire. The pressing strategic question at this time was how to build up an extensive empire relatively quickly in order to subdue and contain the 180

TENOCHTITLAN: CITADEL OF THE SUN

various dissident forces unleashed by the break-up of the Tepanec Empire. The Aztec answer was by hegemonic rather than by territorial control: an empire held together by intimidation rather than by occupation. This involved the negotiation of ‘agreements’ with other city-states, either after their defeat in war or after they had been threatened with defeat, to accept Aztec overlordship and to provide some combination of tribute, labour service, and military support to the cities of the Triple Alliance. In return the Aztecs would provide ‘protection’ and would, in the absence of rebellion, guarantee the position of the existing nobility. As economic and political control was already exercised by dominant cities over subordinate cities, the Aztecs needed only to subdue the leading cities and allow them to retain their traditional influence. This economized not only on investment in warfare but also on imperial administration. What I am arguing, therefore, is that the Aztecs chose to minimize their strategic investment in conquest so as to build up their empire rapidly. But, of course, they could only maintain control by the constant exercise of military force. Any city foolish enough to rebel had to be treated with quick and severe retribution. This was not without its costs. To both sides. The alternative, the territorial empire that had been developed by Rome, required much greater initial investment in the form of fortifications and garrisons of soldiers, the establishment of a permanent army, modifications in the domestic economy to liberate labour for a professional army, and a more complex imperial administration in both the imperial city and the provinces. The only concession made by the Aztecs to the territorial approach was the establishment of ‘strong points’ at Oaxaca, Oztuma, and Tuxtepec—a concession made late in the Empire’s history and on its frontiers (perhaps a harbinger of things to come); and they were colonies rather than garrisons, having no permanent military support (Davies 1987:196–7). Such strategic investment takes time, time the Aztecs do not appear to have had. This interpretation rejects the conventional one cast ‘largely in terms of technology’, namely, that Mesoamerica ‘lacked efficient transportation, having neither wheeled vehicles nor draft animals’ (Hassig 1988:17). When long-distance conquests were adopted about 1450 during the reign of Moteuczomah the Elder (1440–1468), once the old Tepanec Empire had been absorbed by the Aztecs, they also were based on the hegemonic principle. These campaigns, which drove hundreds of kilometres into the south, north-east (reaching the Gulf coast), and south-east (almost to the Pacific), were aimed at conquering selected cities that dominated their economic hinterlands (see Figure 7.3). Not surprisingly these strategically innovative campaigns were relatively expensive and involved considerable risk. It has been calculated that the longest of these—a round trip of some 900 kilometres into the south-east—involved a minimum marching time of 26 to 43 days (exclusive of rest, combat, and regrouping) and would have needed 7.4 to 12.3 million kilograms of maize to feed an army of 200,000 181


Figure 7.3 Mexica campaigns from Tenochtitlan, 1427–1519 Source: Drawn from data in Hassig (1988).

warriors accompanied by 100,000 porters. The success of these longdistance campaigns led to the steady expansion of the Aztec Empire during and beyond the reign of Moteuczomah the Elder. While expansion continued under the next two kings—Axayacatl (1469– 1481) and Tizoc (1481–1486)—mainly east and west along the Gulf coast, the weakness of the hegemonic system soon became apparent. It depended crucially upon the military abilities of the king. As Tizoc does not appear to have possessed the necessary abilities, revolts broke out throughout the Empire. Only the election of a great warrior-strategist as king in 1486— possible after he had eliminated Tizoc—prevented the disintegration of the Empire. Ahuitzotl (1486–1502) spent the first years of his reign suppressing rebellion throughout the Empire, first in the basin of Mexico and then in the north-east and east. Only once the security of the Empire had been achieved could the programme of long-distance conquest be resumed. In a series of campaigns between 1494 and 1497, Ahuitzotl made a breakthrough in the far south-east, getting as far as the modern border of Guatemala. The final thrust of 1497 involved a round trek of 1,900 kilometres which would have taken between 59 and 99 days to complete, exclusive of rest, combat, and regrouping (Hassig 1988:215–17). Through these conquests Ahuitzotl doubled the size of his Empire (Davies 1987:82). The last great Aztec conqueror was Moteuczomah the Younger 182


(1502–1520), son of Axayacatl and grandson of his namesake. This king, who died at the hands of Cortés, continued the incessant wars of retaliation and the long-distance campaigns of his forebears eastward along the Gulf and Pacific coasts. But under Moteuczomah the conquest tactics of the Aztecs began to change significantly. The Empire began to undertake simultaneous multiple military engagements, to use larger armies, to use siege tactics, to show a growing tendency to slaughter the occupants of captured cities as well as enemy warriors on the battlefield rather than taking them back to Tenochtitlan for ceremonial sacrifice, and to establish a few colonies (Hassig 1988:230–2). These may have been the signs of the beginning of a territorial conquest empire. Although Moteuczomah commanded armies of up to 400,000 men (ibid.: 227), he was defeated by an invading Spanish army of merely a few hundred. How was this possible? Not, as some have claimed, that ‘a handful of Spaniards could make mincemeat of a horde of Indians’ (Davies 1987:192), but because the hegemonic imperial system was inherently unstable and only required a small but determined outside force capable of upsetting the competitive balance by exploiting the resentment that the tributaries felt for the Mexica. The Spaniards did this brilliantly. They had to because they would have been annihilated in any open battle against the full Aztec army. An unfolding dynamic strategy As I have argued before, and will do so again before this book is completed, strategic demand for facilitating institutions is an outcome of an unfolding dynamic strategy.1 In this case the dynamic strategy is conquest. Let me begin with a digression. In The Dynamic Society I presented data to suggest that the expansion of an earlier lowland civilization, that of the Maya which flourished between AD 300 and 900, exhibited ‘great waves’ of expansion of about 300 years’ duration and, within that dynamic structure, ‘long waves’ of about 50 years. Unfortunately we do not have a comparable time period for Mexica society. Owing to the Spanish conquest the Aztec Empire, cut off in its prime, lasted barely a century, while even Tenochtitlan had been occupied by the Mexica for barely two centuries. Nevertheless, an interesting pattern can be discerned even for this relatively short period of Mexica expansion. Mexica society experienced four long waves of about 50 years in duration over the period 1325 to 1519. This has been commented upon before more generally (Clendinnen 1993:37), but is presented here (Table 7.1) in a more systematic way. Each of these long waves was driven by a major conquest substrategy. The first of these dynamic phases or substrategies was from the initial settlement of Tenochtitlan to the city’s adoption of a kingship system. This was a period of establishment, growth, and participation in the Tepanec conquest strategy. Owing to this development Tenochtitlan was able to compete more effectively with other small cities within the Tepanec sphere of 183


Table 7.1 Patterns of Mexico expansion, 1325–1519

influence. The second phase, from 1372 to 1427, saw the growth of Mexica economic and military strength to the stage that they, in alliance with two of their neighbours, were able to take over the Tepanec Empire. During these two generations under the leadership of kings, the Mexica were increasingly able to exert their strength against their competitors in the Valley of Mexico. The third, and entirely new, phase or substrategy in the history of Tenochtitlan saw the beginning of the Mexica’s independent conquest strategy—the first long wave of imperialism. The period 1427–1479, coinciding with the reigns of Itzcoatl, Moteuczomah the Elder, and Axayacatl, was the first drive to extend the frontier of empire. Of these two generations, the first was marked by an attempt to consolidate the Aztec takeover of the Tepanec Empire in the Valley of Mexico and its immediate surrounds. But from about 1455 Moteuczomah made the first Mexica break-out from their initial environment, with thrusts to the north, east, and south-east (Davies 1987:64). The solid defence of the Tarascans in the west prevented any significant imperial advance in that direction (see Figure 7.3). After a generation of successful eastward expansion the Aztecs made a further thrust westward, but were soundly defeated by the Tarascans in 1480. Much has been made of the extended supply lines of the Aztec army and the sound fortifications of the Tarascans, but it is highly likely that the first wave of imperialism, lasting about 50 years and based upon the energies of father and son leadership, had temporarily exhausted itself. Expansion was not resumed for a further six years. This interval is usually blamed on the ‘poor war record’ of Tizoc (Hassig 1988:195), but it may have arisen from a need to consolidate the first wave of imperial expansion by reorganizing the domestic economy, to extend and strengthen the tribute system which was the lifeblood of conquest, to expand the system of military training in Tenochtitlan, and to seek new leaders who could spearhead the next wave. 184


The fourth phase involves the second long wave of imperial expansion, which began in 1486 under the leadership of Ahuitzotl and continued under Moteuczomah the Younger. This wave of conquest swept eastward towards the lowlands of the Maya and, until it was cut short by the Spanish invaders in 1519, showed no signs of abating. It is likely that it would have continued for at least another decade or so. Certainly the Mexica were expanding on all fronts, and had even returned to an offensive against the Tarascans in the west in 1515—the first time since their defeat there some 35 years before. The only apparent difficulty was the continual need to suppress rebellions throughout the Empire. This was endemic to the hegemonic form of empire chosen by the Aztecs. And as the Empire expanded this emerged as a growing problem. THE STRUCTURE OF AZTEC SOCIETY The Aztec economy Like all true conquest societies, the domestic economy of the Mexica, which involved a mixture of government and private activities, was based upon agriculture. But, unlike conquest societies such as Rome, Mexica agriculture was never organized on a large-scale basis using slave labour. Throughout the Empire, Mexica agriculture retained its peasant basis, in the form of small holdings worked by owner-occupiers or larger holdings worked by dependent peasant labour. Hence the Aztec army continued to consist of part-time warriors, able to fight only during the six months between the harvesting and planting seasons. It was never organized on a full-time professional basis as in Rome after the mid-third century BC, because the Aztec’s dynamic strategy of conquest did not call for a professional army and hence did not require a change in the traditional structure of agriculture. Organizational change was driven by strategic demand. Nevertheless, Aztec agriculture, particularly in the Valley of Mexico, was organized on a sophisticated basis. The economic system in the Valley of Mexico was dominated by the great city of Tenochtitlan. As Ross Hassig (1985:145–50) persuasively argues, the unique location of this city contributed to its rapid growth. Of course, like all imperial cities, the size of Tenochtitlan was liberated from the technological restrictions of the neolithic system by the flow of tribute from conquered territories. But, in addition, Tenochtitlan had the advantage of being located on a large lake (see Figure 7.2). The absence of wheeled, animal-driven transport limited the effective hinterland of Mesoamerican cities to a radius of about 25 kilometres, the distance a porter could carry a load of 23 kilograms in a day. But being on a large lake, which enabled the use of more efficient—by a factor of 50—canoe transport, Tenochtitlan was able to extend its effective hinterland to a 25-kilometre radius around the entire lake shore. Even in the 185


absence of the conquest strategy this locational factor would have allowed any dominant city to grow much larger than the Mesoamerican average. As Tenochtitlan became the dominant city in the Valley of Mexico, specializing in the production of craftwork, other cities of the region relocated to the lake shore to take advantage of the possibility of specializing according to comparative advantage. Increasingly Tenochtitlan specialized in manufactured goods and achieved economies of scale, while the surrounding lakeside communities specialized in various forms of agricultural production. The lakeside communities brought their agricultural products by canoe across the lake and into the central markets of Tenochtitlan via a network of canals, returning at night laden with craftwork. Because the Mexica did not develop a money economy, commodity exchange in Tenochtitlan and smaller markets took place through barter. Prices, however, were recorded in terms of cacao beans, blankets, quills filled with gold dust, and small copper axes (Hassig 1985:67–9). The fact that the imperial city was also a wealthy centre for the redistribution of tribute hastened and extended this process. In the end, the Valley of Mexico developed a highly integrated barter economy based on specialization and division of labour. The nature of agriculture varied considerably from the larger landholdings of the aristocratic warriors to the small holdings of the peasants that were located both on the mainland and on artificial islands in the lakes (the chinampas). Just prior to the Spanish conquest it is possible that chinampas covered an area of 9,500 hectares in the southern lake region alone (Parsons 1976:243). These plots were attached to residences and ranged in size from 0.01 to 0.5 hectares, with most falling between 0.01 and 0.04 hectares (Hassig 1985:49). Owing to their fertility and to the availability of adequate water, these small plots could, when worked with family labour, consistently produce enough maize, fruit, and vegetables for a family, with a surplus for the market. In contrast, the aristocracy held large estates that were worked using hired labour—which was paid with commodities in this non-monetized economy— as well as labour services required as tribute. With the unfolding of the conquest strategy the ruling elite became increasingly wealthy by converting conquest profits into larger land holdings. In the process the dispossessed peasants joined the rural workforce. By the early sixteenth century die majority of peasants, certainly more than two-thirds, worked on the lands of the aristocracy (Davies 1987:120–3). Tenochtitlan was the hub of an even more complex system of commodity flows. These flows, which did not require a monetary system, were threefold in nature: local trade, tribute, and long-distance trade. The first has been considered, and the second will be explored in a discussion of imperial administration. Long-distance trade had existed in Mesoamerica for thousands of years and, while it took a back seat to the economic role of conquest, it was still important. This traffic was organized by hereditary merchants (pochtecah) who formed themselves into merchant guilds, lived in 186


separate wards (local government areas) that had their own courts and laws, and quietly sacrificed to their own gods of commerce. Their children attended the priest schools in order to learn to write, to keep ‘painted records’, and to conduct their own religious activities as the priests were devoted, as we shall see, to serving the dominant conquest strategy. Not surprisingly in a conquest society, merchants, who represented the unheroic characteristics of a rival dynamic strategy, were distrusted by the ruling elite in Tenochtitlan. Merchants were only tolerated at all because they were useful to the state and because they could be bullied into sharing some of their wealth with the military elite by a levy on their goods and by lavish feasts. Perhaps this was not unreasonable in view of the fact that merchants profited from following in the footsteps of warriors as they pushed back the frontiers of empire. Inga Clendinnen (1993:133) tells us that the long-distance merchants were notable servants of the state, policing the petty traders of the local markets, and collecting their taxes, trading on the ruler’s behalf, providing information on the outer reaches of empire. But much of their public conduct appears designed to deny their status. If Mexica warriors and lords moved in accord with a style of watchful pride, the merchants practised a thorough-going self-effacement, habitually wearing the maguey fibre cloaks of the commoner and cultivating an address of conscientious humility. The merchants also acknowledged the military values of the dominant conquest strategy. They told heroic tales about their own exploits; they purchased slaves, dressed them in warrior garb, and offered them for sacrifice to the God of War alongside real captives of their warrior brothers; they went into enemy territory heavily armed; and, sometimes, they even became warriors themselves. In the Aztec Empire, merchants had the misfortune to follow a calling that was not at the centre of the dynamic of their society. While long-distance trade had existed as long as civilization in Mesoamerica, its considerable expansion within the Aztec Empire was largely derivative. Trade expanded because the conquest empire expanded, not the other way around. In other words, the unfolding conquest strategy provided growing opportunities for the merchants of Tenochtitlan. Ross Hassig (1985:114) has demonstrated that the trade of Mexica merchants grew from a few types of parrot feathers in the mid-fourteenth century to include: a wide range of feathers, precious stones, cotton capes and breechcloths in the early fifteenth century; gold lip and ear plugs, necklaces, fine precious stones, wild-animal skins, and fine exotic feathers in the midfifteenth century; and costly capes of varied design, embroidered clothing, long capes, and chocolate by the late fifteenth century. He concluded that the merchants’ trading areas were expanding in step with the Empire. As the borders of the Empire were pushed back, Aztec merchants traded within 187


these areas. While trading beyond the confines of the Empire during this time may have been possible, the regularly acquired goods were derived from within the boundaries of empire. What of state intervention in the economy? It is generally accepted that the Aztec state did not attempt to control commerce in a ‘heavy-handed, directed way’. Instead, they exercised a more subtle influence by regulating the operation of markets in a way similar to that of governments in modern mixed economies, and by controlling the supply of porters who were essential to the success of the state’s military campaigns. Other types of control over the flow of goods are difficult to implement in a society where tradeable items are carried by porters who are not restricted to recognized roadways. Hassig (1985:126) concludes: ‘The picture presented in many sixteenth-century chronicles of a free economy—including laissez-faire entrepreneurs, supply-and-demand markets, bargaining, and freely hired professional porters—is accurate. All this took place.’ This is an outline of the Aztec economy according to the conventional perspective. What must be realized is that, for a conquest society, the domestic economy is really a side issue (see Figure II.1). The real economic powerhouse of Aztec society was not agriculture, craftwork, or longdistance trade. It was the massive investment in war and conquest. The dynamism of Aztec society was centred in the conquest strategy that generated a standard of living for the Mexica that could not have been achieved at that time and that place through rural, urban, or commercial activities. In ancient societies, the conquest strategy was so important that it could not be left to private interests. It had to be the prime object of central government control that looked after the material interests of the ruling elite. Yet, as we saw in the case of Rome, the agricultural, craftwork, and trading sectors, together with their respective institutions, played an important subsidiary role by converting the fluctuating returns from conquest into a steady flow of income. This was achieved by the ruling elite in Tenochtitlan by investing the returns of conquest in secure incomeproducing assets such as land, craftwork shops, and trading enterprises. The domestic economy and its institutions served the wider conquest economy created by the dynamic strategy of the Mexica. The political system Of interest here is the way both the city of Tenochtitlan and the Empire of the Triple Alliance were governed. The basic political unit in Mesoamerica was the city-state, which had a radius of influence of about 10 kilometres (Hassig 1988:20). Larger political entities were constructed by a dominant city-state weaving an imperial network of subordinate city-states. To maintain this network, regular warfare was required to suppress rebellions. This warfare took two forms: harsh reprisals with the taking of captives for 188


human sacrifice; and ‘flower wars’ with city-states that could not be overwhelmed. The flower wars were ritual wars designed to display military strength without committing scarce resources to a risky all-out conflict. They had a salutary demonstration effect on other city-states that were contemplating rebellion. The city-state and, later, the Empire of Tenochtitlan were governed by a monarchy. In the period of high empire the Mexica were ruled by a king (tlahtoani), who was advised by a chief minister (cihuacoatl). The king was chosen from a council of four great men (tlacateccatl), usually brothers or close relatives, by a group that included the chief minister, the council of four, and the rulers of Tetzcoco and Tacuba. The inclusion of the other rulers of the Triple Alliance was a formality as the king of Tenochtitlan was the recognized head of the Aztec Empire. This system was supported by a landowning nobility who had a vested interest in the success of the Empire. Indeed, the senior warrior-aristocrats, together with the royal family, were the dynamic strategists of the Aztec Empire. They invested in conquest, took considerable personal and financial risks, and received the lion’s share of the spoils. Empire expansion, in pursuit of the dynamic strategy of conquest, took place by attaching additional networks of city-states through wars and threats of wars. The aim of this conquest strategy was to target certain dominant city-states which then brought their own tributaries into the expanding imperial system. Unless persistent rebellions occurred, no attempt was made by Tenochtitlan utterly to destroy opposing armies and cities, precisely because the conquered cities were a source of tribute and their armies were essential for further imperial expansion. Hence the Aztecs left the administration of newly acquired city-states in the hands of existing ruling elites, provided they delivered the agreed tribute. And if they could be persuaded to join the Empire without fighting a war against the Triple Alliance, they could expect a lower rate of tribute extraction. Generally, once Aztec dominance had been demonstrated, the local dynasties cooperated enthusiastically because they could maintain their economic power by squeezing their own tributaries a little harder, and because they could use their Aztec affiliations against their former enemies. As Hassig (1988:26) concludes: ‘The Aztecs’ reliance on hegemonic rather than territorial control produced an empire of distinctive character and vast expanse but loose control… The Aztec Empire was essentially an alliance, and was expectedly fraught with rebellion.’ The impression is often given that this type of empire had no overarching imperial organization and that its ‘cost was very low’ (Hassig 1985:147). While the Aztec Empire certainly minimized the amount of imperial administration, dispensing with a system of provincial governors presided over by an imperial organization in Tenochtitlan, it would have required a ‘foreign affairs’ office, probably attached to the royal palace, to handle diplomatic relationships with the large number of subordinate city-states. 189


Certainly it involved, as we shall see, a central military organization to monitor and suppress rebellion within the Empire and to plan and supervise new conquest initiatives. None of this happened spontaneously. Also, we know that in Moteuczomah the Younger’s reign there was an attempt to strengthen the administration of the Empire by requiring the sons of nobles in subordinate cities to go to Tenochtitlan to be educated, indoctrinated, and employed in the central imperial government. Initially hostages, these young nobles helped to strengthen the imperial structure (Hassig 1988:221–2). Moteuczomah also replaced commoners with poor nobility in government posts in what is known as the ‘counter-revolution’ of the early sixteenth century (Davies 1987:90). All this implies an imperial administration of considerable proportions. We do know that a complex organization existed throughout the Empire to collect tribute and to funnel it into Tenochtitlan. As suggested by others, this organization could have been used to administer the Empire (ibid.: 205). The tribute system that emerged with the unfolding of the Aztec conquest strategy was based on thirty-eight provinces. Each province was responsible for organizing the collection, storage, and despatch to Tenochtitlan of tribute goods which included grain, cacao, other foodstuffs, clothing, warriors’ costumes, cotton armour and helmets, arms, gold, silver, precious stones, feathers, and animal skins. Tribute was also collected in the form of labour services that had to be employed on public works, the estates of nobility, and as carriers and soldiers. The collection of tribute from commoners—as nobles and officials were exempt—passed through a number of stages and was supervised by officials of varying status. A petty official (tequitlahtoh) collected tribute goods at the local (calpolli) level and had them transported to a regional centre where the appropriate official (calpixqueh) transferred them to the provincial centre. At the provincial centre the imperial calpixqueh—who, unlike the lowerranking officials, was of Mexica nobility—arranged their delivery to Tenochtitlan (Hassig 1985:103–10). Warehouses were constructed at each of these levels to hold the tribute goods until they were required further up the collection system. All storage and transport costs were borne by the dependent cities. Some of the tribute went directly to the Tenochtitlan’s partners in the Triple Alliance, while some was held at the local and provincial levels to feed and provision passing Aztec armies and temporary garrisons. The rest was delivered to the imperial city. In Tenochtitlan itself huge tribute houses held goods until they were needed to finance war, to feed and supply the nobility and sometimes the merchants for meritorious service to the state. As all investment in conquest infrastructure was undertaken by the state on behalf of the nobility, the tribute system obviated the need for financial institutions. The tribute system was a direct response to the growing demands of Tenochtitlan’s conquest strategy. As its armies marched throughout 190


Mesoamerica, and as its population, freed from the limitations of a neolithic agriculture, grew rapidly, the demand for tribute goods increased. In turn this required the development of an effective administrative structure that could facilitate the flow of tribute goods from the periphery to the centre of the Empire. While this mechanism enabled the population of Tenochtitlan to increase rapidly, both through higher than usual rates of natural increase and through migration, it prevented the recovery of populations on the Empire’s periphery from war losses. A similar argument has been made by Ross Hassig (1985:10). The great metropolis of any conquest society is a cancer upon the body of its subject peoples. The tribute system was also a major instrument of imperial administration. The imperial tribute officials in each of the provincial centres had the authority and economic resources to exercise imperial supervision and control of local rulers if any problems arose. We know they controlled local public works (Davies 1987:117). Centralized control could operate through the effective empire-wide network of tribute officials and, if necessary, could be supported by military forces sent out from Tenochtitlan. Even when not actively engaged in imperial control, this system could be used to gather vital information about local developments throughout the Empire—information that was essential to the direction of the dynamic strategy of conquest. What of the governance of the imperial city itself? Although the palace provided central direction for the administration of Tenochtitlan, it did so with minimal intervention in local affairs. The city was divided into a number of local wards (calpolli) that were administered by lords responsible both to the king and to powerful local families. It was a political system that had its roots in the origins of the city before the Empire emerged in 1428, and even before a monarchy was adopted in 1372. Before 1428 the palace had to depend solely on tribute from the citizens of the city. In these circumstances the king’s power was severely circumscribed. After 1428 the king was able to obtain independent sources of wealth in the form of land and tribute from the defeated Tepanec Empire, which he used to strengthen his own dynasty and to create a nobility that was dependent upon his generosity. From this time the king and his nobles focused upon imperial expansion, leaving the details of urban administration, if not the guidelines, in the hands of local interests. Nevertheless, the calpollis were ‘firmly subordinated to the central administration’ (Clendinnen 1993:21). The local wards were responsible for a number of organizations that were critical to the success of Tenochtitlan and, hence, to the success of the Empire. They organized the training of warriors, the preparation and provisioning of troops for war, the preparation of captives for sacrifice at numerous festivals and celebrations, the raising of internal tribute, the fulfilling of labour obligations to the temple and the city, and the redistribution of part of the 191


returns from conquest. And the warriors of each calpolli fought as a unit under their own local lords and their own banners (ibid.: 40). The military system We now turn to those organizations that were at the dynamic centre of Aztec society and the strategists who invested in conquest—the military and the ruling elite. These organizations and their associated institutions were responsible for facilitating the dynamic strategy of the Aztecs. The Mexica initiated and sustained their conquest strategy, as we have seen, under the direction of an elected monarchy. To do so, in 1372 they abandoned an earlier and more egalitarian tribal organization. This strategic ‘corporation’ with its strong central direction and control persisted throughout the life of the Empire with conspicuous success. Here is an interesting contrast with Rome. In 509 BC the Romans abandoned their monarchy for an aristocratic oligarchy of equals, which persisted until the first century BC when the escalating demands of their conquest strategy demonstrated its inadequacies. Fortuitously the Aztecs had stumbled upon a strategic system that could handle the growing scale of empire. The problem that the Aztecs faced was that their chosen conquest structure—the hegemonic empire—was beginning to act as a constraint on the development of their dynamic strategy. By contrast, the Roman Republic had opted for a territorial empire that was capable of seeing their dynamic strategy through to exhaustion. This instructive contrast of strategic control and strategic form will be taken up in the conclusion to this chapter. The brains trust for the Aztec dynamic strategy of conquest consisted of the king of Tenochtitlan together with his senior aristocratic supporters. The king was advised in military matters by the Supreme Council composed of four officers of the highest nobility, namely the king’s brothers and near relatives. Then came the king’s generals, followed by the military orders that comprised the most valiant and seasoned Mexica warriors. The main military orders were the ‘eagles’ and the ‘jaguars’, who were housed in the king’s palace. It was here that war councils were held—where decisions were made about the nature and scale of investment in the conquest strategy. This strategic investment took two main forms, military training and military campaigns. First, military training. To be a valiant warrior was the whole purpose of life in Tenochtitlan. While this is difficult for us to understand, living as we do in societies dominated by the technological strategy, we can gain a sense of the ancient reality through the evocative prose of Inga Clendinnen (1993:112): To be born a male in Tenochtitlan was to be designated a warrior. The attending midwife met the birth of a boy child with war-cries, and lifted the baby, still slippery with the birth fluid, away from his 192


mother’s body to dedicate him to the Sun, and to the ‘flowery death’ of the warrior in battle or on the killing stone. The umbilical cord would be entrusted to a seasoned warrior, to be buried ‘in the midst of the plains where warfare was practiced’. At the child’s naming a few days after birth the small boys of the neighbourhood were recruited to shout the name of the tiny warrior through the streets and at the house entrances, so awarding him his first triumph. After the ceremonious dedication at birth came the first marking of warriordom into the flesh. A boy’s early education took place at his father’s side until, at the age of 10 years, he came under the full jurisdiction of the ‘House of Youth’ (telpochcalli) attached to the local warrior house. Here he was called upon to join in work details for the local ward organized by senior youths, and he was taught physical skills together with the economic expertise necessary for sustenance between the seasons of war. At the age of 15 he began intensive training under the guidance of a senior warrior from the local warrior house. In 1519, on the eve of the Spanish conquest, there were some twenty local military schools in the city, each attended by 419–559 youths aged between 15 and 20 years (Hassig 1988:31). But this included only the commoners. The sons of aristocrats attended elite schools attached to the temples, schools that also trained priests. Here education was of an intellectual as well as a military kind, and the boys learned to read and write, to paint, to understand the complex Mexica calendar, the book of years and the book of dreams, and to debate political issues, to sing poetic songs, and to dance. By the time they were 18 the boys were required to accompany their trainers on war campaigns, to carry the weapons, and to watch from a safe distance. Two years later the novice warriors, organized into small groups, had to take part in the capture of an enemy warrior, generally when the tide of battle had turned in their favour. Later they would share the body parts of their captives offered as a sacrifice to the God of War. From this time they were expected to take captives on their own, and their promotion through the military ranks, together with their share of the tribute, depended on the number of live captives they took. The aim of Aztec warfare was not to kill enemy warriors on the battlefield but to capture them for sacrifice back in Tenochtitlan. The great warriors were ‘solitary hunters’ (Hassig 1988:33–7; Clendinnen 1993:112–15). The training was long, hard, and dangerous. It was costly both for the individual attempting to accumulate human capital for war, and for Mexica society that invested in a large number of training schools staffed by highly skilled warriors. What was it that motivated such investment in military skills of the individual and the society? Having examined the flow of tribute into Tenochtitlan we need only focus on the motivation of warriors here. Successful warriors, it is generally acknowledged, received both profits and fame. I will argue that these are both aspects of material advantage—profits in the form of 193


tribute are the short-term material rewards, and fame is a form of human capital that generates long-term material rewards. Military fame in Tenochtitlan was not something that happened by chance. It was something that required a great deal of investment, hard work, and the willingness to expose oneself to considerable risk on a continuing basis. Fame in Mexica society-indeed, in any conquest society-was not a matter of one heroic event, as it is in wars undertaken by non-conquest societies, that leads to the granting of a prestigious award such as the Victoria Cross, the Iron Cross, or the Croix de Guerre. In isolated actions luck can play a large part, but in Mexica society fame depended upon the number of captives taken and on the status of those warriors. You can be lucky in one or even two battles, but not time after time. Fame in Tenochtitlan was based on the acquisition of special human capital as it was in Rome (see note 1 to Chapter 6 on p. 513). What did the successful warrior stand to gain in Tenochtitlan? The returns to conquest depended both on the socioeconomic status of the warrior and on fame achieved in battle. Successful warriors received a share of goods from the city’s tribute warehouses: the commoners received an allowance of food, clothing, and luxuries such as chocolate and tobacco; and the nobles received gold objects, princely garments, rare feathers, land, and government office. We are told that the ‘houses of those who had taken captives were centres of abundance, and their kinfolk were fat through the leanest season’ (Clendinnen 1993:119). Scarce objects such as cacao beans and richly worked capes of gold and feathers were used as a medium of exchange and could readily be converted into more durable assets such as land (Davies 1987:150–2). And for those commoners who achieved fame based on consistent success in taking captives, a more lasting material benefit was to be gained through admission to the nobility. Commoners admitted to the nobility in this way might not wear the feathered cloaks of the established aristocracy but they could claim other aristocratic privileges such as wealth from the tribute warehouses, exemption from the payment of internal tribute, the right to eat at the royal table, and the rights to drink in public, to keep concubines, to take entertainment with the lords, and to pass on these privileges to their children. Fame was a means to an economic end. The other major form of strategic investment in Aztec society was the mounting of conquest campaigns. By the end of the fifteenth century the Mexica strategists were undertaking large campaigns requiring armies of between 200,000 to 400,000 soldiers and 100,000 to 200,000 porters, and involving round trips of up to 2,000 kilometres (Hassig 1988:60, 64, 229). These large, complex undertakings required considerable planning and massive investments for a neolithic society. First, it was necessary to gather and assess information about distant parts of Mesoamerica. This was achieved by the activity of merchants, by sending out ambassadors, by establishing messenger relay teams (relays of men stationed every 4 to 5 kilometres along the main roads), and by developing a network of spies. 194


Second, once the decision to attack a series of selected cities had been made, it was necessary to provide supplies of food, clothing, bedding, cotton armour and helmets, military capes, shields, and an array of weapons including slings and slingshot, bows and arrows, lethal dart throwers and darts, thrusting spears, wooden swords edged with razor-sharp obsidian or flint blades, and clubs of various types (ibid.: 75–90). All this equipment, which bore ornate designs, had to be produced by highly skilled craftsmen and stored in specially constructed warehouses. Food for the first stages of the journey was supplied by each ward and prepared by local women. Third, once on its way the great army had to be fed by tributary cities en route, possibly from the network of tribute warehouses constructed throughout the Empire. The demands of these armies were great, particularly as they were away from Tenochtitlan for up to four months. Fourth, there was the opportunity cost of lost manpower. Even large successful armies marching and fighting over long distances could expect to lose around 17 per cent of their numbers (ibid.: 116–17). And if unsuccessful, the proportion could be much higher. Finally, there was the extravagant cost of religious ceremonies which, as we shall see, were used to demonstrate the power of Tenochtitlan to its enemies and symbolically to involve all the people of the great city in the conquest strategy. These religious ceremonies were highly expensive in terms of both physical and human resources. Such large costs could only be financed from the returns of successful past conquests. No neolithic society could afford such large-scale ventures from internal resources. Hence, these expenditures should be thought of as strategic investment undertaken to increase the flow of tribute from the periphery to the centre of empire. And once at the centre of empire this tribute was used to increase the immediate living standards of the metropolis; to invest in urban infrastructure (using tribute labour) such as great public buildings, streets, canals, a great dyke to hold back the brackish water of Lake Tetzcoco, conversion of the swamplands to chinampa gardens, reclamation of land from the lake to extend the city, and aqueducts to bring in pure water from the mainland; and to transform the nature of the imperial economy to a scale and degree of sophistication beyond even the wildest dreams of those in a society depending solely upon a neolithic technology. The role of state religion The state religion of the Mexica was a massively expensive and a brutally extravagant affair. I will argue that this remarkable institution was used by the ruling elite to support its conquest strategy rather than its spiritual aspirations. It was in effect part of their strategic investment in conquest. The objectives of Aztec state religion were to symbolically and publicly involve all the people of Tenochtitlan in the conquest strategy, to help generate strategic confidence, to demonstrate their power to those within 195


and without the Empire, and to keep the lower orders in their place. Aztec religion embodied the dark spirit of the dynamic strategy of conquest. There is much disagreement about the relative importance of the gods in the A2tec pantheon (Nicholson 1971; Brundage 1979; Davies 1987). Particularly as to whether Huitzilopochtli (‘Humming bird on the left’), the God of War and the Sun God, or Tezcatl-Ihpoca (‘Smoking mirror’), the supreme power, had priority in a pantheon that included more than a score of gods. But this need not concern us here. What we do know is that Huitzilopochtli was the tribal god of the Mexica; that he was the main god in Tenochtitlan, celebrated by the great pyramid in the centre of the city, if not in Tetzcoco or Tacuba; and that he was central to the ceremonies involving the sacrifice of captured warriors, and to the crucially important New Fire Ceremony. All these extravagant and brutal religious activities were closely related to the Aztec conquest strategy. This can be seen in the two main ceremonies involving the God of Sun and War. The first of these is the large-scale sacrifice of captive warriors to the God of War. While such practices are, to our mind, unthinkable (but only because we pursue a different dynamic strategy), they were widely practised in ancient societies of the Old World as well as the New, and in Mesoamerica can be traced back to at least 5,000 BC (Davies 1987:219). The most famous occasion in Tenochtitlan is said to have occurred when the great temple of Huitzilopochtli (see Figure 7.1) was dedicated in the reign of Ahuitzotl (1486–1502). Some sources put the number of warriors sacrificed at 80,400, a bloody ritual taking four days to accomplish (Hassig 1988:205), while others argue for what is probably a more realistic figure of about 20,000, involving ‘four patient lines stretching the full length of the processional ways and marshalled along the causeways, slowly moving towards the pyramid’ (Clendinnen 1993:91). Whatever the real figure, we do know that largescale human sacrifice of captive warriors, maidens, and small boys occurred in Tenochtitlan on a regular basis and that it was associated with the installation of a new ruler, the dedication of a major temple, and the opening of a major work of engineering. Before any great ceremony the captive warriors were carefully attended to and prepared for the ordeal to come by the families of their captors. On the appointed day selected captive warriors dressed in chalk and feathers were paraded through the streets, marched up the steep steps of the great pyramid, tethered to the elevated ‘gladiatorial stone’ and ordered to fight a number of Mexica warriors until they collapsed. Most fought bravely, as this is what they had been trained to do, but the end was always the same. Once the captive warrior had collapsed, the priests pounced, arched the victim’s back across the sacrificial stone, slashed open his chest, plucked out the stillbeating heart, and held it up to the sun. The public act ended and the private began. We are told that:

196


Throughout all this the captor, who had nurtured his captive with care and pride, watched his mirrored self on public display. His warrior at last dead, the heart burnt in the eagle vessel in homage to Huitzilopochtli, the head removed for use in a priestly dance and then skewered on the appropriate skull rack, the cadaver carried to his home calpulli, the captor was given a gourd fringed with quetzal feathers and filled with the blood drawn from the welling chest cavity to carry through the city, daubing the blood on the mouths of the stone idols in all the temples. Then he returned to his own ward temple to flay and dismember the body, and to distribute the limbs in the conventional way. Later again, he watched while his kin, summoned to his home household, ate a small ritual meal of maize stew topped by a fragment of the dead warrior’s flesh, as they wept and lamented the likely fate of their own young warrior. (Clendinnen 1993:95) The captor did not partake of the meal because it would have been the same as eating his own flesh. Rather, he put on the chalk and feathers of his captive. It was a celebration of his own future death—the death of all Mesoamerican warriors. The crucial point to note about this ceremony is that it involved all the people of the city: men, women, and children, not just warriors. We are told that ‘the people were implicated in the care and preparation of the victims, their delivery to the place of death, and then in the elaborate processing of the bodies’ (ibid.: 2). What it amounted to was the symbolic participation of all the people of Tenochtitlan in the dynamic strategy of conquest. All benefited from conquest and all were publicly implicated in it. More than any other conquest society, the Mexica refused to deny the true nature of their objectives in life. By forcing home this simple but brutal truth, the Aztec state was able to reinforce its dynamic strategy. It was a most effective way of reinforcing the natural process of strategic imitation. The Roman state, as we have seen, also attempted to involve the people of Rome in their conquest strategy. But they did so with less honesty and directness. The Romans sacrificed animals to Jupiter and the other gods in their pantheon, and they provided free public entertainment in the form of mock battles and other war-games. While we may be tempted to see Aztec society as more brutal than Roman society, that would be a mistake. Aztec society was just more open about the way in which it attempted to improve its material standard of living. The scale of Roman slaughter on the battlefield and in captured cities was even greater than the highest estimates of Aztec ritual slaughter. It is just that the Mexica preferred to do it at home rather than on tour. A reason that Rome appears less savage could be the example of Greek values that, as we shall see in Chapter 8, were fashioned by the less brutal commerce strategy. This was an example not available to the Mexica. It 197


is just possible that over time the state religious ceremonies of the Mexica may have become more abstract and human sacrifice may even have been abandoned. As we know, at one time human sacrifice was widely practised in the Old World, even in Greece. And the ritual slaughter of large numbers of gladiators, criminals, and captives in the Roman Colosseum is human sacrifice disguised as war-games. There usually comes a time in the history of any successful society when they find it difficult to reconcile their baser desires with their intellectual aspirations. The solution is to ignore and deny the materialist motivation and the instrument by which it is achieved. But the Aztecs had yet to suffer the sophisticated condition of existential schizophrenia. The second major state religious ceremony in Tenochtitlan was the New Fire Ceremony observed every fifty-two years. This ceremony emerged from the Mexica belief about the beginning and end of their world and from the complexity of their solar and sacred calendars. Like all Mesoamericans, the Mexica believed that there had been four world creations, known as the Four Suns, before their own which, with a great rhetorical sense, they called the Fifth Sun. The Fifth Sun they believed was the last Sun. Within each Sun, time was cyclical. Like all ancient societies they believed in the eternal recurrence of time. This, I argued in The Dynamic Society, is because the ancient dynamic strategy of conquest generated the ‘great wheel of civilization’, by which human societies rose and fell without advancing in material or cultural terms. The ancients realized this because the ruins of formerly great societies lay all around them. The Mexica possessed two main calendars, one solar and the other sacred. The solar, or seasonal, calendar (the xiuitl) was based on a year of eighteen months each of twenty days with a further five days of ‘ill-omen’; and the sacred calendar (the tonalpohualli) involved ‘twenty “signs” in fixed sequence interacting with the numbers one to thirteen, as in “One Lizard” or “Twelve Death”’ (Clendinnen 1993:35). These interacting time counts worked themselves out over a fifty-two-year cycle, a period of time known as a Bundle of Years (or a xiumolpilli). We are told that under such a system, each ‘day’ is not the outcome of the days preceding it: it has its own character, indicated by its complex name derived from the time counts, and is unique within its Bundle of Years. It is also more closely connected with the similarly named days which had occurred and will occur in other Year Bundles than with those clustered about it in its own bundle. (ibid.: 35–6) But this did not imply a form of predestination, as human effort could make a difference. Nigel Davies (1987:125) has argued that general dynamic models, such as Marx’s, that are based on the concept of linear time are unable to cope with Aztec society which was based on the concept of cyclical time. The model developed in The Dynamic Society (1996: Chapter 12) can 198


handle both cyclical and linear time by treating them as outcomes of different dynamic strategies, and by modelling the relationship between these dynamic strategies. Life for the Mexica was subject to great recurring patterns even if these could be observed but imperfectly. They believed that the Fifth Sun, and hence the great city of Tenochtitlan, would eventually collapse. Decline was inevitable. The only question was when. A time of great vulnerability was the ending of a Bundle of Years: would the Sun now be extinguished or would it be renewed for another fifty-two years? The New Fire Ceremony that marked the transition between cycles, or ‘bundles’, was, therefore, of great significance in the life of Tenochtitlan. We are told that, on the eve of the new Bundle of Years, fires throughout the city were extinguished; all domestic images were thrown into the water; grinders, pestles, and hearth stones were discarded; and the priests went out of the city to a nearby hill to prepare for this great transition. They anxiously watched the night skies to see if the constellation of the Pleiades would pass its zenith. If it did the world would continue and the sun would rise. With the rising of the sun, a priest would kindle a fire in the breast of a noble warrior captive, feeding the growing flames with the warrior’s heart and flesh. The fire would then be taken to the temple of Huitzilopochtli, the God of the Sun and the God of War, from where it would be distributed to each ward temple, to each priest house, to each warrior house, and finally to each commoner house. While the priests had no control over whether the Fifth Sun would finally end, they were responsible for renewing the Mexica relationship with the divine powers through the New Fire Ceremony. Until this was successfully done the future of Tenochtitlan remained in jeopardy. What is interesting here is the way the New Fire Ceremony appears to link the fifty-two-year cycle, the anxiety about the end of the Fifth Sun, and the dynamic strategy of conquest. The appropriate links are as follows: warriors are the children of the sun; Huitzilopochtli is the god of both war and the sun; the new fire, which comes from the sun, is kindled upon the breast of a captive warrior; this fire is taken directly to the God of War and from there to the houses of warriors by priests. We can interpret this from the Aztec point of view as meaning that those societies driven by the conquest strategy must ultimately collapse, but that this strategy can and must be reviewed at the end of each long cycle of conquest expansion to generate growth anew. Despite the harshness of their dynamic strategy and its brutal expression through the severest of state religions, the Mexica were a sensitive and enquiring people. They were no different to the rest of humanity. This can be seen in their poetry or songs recorded in their own language, Nahuatl, in the sixteenth-century manuscript known as Cantares Mexicanos (Bierhorst 1985). In these beautiful and reflective songs, the Mexica poets celebrate the joys and sorrows of life and explore its ultimate meaning. While the tone of 199


these songs, some of which were composed after the Conquest, may have been influenced by the changed circumstances of the Mexica, they provide us with some insight into their perception of life. Here is just one short excerpt, from ‘Song 17, folio 10v’ (Bierhorst 1985:163): It would seem that you’re a swan for Life Giver, a singer for God, you, the first of these singers to watch for the dawn. ‘Though my heart desires shield flowers, Life Giver’s flowers, what might happen to this heart of mine? Alas, it’s for nothing that we’ve come to be born here on earth. ‘I’m to pass away like a ruined flower. My fame will be nothing, my renown here on earth will be nothing. There may be flowers, there may be songs, but what might happen to this heart of mine? Alas, it’s for nothing that we’ve come to be born here on earth. ‘Friends, be pleasured! Let us put our arms around each other’s shoulders here. We’re living in a world of flowers here. No one when he’s gone can enjoy the flowers, the songs, that lie outspread in this home of Life Giver. ‘Earth is but a moment. Is the Place Unknown the same? Is there happiness and friendship? Is it not just here on earth that acquaintances are made?’ While the sentiments expressed here are universal, they have, as we shall see in Chapter 10, a special affinity with those contained in the poetry of the war-like Anglo-Saxons. Men are no less human because they pursue the dynamic strategy of war. The dynamic of ‘class’ structure The class structure of Aztec society emerged in the early years of the Empire and continued to develop over the following century until the Spanish conquest. What was the dynamic of class structure? I will argue that it was grounded in the Aztec conquest strategy. As we have seen, the ruling class in the late Empire consisted of the king and a number of noble families whose wealth was based on the returns from conquest. While the king drew income from his own lands that had been carved out of the territories surrounding Tenochtitlan during the early years of empire, he also received tribute from his own subjects and from those in tributary cities. The royal family, which came from the ruling class, held major posts in government of varying status and authority depending upon their military abilities. They received income from hereditary lands and from tribute. The remainder of the nobility comprised men who had been born into that class as well as commoners who had achieved noble status through outstanding military prowess. This system of class mobility was an effective method by which the central government could remove any potential 200


opposition in the commoner military ranks that might just have rallied around the ward leaders. Also, it introduced new blood into the older aristocracy. This lesser nobility also possessed hereditary lands, received tribute, and held more minor government posts such as ambassador, or minister of one of the various bureaucracies such as justice. Finally the ward leaders, who administered and represented the calpollis before the central government, were commoners who were nominally elected but who generally held their positions by virtue of their birth. Naturally the great bulk of Aztec society consisted of commoners. The men not only served in the army, they also worked seasonally on the land or in urban workshops. As the agricultural workers were exempt from the taxes paid by the craftsmen, we can assume that the latter enjoyed a higher standard of living. Merchants, despite their wealth, were merely commoners, but as they paid taxes on their wares and performed services for the palace they were exempted from military service. Only warriors could aspire to the nobility in a conquest society. Finally, there were some slaves, consisting not of captives who were sacrificed to the God of War, but of citizens who had sold themselves into service or who had committed a criminal act. Property rights in slaves was limited to their labour not their person. These socioeconomic distinctions were highlighted and reinforced by the institution of public attire. By law, commoners, even those promoted to the ranks of nobility, had to wear plain cloaks and go barefooted. This stricture applied even to the wealthy merchants. Only the true nobility could wear sandals on their feet and cloaks, decorated with fine feathers, gold, and precious stones, on their shoulders. Also, there were laws about public conduct, with only the nobility permitted to partake of fermented drink outside their own homes. But with other laws of conduct, the penalties were harsher for the nobility than the commoner for the same crime, as more was expected from them by society. There was no evidence of conflict between the ‘classes’. Aztec class structure was an outcome of the conquest strategy and, as all classes benefited from that strategy, they accepted their role in it. This acceptance was reinforced throughout society by their constant symbolic participation in the conquest strategy through public religious ceremonies. Hence there was no dynamic of class conflict as Karl Marx insists, but a deeper dynamic that transcends class. Only when the dynamic strategy has exhausted itself do conflicts emerge. If a new strategy emerges there will be a conflict between the old strategists and the new strategists, but if a new strategy cannot be found, the old ruling elite will transform themselves into antistrategists and pursue rent-seeking activities at the expense of the vast majority of the people. But, as we know, the Aztec Empire was invaded by the Spanish before its conquest strategy had been exhausted. Nevertheless, there was intense competition between individuals in the lower orders to break into the ruling class through fame on the battlefield, and between 201


individuals within the ruling elite to gain greater control over the dynamic strategy and its rewards. This is the classic struggle, discussed in The Dynamic Society, between the forces of order and chaos—between those who exercise control over the dynamic strategy and those who wish to exercise such control. Sometimes this led to dynastic struggles in Tenochtitlan, such as the premature removal of Tizoc in 1486 and the tactic of Moteuczomah the Younger to break the power of the older nobility by importing the sons of nobles in other cities. Changes in Mexica ‘class’ structure were driven by the unfolding of the conquest strategy. When Tenochtitlan was first settled in the early fourteenth century, Mexica society was characterized by a ‘relative egalitarianism’ and a close association between individual members of what essentially was a tribal society (Clendinrien 1993:37–8). As the city grew and attracted the attention of regional warlords in the Valley of Mexico, it was drawn into their orbit and forced to adopt a junior-player role in the conquest strategy of the Tepanec Empire. In order to play this new role, Tenochtitlan adopted the social and political structure of its master, and it shared in the rewards of empire even if at second hand. But before the emergence of the Aztec Empire, Mexica kings were largely dependent on the financial support of local leaders. Tenochtitlan came of age with the overthrow of its Tepanec master in 1428 and the adoption of its own independent conquest strategy. With the tribute of empire, Mexica society formed its own landed aristocracy which, now independent of ward leaders, assumed control of the new dynamic strategy of conquest. Thereafter the gradual unfolding of the conquest strategy fed the growing power of the ruling elite rather than that of the commoners, and led to the growing economic, political, and social distinctions within Mexica society. Clearly ‘class’ structure was driven by the dynamic strategy of empire. THE AZTEC TRAGEDY—AN OUTCOME OF BAD TIMING It is quite clear that institutional change in the Aztec Empire was a response to the unfolding dynamic strategy of conquest. The economic, political, and social institutions of Tenochtitlan responded directly to the four long waves of conquest-led expansion between 1325 and 1519. The first three of these conquest waves were about 50 years in duration, while the fourth was cut short by the Spanish invasion. What might the future have held for the Aztec Empire if the Spanish had not invaded in 1519? We can attempt an answer to this question because it is possible to model the changing nature of strategic demand for an unfolding conquest strategy. There can be little doubt that the growing costs of the hegemonic empire—in the form of continuous rebellion—relative to the material benefits would have generated a strategic demand for a different form of empire and a different economic base. The 202


type of political structure adopted by the Aztecs, however, was adequate. This was the reverse of the circumstances in which the Republic of Rome found itself: its empire structure and economic base in the late first century BC was adequate, while its political structure was not. Rome, as we have seen, resolved this problem by replacing the republican oligarchy with an absolute monarchy. Without the Spanish invasion the Aztecs probably would have transformed their imperial structure. Is there any evidence in Aztec expansion suggestive of a looming dynamic crisis and an emerging territorial response? The answer is yes. Imperial resources were being stretched to the limit by regular simultaneous multiple campaigns to quell rebellions at a time when the Mexica were attempting to mount large-scale invasions of new territories on two fronts. If the need to suppress rebellions within the Empire could have been eliminated by transforming their empire from its hegemonic to a territorial form, they would have been able to pursue their conquest strategy with renewed vigour. It is interesting that, at this time, Aztec armies were beginning to replicate the tactics of Old World conquest societies, with a growing use of siege tactics, the large-scale slaughter of the populations of captive cities, the establishment of a few colonies, increasing dependence on imperial rule through tribute collectors, and possibly the use of fortification. Certainly the Tarascans on the western frontier had adopted a more territorial form of empire with fortifications garrisoned by small permanent forces. If the Aztecs had wished to push back the western frontier, which was only 100 kilometres from Tenochtitlan, they would probably have had to do the same. Also, any attempt to use their base in the far south-east (called Soconusco) as a springboard for attack on the Mayan lowlands—and later the Incas— would have required the stronger support system that only a territorial empire could provide. There can be little doubt that these essential organizational changes would have been made in the generation beyond 1519 in response to the strategic demand generated by a continuously unfolding conquest strategy that was far from exhaustion. We need to understand what this change in the structure of empire would require. In order to establish fortified, garrisoned colonies throughout the Empire, and also to build up the large professional armies of full-time warriors that were needed to sweep aside the Tarascans in the west and the descendants of the Maya (and later the Inca) in the east and south, it would have been essential to liberate Aztec warriors from seasonal agricultural and urban activities. As this was not possible through technological change at this time—it needed an Industrial Revolution and the benefit-cost conditions were not appropriate—it would have required the use of slaves both on large-scale agricultural estates and in urban workshops. This, as we have seen, was achieved by the Republic of Rome by the end of the third century BC in order to create and maintain the large standing army needed for overseas conquest. In Mexica society such a transformation would have 203


required the diversion of captives from large-scale human sacrifice to productive uses, and it would have meant the development of a comprehensive system of military provincial governors not only to pacify the Empire but also to increase the flow of tribute and slave labour. The new, more expensive form of empire would have required a more effective method of tribute extraction. Religion would have changed to accommodate this economic transformation. In the longrun there would have been a convergence of the basic organizational and institutional structures of the Aztec and Roman Empires. Once this structural change had occurred, possibly in the generation after Moteuczomah the Younger, the Aztec Empire would have been ready for the third and subsequent wave of conquest into North and South America. As the history of Old World societies shows, the Aztec Empire was relatively young and had much further to go before its dynamic strategy would have been exhausted. Hence, any institutional difficulties it was experiencing would have been overcome in an effort to exploit this great potential. Institutional change is the usual response to a growing strategic demand. Indeed, so-called institutional barriers exist only in societies that have exhausted their dynamic strategy and are pursuing rent-seeking tactics. In these societies the problem is not an institutional constraint but rather the absence of strategic demand. Hence, we must reject the type of argument made by Conrad and Demarest (1984:91, 105) that Aztec society in 1519 was on a ‘terminal trajectory’ because, they argue, it continued to be driven by religion and politics—and hence could not achieve a ‘stable state’—in the face of impassable external barriers and an irrecoverably weak internal structure. It is also interesting to speculate that if the Spanish invasion had taken place at the end rather than the beginning of the sixteenth century, by which time the Aztec Empire would have been transformed along the lines suggested, it is highly unlikely that such a small force could have defeated the Mexica. A territorial empire is far less vulnerable to outside forces than a hegemonic empire because it does not contain such highly volatile centrifugal forces. Indeed, it is difficult to believe that the Spanish could ever have mounted a force of sufficient size to defeat a territorial Aztec Empire, owing to the distance from its home base and the costs of deploying such a large army. It is unlikely, even when we take into consideration the possible impact of new diseases, that the Europeans would have been able to do more than negotiate trading concessions with the New World. The tragedy of the Fifth Sun was an outcome of bad timing. CONCLUSIONS Once again we can conclude that the central dynamic principle in human society is the unfolding dynamic strategy. As the conquest strategy of the 204


Mexica developed, their society passed through three completed waves of expansion, each with a duration of about 50 years, together with a fourth forever cut short by the Spanish conquest of 1519. And as this strategic unfolding took place, the institutional and organizational structure of the Aztec Empire changed to facilitate its demands. Because of the predictable nature of this strategy-institutional relationship, we can contemplate, with a reasonable degree of probability, the counterfactual issue of how the structure of the Aztec Empire might have changed had the European invasion been delayed by another generation or so. It can be concluded that even such a short delay would have changed the history of the Americas, and of the modern world, beyond all recognition.

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COMMERCE SOCIETY

In the pre-modern world those few societies able to pursue the dynamic strategy of commerce were greatly favoured. They grew rich by sharp dealing rather than sharp weaponry. Although they were not saturated with the blood of their neighbours, as were the conquest societies, force was used when words failed. They created flourishing cultures that sought the beauty of reason rather than the harshness of a darker imagination. They devised political systems based on a wider franchise than those found in conquest societies—political systems that gave rise to the birth of democracy. Yet they still responded to the same forces driving conquest societies—the desire to survive and prosper. Commerce societies existed just beyond the reach, either in time or space, of conquest empires. There was no scope for coexistence. Commerce societies— those glittering jewels scattered through the ‘wine-dark’ seas—were irresistible to predatory empires. And, owing to the greater offensive capabilities of the conqueror, the merchant was inevitably swept away. There were heroic exceptions, and we will explore the most remarkable here, but even these merely delayed the inevitable. Assyria oppressed Phoenicia, Rome crushed Carthage, Macedonia overwhelmed the Greeks and finally swept away Phoenicia, and the Napoleonic Empire extinguished the Republic of Venice. But while they shone in an ancient or medieval darkness, the commerce societies made a contribution to human civilisation that was not surpassed until the emergence of the technological strategy in the modern era. The next two chapters will focus in some detail on two brilliant examples of the commerce society—ancient Greece and medieval Venice. The citystates of Greece provide a stark contrast with the empire of Rome, and Venice provides a rare example of a ‘pure’ commerce society. We will see how the institutional characters of these societies were formed and driven by the unfolding of the dynamic strategy of commerce. We will see how the institutions of commerce societies differed in a predictable way from those of conquest societies. And yet we will see that these different societies were driven by the same desires.

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8 GREECE Jewel of the Aegean

From the flowing waters of the River of Ocean my ship passed into the wide spaces of the open sea, and so reached Aeaea, the Island of the Rising Sun, where tender Dawn has her home and her dancing-lawns. (Homer, The Odyssey (eighth century BC) trans. E.V.Rieu) Greece in the fifth century BC is regarded by most observers as the pinnacle of ancient Western cultural achievement. Roman culture, if not its economic power, pales in comparison. Many regard the end of the fifth century, which is marked by the Peloponnesian wars between Athens and Sparta, as the beginning of the decline of the ancient world. But they are at a loss to explain why Greek culture reached such heights, particularly as it was achieved in just two or three generations by small urban communities, and why it shone less brilliantly thereafter. In The Dynamic Society I argued that cultural brilliance is not an appropriate measure of the rise and fall of civilizations, because it is not their overriding aim. The universal objective of decisionmakers in human society is survival and prosperity. The rise and fall of civilizations—‘the flowing waters of the River of Ocean’—must be measured in material terms, and cultural attainments must be seen as the characteristic outcome of the dynamic strategy chosen by a particular society. Hence the decline of the ancient world began not in the late fifth century BC, but in the early first century AD when the ancient dynamic was finally exhausted. Different dynamic strategies generate characteristically different cultures. Commerce societies promote a search for cultural order and balance, because only in an ordered system can their chosen dynamic strategy flourish. The intellectual and artistic exploration of order leads to the elevation of reason and beauty above all else. By contrast, the underlying dynamic of the conquest strategy is chaos because the conqueror attempts to destabilize and overrun his neighbours. The intellectual exploration of chaos leads to an elevation of the darker forces in the human imagination as in Aztec civilization. The classical form of Roman society, which is more apparent than real, resulted from an attempt by a warrior class to clothe their conquest institutions in Greek camouflage. As this superficial 207

HISTORY: COMMERCE SOCIETY

institutional form, taken from a commerce society, had no substance, the Romans were unable to develop Greek culture any further. This accounts for the sterility of Greek cultural forms in Roman society. Roman culture, therefore, amounted to conquest substance in commerce forms—a wolf in sheep’s clothing. THE RISE AND FALL OF GREEK SOCIETY Following the collapse of the Mycenaean world just after 1200 BC, Greek settlements on the peninsula and throughout the Aegean Sea turned inward. Between 1100 and 800 BC Greek society consisted of small tribal kingdoms based upon subsistence farming and pastoral activities on small family farms. To supplement their income and to resolve disputes over land, neighbouring tribes were involved in incessant raiding and tribal warfare. And when not raiding they were trading. From these origins emerged a highly competitive structure that was not extinguished until the Macedonian conquest in 338 BC. Institutional change in Greek society over the period 1000 to 336 BC can be explained only in terms of the initiation, expansion, and exhaustion of the dynamic strategy of commerce; together with the unsuccessful attempt to change its dynamic strategy from commerce to conquest. These strategic changes have been explained in The Dynamic Society in terms of more fundamental economic forces. The unfolding of the Greek dynamic strategies is roughly outlined in Figure 8.1, which shows the changing area of territory controlled by the Greeks from 1000 to 100 BC. Hence I have included the great waves of both the commerce and conquest strategies. In examining the strategic pathway outlined by this figure it should be realized that the extent of territorial control exercised by an expanding society is a measure not of real GDP or real GDP per capita but of the unfolding of a dynamic strategy or a sequence of dynamic strategies. Admittedly, there is a close correlation between territory held and real GDP in a conquest empire, but the correlation for a commerce empire is much more approximate. In the case of a conquest empire the flow of tribute depends upon the amount of resources captured, which in a neolithic world is closely tied to the area of territory acquired. Of course the quality of different lands is not homogeneous, but little violence is done by making this assumption. In the case of a commerce empire, the returns from trade still depend to a large degree on the control it exercises over territory, but strategic location is more important than the amount of land held. The art of the commerce society resides in the ability to control flows of goods between territories that one does not hold, rather than controlling resources directly as in the case of the conquest strategy. Hence, the volume of business handled by a commerce society may grow more rapidly than the volume of territory held, which seems to have been the case 208

GREECE: JEWEL OF THE AEGEAN

Figure 8.1 The rise and fall of the Greek Empire, 1000–100 BC Source: Calculated and drawn from data in McEvedy (1967).

with Greece during the sixth century BC. But, and this is the important point to realize in relation to Figure 8.1, the unfolding of a dynamic strategy—the rise and fall of a territorial empire—is captured nicely by the rise and fall of territories held. What does Figure 8.1 show? It shows two great waves of territorial expansion, each of three centuries in duration, coinciding with the commerce strategy of the Greek city-states between 800 and 500 BC, and with the conquest strategy of the Macedonians between 400 and 100 BC. The great wave of commerce consisted of an expansionary phase (0.45 per cent per annum) from about 800 to 550 BC, by which time the commerce strategy had exhausted itself, and a decline thereafter (—0.34 per cent per annum) until the early fifth century, in the face of an expanding Persian Empire. From the early fifth century the Greeks embarked upon a new dynamic strategy of conquest, which had by 375 BC restored the size of Greek territories—a conquest strategy that, after it had stalled, was then taken over by the Macedonians and pursued with amazing vigour (2.16 per cent per annum) for the following half-century. Thereafter the Macedonian Empire 209


stagnated and declined equally rapidly in the face of the explosive expansion of the Roman Empire in the west and the Parthian Empire in the east. Each of these broad dynamic strategies was the outcome of a series of substrategies responsible for shorter-term fluctuations. For example, while the rate of territorial expansion in the seventh century and first half of the sixth century was almost identical with that in the eighth century, there is other evidence to suggest that the rate of growth of wealth was considerably higher in the sixth century. Starr (1977:37) claims that the resources devoted to temple-building in Greece in the sixth century were probably greater than those in the seventh century by a factor of three. While there may have been a higher proportion of GDP devoted to temple-building in the sixth century, this constructional evidence does suggest that income earned through commerce was growing at a faster rate than territorial expansion. This outcome probably reflects the growing military competition that Greece was experiencing throughout the Mediterranean—an early sign that the commerce strategy might soon reach its limits—which led the Greeks to use non-military methods, such as diplomacy and hard dealing, to achieve more favourable access to existing markets. None the less, Figure 8.1 is a reasonable representation of the changing fortunes—the strategic pathway—of the Greek dynamic strategy of commerce. The commerce strategy Greek society before 800 BC should not be regarded as static. There was a constant and deadly tension between neighbouring clans as each attempted to improve its lot at the expense of the others. From this intense competitive struggle emerged the dynamic that was to drive Greek expansion throughout the following seven centuries. The question at this formative stage was: Would the Greeks do as the Assyrians had done and adopt the conquest strategy, or would they do as the cities of Sumer had done even earlier and pursue the commerce strategy? They adopted commerce. Why? Because within this highly competitive environment the large number of small clans were equally matched militarily. As in medieval Europe, whenever one tribe, and later city-state, appeared to be gaining the upper hand, the others formed alliances against them to retain the competitive balance. Hence the Greek tribes could grow richer by trading their agricultural surpluses and craft products than by investing in the apparatus of conquest. War was used to defend the commerce strategy rather than to pursue an offensive conquest strategy. It was similar to the situation in Europe from the late fifteenth century. The beginnings of the Greek commerce strategy can be traced back to the middle of the eleventh century BC in the south-eastern part of the Greek mainland, particularly in Attica and Argos. The most durable evidence can be found in the pottery of this period, known as the ‘Attic Protogeometric’ 210


style, which was produced for trade as well as local consumption. During the following century pottery in this style found its way throughout the Greek mainland, the islands of the Aegean, and the coast of Asia Minor (Starr 1991:192–4). Other less durable goods would also have followed these routes. Hence, by 1000 BC the roots of the Greek dynamic strategy were gaining a firm hold. Over the next two centuries Greek commerce, which was intimately linked to the physical character of the Greek world, flourished. The Aegean Sea was central to the development of the Greek dynamic strategy of commerce in these early centuries, just as was the Adriatic for Venice and the North Sea for England and the Netherlands. The Aegean was in effect a giant Greek lake. Settlements of Greek origins were scattered along its shores beginning with the Greek peninsula, Macedonia, the Hellespont, the coast of Asia Minor, Rhodes, Crete, and on all the major islands set adrift in the ‘lake’ itself (see Figure 8.2). While the transport of bulky commodities was severely restricted by freight costs because of the rugged landscape, it was virtually unrestricted over the waters of the Aegean. Instead of the hinterland of any settlement being limited to a radius of about 25 kilometres (for wheeled transport), it was limited only to a 25-kilometre band around the entire Aegean Sea. Accordingly, all Greek settlements in this zone were in regular contact economically as well as culturally, thereby providing scope for the achievement of specialization and economies of scale. Various Greek settlements specialized according to their comparative advantage and exchanged surplus commodities. Some settlements, such as Athens, specialized in the production of fine pottery, others in a variety of manufactured metal products, and still others in rural commodities such as grain, olive oil, and wine. This was the foundation on which villages grew into towns and, sometime after 800 BC, towns grew into cities. This was the foundation on which urban populations, consisting of merchants, artisans, workers, slaves, and officials, grew into flourishing communities, and on which Greek social, political, and cultural institutions were constructed. And this was the first major commerce substrategy that laid the foundation for the Greek break-out from the Aegean world after 750 BC. Under the competitive conditions operating throughout the inwardlooking Aegean world, Greek traders developed skills required to undertake long-distance trade when the opportunity came. As they plied their trade throughout the Greek ‘lake’, merchants not only honed their maritime and trading skills but also learned how to defend their cargoes against pirates and regional warlords. As the Venetians and English were to do after them, the Greeks developed maritime power in order to defend their commerce strategy. And as trade expanded, the artisans and landowners became accustomed to producing surpluses for distant markets and saw the need to develop an army that could defend their assets. Once again the most durable evidence of this trade is pottery, which in the hands of Athenian craftsmen 211


Figure 8.2 The Aegean Sea (or Greek ‘lake’) Source: Drawn by Cartography Unit, RSPAS, Australian National University.

achieved a greater sophistication that embraced the geometric style from 900 BC and the Dipylon (or figurative) style a century or so later. But, even as the Greek Aegean world looked inwards, there were growing commercial contacts with the Levant from the late ninth century BC as Phoenician traders pushed westward in their search for minerals and amber in Europe. The evidence for this growing outside contact can be found in ninth-century graves of the aristocracy, which contain eastern luxuries such as gold jewellery and ivory objects (Starr 1977:57). The Greek break-out from the Aegean world, which was based upon its carefully nurtured commerce strategy, occurred in the early to mid-eighth century BC. This was the second major substrategy of Greek commerce. As early as 800 BC Greek trading posts had been established at the eastern end of the Mediterranean, and Greek traders-cum-pirates were active in the 212


waters off Egypt, Italy, and Sicily. This trading activity was a prelude to the great waves of Greek colonization that, during the century and a half after 750 BC, broke over the shores of Italy and Sicily (from 750 BC), Thrace and the Black Sea (from 700 BC), North Africa (from 630 BC), and France and Spain (from 600 BC). These waves of colonization surged round the Mediterranean with great energy in the seventh century and again in the century that followed. By the time these waves were spent there were some 1,500 Greek colonies and trading posts in the Mediterranean and Black Seas. In The Dynamic Society (1996:350–1) I have argued that these waves of colonization were part of the mechanism of the Greek commerce strategy rather than an outcome of overpopulation. In particular they were the means by which Greek city-states attempted to gain a monopoly over trade in a particular part of the Mediterranean. The exclusion of competitors through the miliary power of colonies enabled Greek merchants to earn the supernormal profits that mark the difference between mere trade and the commerce strategy. More generally I argue that population change in a viable society is a response to the unfolding of the dominant dynamic strategy. As far as the Greek city-states were concerned, these overseas colonies provided an extensive network of trading bases and dependable markets. Chester Starr (1977:60), one of the most sensible observers of Greek society, notes: Once seaborne activity was under way, for economic and other reasons, it served as a mighty engine for further progress. By the seventh and sixth centuries we may certainly speak of Greek overseas commerce resting upon a far-flung network of trading posts, colonies, and friendly native ports in Etruria and elsewhere. These colonies and trading posts were established by Corinth, Athens, Chalcis, Eretria, Megara, Miletus, with even one by Sparta (Tarentum or Taras on the instep of Italy in 706 BC). Through these settlements the Greeks exported wine, olive oil, and fine pottery, and they imported, often for reexport, grain, fish, slaves, gold, iron, timber, and textiles. But more important than the ordinary gain that could be made through specialization and economies of scale was the monopoly that Greek traders had over the east-west flow of these commodities in the northern Mediterranean and the extraordinary gains that this monopoly conferred. While not discussed in the literature, it is this monopoly that enabled Greek merchants and artisans to grow rich, Greek cities to be built, and Greek culture to flourish. This monopoly, as explained in The Dynamic Society, was the foundation of the dynamic strategy of commerce—a monopoly that had to be defended on land and on sea. The commerce strategy is much greater than just trade. But in a world dominated by large successful players the scope of the Greek dynamic strategy was inevitably limited. By the early fifth century BC the Greeks became embroiled in a strategic struggle with powerful conquest 213


and commerce societies. This was the final, and unsuccessful, substrategy of Greek commerce. The southern and western Mediterranean was dominated by the powerful commerce society of Carthage, the centre and north of Italy was occupied by the commercially oriented Etruscans, and the east was the stronghold of the even more intimidating conquest society of Persia. As early as 546 BC the expanding Persian Empire annexed Lydia (western Anatolia) together with the Greek settlements along the coast; and in 525 BC they overran Greek cities in Cyprus and on the adjacent coast of Anatolia. And from 490 to 479 BC the mainland Greeks became locked in a life-and-death struggle with this great foe. In the end they were only able to repulse the Persian invasion by a unique demonstration of solidarity in 479 BC when they amassed the largest ever combined Greek army of 108,700 hoplites and light infantry. This was achieved by employing their comparative advantage in defensive warfare—a comparative advantage built up by fiercely defending their dynamic strategy of commerce against each other over the previous few centuries—and by skilfully deploying their navy. But the Persians retained control of Greek settlements on the western coast of Anatolia, the south-eastern coast of the Black Sea, the Hellespont, and in Thrace. At the same time the western Greeks faced an anti-Greek alliance between the Carthaginians and the Etruscans which, in 535 BC, forced the Greeks to abandon Corsica. Greek traders were also excluded from much of southern Spain in 510 BC, and in 480 BC the Carthaginians invaded Sicily and occupied the western third (although they suffered subsequent defeats by the Greeks). The conquest strategy Hence, by 500 BC the waves of Greek commercial expansion had reached their high-water mark and in the following generation began to retreat. By this time the population of the Aegean world was still only about 2 million (Starr 1977:45). If the Greeks were to continue to enjoy a growing material standard of living, they would need to develop a new strategy. And the only alternative to commerce in that time and place was conquest. The possibilities of pursuing a conquest strategy had already been demonstrated during the Persian wars. For any individual Greek city-state conquest was a zero-sum game within the Aegean world and would remain so until an alliance of Greek states could seriously go on the offensive against either Carthage or Persia or both. The exploration of these possibilities underlies the contest between the rising power of Athens and the Spartan League that included the declining power of Corinth. As the Persians were forced from mainland Greece, the Athenians formed the Delian League in 478–477 BC to liberate the Aegean islands and the Greek coastal cities of Asia Minor. To do so the League waged almost continuous war with Persia until, in 449 BC, it achieved its 214


objective. But, with the defeat of Persia in the Aegean, Athens refused to grant autonomy to League members and instead established garrisons of Athenian troops and colonies of Athenian citizens—some 10,000 in all— throughout this region. In doing so the Athenians formed the first real imperial Greek power. And it was remunerative. Tribute was sent each spring to Athens from some 134–173 city-states that were organized into five groups—Ionia, Hellespont, Thrace, Caria, and the Aegean islands. This tribute was used not only to build up the military forces of Athens at sea and on land, but also to increase the population and living standards of Athens (Jones 1969:6–9). The rise of Athens, therefore, was based upon a growing hegemony in the Aegean between 478 and 454 BC. Having tasted the exotic fruits of imperialism against other Greek states in the Aegean, Athens attempted to extend its empire throughout the Greek mainland. Initially it was successful in Euboea and Boeotia, but in 447 BC the Athenians suffered defeat at the hands of a Boeotian army at Coronea and, in the following year, Sparta invaded Attica causing the Euboeans to revolt against their Athenian overlords. These reverses made it clear to the great Athenian leader Pericles that they had overextended themselves and that they should, for the time being, restrict their landward ambitions and focus on their maritime empire in which they had a comparative advantage. Hence, in 446–445 BC a treaty was signed for a thirty-year peace during which Athens would relinquish its mainland aspirations and Sparta would recognize Athens’ control of the Aegean. But continued Athenian maritime expansion adversely affected Corinth and Megara which were important member states of the Peloponnesian League. Eventually they persuaded a reluctant Sparta that Athens was becoming too powerful and was endangering the competitive balance in Greece. Taking the lead in this struggle for the ‘freedom’ of Hellas, Sparta invaded Attica in 431 BC. The contest, however, was inconclusive as Sparta could not be defeated on land and it could not defeat the Athenians at sea. Ironically Corinth was the main casualty of this first encounter as Athens was able to block its old competitor’s trade to the west and to interfere in Sicilian politics. Although a peace treaty was signed in 421 BC, Athens’ determination to resume its imperial expansion led to renewed war with Sparta in 413 BC. So began a war that was to lead, with the involvement of Persia on Sparta’s side, to Athens’ defeat in 404 BC and to the loss of its maritime empire. In this final war between old foes, the nature of the conflict began to change. The limited defensive tactics of earlier centuries, which had been employed to protect the commerce strategy, were replaced by the offensive tactics of conquest that involved not only the destruction of opposing armies and countryside, but also the total destruction of enemy cities using innovative siege tactics. Athens was beginning to understand the real requirements of the conquest strategy and, but for the interference of Persia 215


(ironically defeating Athens at sea), may have crushed Sparta and ultimately realized its ambitions to conquer mainland Greece and, possibly, even Persia. Athens, as we shall see, was facing the difficult task of developing a new dynamic strategy that required radically new methods in a competitive environment where dynamic balance had existed for centuries through the medium of shifting alliances. In the competitive circumstances of the time, Athens was not able to make the transition from an exhausted commerce strategy to a seemingly unlimited conquest strategy. In the defeat of Athens, Sparta saw its chance to conquer the whole of Greece and to raise its material standards of living by extracting tribute from its neighbours. This decision has surprised even the most perceptive observers, who attempt to explain it by invoking the ‘defensive imperialism’ hypothesis beloved by historians of Rome. Chester Starr (1991:360), for example, argues: Upon the final victory in 404 Sparta might have been expected to retire once more within its Peloponnesian stronghold, for the primary requirement of Spartan policy was to maintain the strength of its citizens at home. But the world was now much changed. The bitter struggle just concluded must have suggested to Lysander and other Spartan leaders that they could no longer be safe even in their ancestral domain unless they controlled Greece. The reality, however, is somewhat different. Sparta provides us with an apparent paradox. While it participated in the emergence and expansion of Greek trade, it had only a limited involvement in the great waves of colonization, establishing its only colony in Italy in 706 BC. While Sparta contributed to the cultural innovations of the Greek world of the seventh century BC and developed one of the earliest forms of democracy in the middle of that century, it failed to participate in the economic and cultural advances of the sixth and fifth centuries. How do we account for Sparta’s growing inflexibility from the sixth century? Basically, Sparta’s leaders made a series of decisions that not only provided a shortrun gain at the expense of longrun returns, but which also made it difficult to reverse these decisions without material loss. The basic mistake was to conquer the lands of Messenia and to reduce its subjects to the status of heilotes or serfs in their own country. A more viable alternative would have been the one chosen by Rome prior to 264 BC—to confiscate one-third of a conquered neighbour’s territory and either to grant them citizenship or to make them allies (as Sparta later did with other Peloponnesian states). Possibly this was not done because the Spartans wanted to participate in the wider Greek commerce strategy rather than a less remunerative—at least at this stage—conquest strategy. It is one thing to use slaves imported from other societies, but quite another to reduce one’s neighbours to the status of slaves in their own land. 216


Imported slaves are disoriented and disorganized and, hence, are less likely to rebel than those who, oppressed in their own country, retain a feeling of solidarity and hope for a successful rebellion. And rebel the Messenians did, in 640 and 464 BC. The first of these rebellions prompted Sparta to make changes to its economic and political system that certainly did help to contain rebellion, but it did so at the cost of bringing the commercial expansion of the city-state to an end. Sparta is famous for the austere lifestyle of its citizens at home, if not when abroad on war exercises, while Athens was known for its more indulgent lifestyle. Hence, my argument is that the oppressive internal control that was required to suppress the Messenians was responsible for starving the Spartan dynamic. Oppressive control in Sparta was exercised through a ‘dictatorship’ of the military ‘Equals’ who numbered about 9,000 in the mid-seventh century but declined to 8,000 in 480 BC and to 1,500 in 371 BC (Starr 1991:258; Hodkinson 1995:149). This decline in the hoplite citizenry was due to the dis-franchisement of Equals who lost their land owing to the failing Spartan dynamic and to a resulting inflexibility in their political system. The outcome was a growing disparity between rich and poor: ‘The rich became richer, while poorer families lost their citizen status and Spartiate numbers continued their rapid decline’ (Hodkinson 1989:114). As we shall see, the same happened in Venice during the seventeenth and eighteenth centuries after the exhaustion of their commerce strategy. Political power in Sparta, therefore, was increasingly concentrated in the hands of a military elite to the exclusion of merchants, artisans and, needless to say, agricultural workers. To make matters worse, day-to-day government was exercised by a conservative council of elders (gerousia) consisting of two kings and twentyeight men of no less than 60 years, elected by the assembly of Equals. This system, which was the outcome of a major economic miscalculation, effectively elevated the objectives of a warrior-landowning elite over that of those decision-makers attempting to pursue the commerce strategy of the wider Greek world. The outcome was to stultify the dynamic mechanism in Spartan society. As the growth of Spartan average living standards slowed, the elite engaged in the self-defeating tactic of rent-seeking, which increased income inequalities in Sparta and made even further oppression necessary. By 404 BC, particularly after the draining effect of protracted wars with Athens (which could be sustained only with financial assistance from Persia), Sparta was close to bankruptcy and collapse. How should Sparta attempt to place its economy on a viable basis? The limits of rent-seeking had been reached. And memories of the helot rebellion of 464 BC must have strengthened those who spoke about the futility of the old system, while those generals fighting abroad brought back stories about the extraordinary returns from investment in conquest (Hodkinson 1995:148). My argument is that the only way for Sparta to recoup its losses would have been to embark upon a systematic programme of conquest. When viewed from the 217


dynamic-strategy standpoint there is no paradox. Spartan decision-makers had consistently pursued their own material advantage, but a costly error of judgement caused them to diverge from the wider Greek commerce strategy after the mid-seventh century. Sparta is the exception that proves the rule of the Greek commerce strategy. With the total defeat of Athens came their chance. Between 404 and 371 BC Sparta did, albeit briefly, what Athens had failed to do—exercise political control over both the Greek mainland and the Aegean. As the Greek citystates fell progressively to its armies and newly won navy, Sparta established military garrisons and imposed either a governor (harmostes) or an oligarchy from the local aristocracy. And the returns from this new conquest strategy were all that they had hoped for. Massive tribute was collected from the conquered Greek city-states to hire mercenaries—as the dwindling number of Spartan hoplites was stretched to the limit by constant warfare with Persia after 401 BC and by the growing demands of garrison duty—to pay for the operation of its new fleet, and to raise the living standards of its ruling class (David 1979–80:38–40). But, as always, the rise of one Greek city-state led to a coalition between the others. On this occasion Sparta was vigorously opposed by Thebes, Corinth, Argos and, once again, Athens. War raged between 395 and 371 BC when Sparta was finally defeated at Leuctra. Once again the dynamic balance between the Greek states reasserted itself. In the end it was demonstrated that Sparta did not possess the resources—particularly as most citizens were still required to hold down the helot population (Hodkinson 1995:152)—to successfully pursue a conquest strategy in the face of such determined opposition. Sparta was still hampered by that fateful mistake made some three centuries before. A mistake that had cut Sparta off from the profitable Greek mainstream of commerce and had reduced its ‘economic resilience’—its power to survive in the longrun. The rent-seeking tactic that had been adopted by the ruling elite was self-defeating. It may have maintained, or even increased, the material living standards of the ruling elite, but it reduced the resources available to Sparta as a whole and it promoted the emergence of inappropriate institutions. This decline in resilience and resort to negative methods of income generation affected Sparta’s ability to pursue positive dynamic strategies when the opportunity arose. Strategic exhaustion The outcome was a Greek stalemate. Athens, Sparta, and Thebes—which stepped into the power vacuum for a mere nine years after Sparta’s defeat in 371 BC—were left exhausted by their unsuccessful attempts to destabilize the Greek dynamic balance. The commerce strategy was exhausted, but none of the leading Greek states was able successfully to develop the alternative conquest strategy. This left the way clear for an outside conquest 218


society, most likely Persia, to invade Greece. No doubt the civilized world was surprised to find that when invasion came, it came from Macedonia which, under the relentless driving energy of Philip and his son Alexander the Great, went on to conquer the eastern end of the Mediterranean and even the entire Persian Empire. THE CHANGING STRUCTURE OF GREEK SOCIETY The tribal Greeks In the centuries before their break-out from the Aegean, the Greeks had developed an economic system that was to serve them well until at least 500 BC. Within each of the large number of tribal kingdoms, the warrior-farmer was the central economic agent. As in the early days of Rome (several centuries later), Greek citizens worked small family farms growing grain, olives, and grapes, and grazing sheep and goats. In the slack season Greek farmers engaged in trade and in raids against their neighbours, both to supplement their meagre income and to gain additional land. In contrast to the Romans, the Greeks discovered that trade by sea was more profitable than war, but war was always necessary to defend capital invested in the production and trading of goods. During these foundation years, Greek settlements were ruled by tribal kings who were little more than local warlords with direct influence over very small territories. They were elected by their peoples to provide protection, leadership in battle or commercial activities, and religious guidance through sacrifice to the gods. Within each tribe or clan (genos) a small upper class possessing larger holdings of land advised the king, supported him in battle and commerce, and undertook priestly and other public duties. But, in common with all ancient societies, the majority of community members comprised small landholders, landless men, craftsmen, and their families. There were also some slaves, captured in raids or acquired in exchange for tradeable goods, who were employed by the upper classes as shepherds or workshop and household workers. In this male-dominated society the warrior-farmers organized themselves into brotherhoods (phratries), eating, sleeping, and fighting together and training youths in the arts of war. This type of organization appears similar to the warrior houses in Mexica society. The origins of the classical Greek outlook and philosophy are reflected mainly in the pottery and the stories that have survived to our time. That outlook was orderly and rational, extolling the virtues of logical reasoning and rejecting the wild irrational forces of a darker human imagination. As already discussed, this is precisely the outlook required to create the order demanded by the commerce strategy. The geometric and Dipylon styles that dominated Greek pottery in the last few centuries before the Greek 219


break-out beautifully express the rational principles of harmony, balance, and proportion which found their fullest expression in the fifth century. Similarly, the epics of Homer, probably written in the early eighth century from the surviving oral culture of earlier centuries, tell heroic tales of men and women living in an orderly world dominated by gods, of whom Zeus of Mount Olympus was the chief. Like mankind the gods are bound by rational laws: ‘Men and gods,’ says Pindar, ‘we are of the same family; we owe the breath of life to the same mother’ (Guirand 1968:93). Hence it is not surprising to find that the gods were not paragons of virtue. Like the merchants who sacrificed to them, they were forever involved in trickery. Well before the rise of the Greek city-state or polis, Greek religion had largely cast off the irrational forces underlying a belief in superstition and magic which, as we saw in Chapter Seven, is more conducive to the pursuit of conquest than of commerce. The urban Greeks The Greek break-out from the Aegean began, as we have seen, with an exploration of the possibilities of long-distance trade, and quickly led to waves of colonization throughout the northern Mediterranean and the Black Sea. It was during this dramatic unfolding of the commerce strategy that major changes in sociopolitical organization were required and achieved. These changes coalesced around the emergence and widespread establishment of the Greek city-state. The Greek polis, which had its origins in the settlements that grew in response to the trading opportunities of the Aegean world, arose to facilitate Greek commercial expansion throughout the Mediterranean. This expansion was fuelled by the intense competition between the large number of Greek city-states that began in the Aegean and boiled over into the rest of the ancient world. The polis, which developed from the tribal structure of earlier centuries, was better able to finance and organize long-distance trade and to supply the infrastructure, force of arms, and the industrial goods required to ‘persuade’ other societies to part with food, minerals, precious metals and stones, raw materials, and slaves. The polis provided port and warehousing facilities, together with a central market-place through which goods from all over the world could be bought and sold. It also provided the facilities and factors of production required to produce manufactured tradeable goods, such as gold, silver, and iron objects, sculpture, textiles and, particularly, fine pottery. The polis was also a centre for the exchange of technological ideas from all over the known world. Indeed, the period 800 to 500 BC was marked by considerable technological change as the Greeks collected and absorbed the ideas of earlier civilizations which, in their turn, they handed down to later civilizations (Starr 1977:82). And it was the instrument of colonization. When colonies were established overseas, the 220


Greeks re-created replicas of the polis from which they had come, adapted to local circumstances. In their heyday, there were more than 200 Greek citystates housing populations of a few thousand free males, their families and slaves, together with a growing number of foreigners (metics) attracted by the prosperity of Greek commerce. The polis, therefore, was the centre of the Greek dynamic strategy of commerce. This new Greek institution changed as the commerce strategy changed. It emerged as a fairly simple structure during the mid-eighth century and became increasingly complex as Greek merchants moved to the centre of east-west trade in the northern Mediterranean. Initially it consisted of a group of villages with an open-air focal point known as the agora, where both mercantile and political events were staged (see Figure 8.3). Around this economic and political market-place were clustered the houses of the merchants and artisans which, with each passing generation, became more substantial. Here the landowning elite, who were also involved in commerce, built their residences. The agora was also overlooked by the temple devoted to the city’s patron god. Hence, the market-place was the centre of the Greek polis—as it was of the Venetian parishes—and it was closely associated with political power (Thompson and Wycherly 1972). It was the strategic centre of Greek society. The polis was ruled not by kings as in earlier Greek tribal society, but by assemblies of all male citizens who met in the agora, and by councils composed of larger landowners. In some city-states these councils prepared the business of the assembly, whereas in others it was an instrument of aristocratic rule. Only Sparta, Argos, and a few minor city-states retained their monarchies. The city’s executive consisted of a number of officials who specialized in separate functions formerly undertaken by kings. These functions included religious duties, military leadership, civil administration, and judicial supervision. And as the Greek commerce strategy unfolded, and a greater proportion of the population was absorbed into it, the government of the polis became more democratic, particularly in Athens. The functions of government were financed by indirect taxes and liturgies (public office performed without pay by wealthy citizens) imposed on the free population, and direct taxes on foreigners (metics). As it was ‘considered irreconcilable with a citizen’s dignity that taxes should be levied on his person, his income, or his capital’, extraordinary direct taxes (the eisphora) were raised from citizens only in time of emergency (Thomsen 1964:11–13). This system of government, in which decision-making and control are relatively decentralized, is more likely to arise, and certainly more likely to be maintained, in commerce societies than in conquest societies. As we saw in earlier chapters, the initial stages of a dynamic strategy can be pursued with a variety of political forms that emerge in response to local conditions and influences; but as the dynamic strategy unfolds, political structures conform to strategic type. It was demonstrated that the Roman conquest 221


Figure 8.3 The agora of Athens, late fifth century BC Source: Redrawn with permission from Agora Excavations, American School of Classical Studies, Athens.

strategy could be pursued to its logical conclusion only by substituting a monarchy for the earlier aristocratic oligarchy. There is no way that the Roman conquest strategy could have been pursued through the political medium of democracy. Similarly, whenever modern democratic nations have turned to total war they have either adopted dictatorships or temporarily abandoned democratic institutions. In the ancient world, the Greek path of political development from tribal monarchies to aristocratic oligarchies to democracies (with the emergence of ‘tyrants’ in times of crisis) could have occurred only within a flourishing commerce society. And in the modern world, only in a technological society. Why? Because the conquest strategy requires centralized direction, whereas the commerce (or technological) strategy requires widespread commercial (technological) decision-making. And economic democracy compels 222


political democracy. Clearly, autocratic control is more compatible with conquest than with commerce. The growth of the commerce-driven polis had implications for the institution of law. Moses Finley (1986:159), for example, argues that: ‘The growth of the polis meant a shift from the pre-law stage…to the law stage, with its more specific and formal rules and a formal machinery for their administration.’ The system of laws that developed more formally and systematically as fat polis grew was meant to facilitate the development of Greek commerce, and in this it was remarkably successful. It was also meant to restrict the influence of foreign merchants in local affairs by limiting their access to land, the key to political participation before 500 BC (ibid.: 144–5, 159). Like its military organization, the laws of the Greek polis were designed to protect and defend the commerce strategy, and as the dynamic strategy unfolded so their design changed. Those laws responded not to an inner voice, but to the outspoken demands of the merchants and their fellowtravellers. There was considerable variety in the institutions of Greek poleis, particularly as between Athens and Sparta. In the main this reflected the extent of their commitment to the commerce strategy. Athens provides the best example of a society that rode the wave of commerce and, once it began to ebb, attempted to catch a wave of conquest. Owing to the growing power of commercial interests, the Athenians had replaced their kings with elected magistrates by about 700 BC. These magistrates included nine archons— each elected by the citizens for one year—who were responsible for various aspects of government. Not surprisingly the aristocratic tribal leaders resented this loss of power and, in a period of trade depression brought about by the mercantile success of Corinth, struggled with the commercial interests for control of government in Athens. In 632 BC an unsuccessful attempt was even made by the aristocrat Cylon to establish a tyranny. Finally, in 594 BC Solon, an aristocrat who appears to have had commercial interests, was elected as sole archon to resolve the continuing unrest. As a virtual dictator, Solon was able to push through a number of economic and social reforms. Despite these reforms the unrest continued and eventually led to the emergence of an aristocratic family of tyrants—the Pisistratids—who ruled Athens between 546 and 510 BC. During their tyranny, but not because of it, the Athenian economy flourished. This new wave of prosperity was based upon a resurgence of commercial success. Athens began to make inroads into the market share held by its old commercial rival, Corinth. As early as 550 BC the famous black-figure Athenian pottery had displaced Corinthian pottery throughout the Mediterranean. This gave Athens a monopoly over a major commodity of trade, and through this monopoly Athenian merchants and artisans grew rich. To maintain this advantage the Athenians followed up their earlier success with the development by 530 BC of the even more famous red-figure 223


pottery that characterized the classical age of Greece in the fifth century BC. Added to this was an increase in Athenian exports of olive oil and wine. This commercial revival led not only to the growth in size and wealth of Athens, but also to the enlarged populations and wealth of merchants and artisans in the city. In turn, this generated a renewed demand for wider political control. Political democracy will always follow economic democracy. The changing balance of power between the narrow aristocratic and wider commercial interests led, in 508 BC, to the elevation to power by popular support of Cleisthenes of the Alcmaeonid family. Cleisthenes reformed the system of Athenian government to bring it into line with the new economic reality. He broke the power of the old tribes and gave political control to the people. To achieve this Cleisthenes reasserted the authority of the assembly which was supervised, together with the executive, by a new Council of Five Hundred that was popularly elected. Election to the Council was arranged through the establishment of a system of electoral districts called ‘demes’, within which all citizens were required to register (Jones 1969:3). Citizenship was even extended to many of the foreign merchants working and living in Athens—a step that Venice many centuries later never even contemplated. This system of government, which was soon called demokratia, facilitated the commercial expansion of Athens during the classical period of Greek history by providing economic decision-makers with some control over their dynamic strategy. Sparta’s political development stands in contrast to that of Athens. While Sparta did not dispense with its king—indeed, it had two of them at any one time owing to an early merger between two tribal kingdoms—it holds the distinction of making the earliest steps in Greece towards a limited form of democracy. But this was done to keep the enslaved Messenians under control, not to facilitate commercial expansion. In the mid-seventh century BC, Sparta extended political control from the monarchy to the rhetra, the assembly of male citizens over 30 years of age, numbering about 9,000 to 10,000. They were known as the ‘Equals’. In turn, the assembly elected for life a council of elders (the gerousia) consisting of the two kings and a further twenty-eight men of at least 60 years of age, and they in their turn elected (for one year only) five ephors to supervise Sparta’s social system. As the aim of this new system was to provide a class of warriors who would keep the Messenians from revolting, the Equals had to be given a source of income that could finance their military strength. Accordingly they were granted estates cultivated by the Messenians who had been reduced to the status of heilotes (helots) or serfs. This land was taken from the old aristocracy of Sparta that had failed to prevent the devastating rebellion of 640 BC and was used to create a new democratic aristocracy. This system enabled the Equals to engage in military training and warfare. Commerce, which had been displaced as the dynamic strategy of Sparta, was undertaken by non-citizens. It was a system something like European feudalism with voting rights. 224


It is highly likely that this major institutional change would have led on to a wider form of democracy that included the commercial interest as well as the military interest if Sparta had been able to resolve the Messenian problem. As this did not prove to be possible, Sparta was unable to build on its earlier commercial success. Indeed, it was unable to reactivate its earlier commerce strategy. Hence Sparta’s early move to democracy was stillborn, and it soon reverted to a form of military gerontocracy. In other words, the continued development of democracy in Sparta depended on the further unfolding of the initial commerce strategy of the eighth century BC. When the commerce strategy stagnated so too did political democracy. Wealth in Greece was shared more equitably amongst its citizens than in any other ancient society. Even the wealthiest Greek would have been regarded by the Persian aristocrat as a man of extremely modest means. Nevertheless, there were clear socioeconomic distinctions in Greek society. While the wealthiest aristocrats in Athens, for example, had estates of only 30 hectares, an ordinary rural family may have had just 4 hectares (Starr 1977:123). Yet land does not tell the whole story. After the mid-eighth century, Greek aristocrats grew rich by investing their rural surpluses in commerce, and these extraordinary profits were in turn invested in urban property, the arts, games (particularly chariot races), and gracious but simple living. As the ordinary rural family remained poor, the gap between the classes increased progressively during the sixth and fifth centuries. The aristocracy of Greece came from a relatively small number of families that rose to prominence with the emergence of the polis from the mid-eighth century BC. Prior to 500 BC the number of aristocratic families in Athens ranged from 100 to 200, and increased to about 300 in the mid-fourth century and about 400 in the late fifth century. In 500 BC this wealthy class would have amounted to only about 1.3 per cent of Athenian citizens, which excluded slaves and foreign-born residents (Starr 1977:46, 123,153–4). The absolute expansion of the aristocracy was due to the growing wealth of the middling farmers who had become rich through investing their initially small surpluses in commercial activities; also some merchants without rural land, even those of foreign origin, were also admitted to the aristocracy (ibid.: 126–8). It is important to realize that before 500 BC these new men were not sufficiently numerous to form a middle class. Instead they attempted to join the aristocracy and to imitate the outlook and manners of that class. One of the problems of doing so in earlier centuries was the difficulty experienced by foreigners (metics) in acquiring land, which was the key to politics before 500 BC (ibid.: 124–6). But land did change hands, certainly from the seventh century, mainly through the growing debt of small landowners and, by the fourth century, through open sales (ibid.: 183; Finley 1986:159). The aristocrats provided the core of the Greek army. But as their numbers were limited it is clear that non-aristocrats were also involved. In Athens the 225


aristocrats could have provided no more than 1,000 of the 9,000 or 10,000 hoplites, and must have been supported by a much larger semi-aristocratic class from the middling landowners. Together they provided the ruling elite in Athens. They were motivated by the same desires, they were both involved in commerce, they possessed the same philosophical outlook (moderation and balance in all things), and they preferred the same lifestyle. But their role changed over time. The aristocrats dominated the life and economy to a greater extent in the seventh than in the sixth century BC (Starr 1977:190). In my view this was because of the rise of commercial urban interests as the Athenian dynamic strategy of commerce unfolded. While there was no conflict between the classes prior to 500 BC—as they all stood to gain from flourishing commercial activities—once the commerce strategy had been exhausted and the aristocrats began to look to conquest as a replacement strategy, conflict arose between the warriors and the merchants. The great majority of the Greek population lived in villages surrounding the city. Of Athens’ 120,000 citizens in 500 BC, only about 10,000 lived in the city. The rest pursued a subsistence living on their own small plots, or worked for wages on aristocratic estates, or did both. While the typical Greek was a peasant farmer who worked a small family farm of about 4 hectares, a large proportion of the population possessed either no land at all or very little land. The emergence of a dependent peasantry in the sixth century was due in part to rent-seeking aristocrats who took advantage of the growing indebtedness of small landowners. Surpluses gained in this way could be invested in the commerce strategy. In contrast to Rome, small landholders were not drawn off the land, because they were required neither in the hoplite army, which was a defensive rather than an offensive force, nor in the dominant commercial activities; and slaves, who constituted a numerous group in ancient Greece, were not used in agriculture as in Rome. There was, therefore, no need to reorganize agriculture as the Romans did centuries later, because there was no need for a full-time professional army in their commerce society. The major Greek cities housed growing populations of merchants, artisans and slaves after the eighth century BC. An important exception to this was Sparta which, after the mid-seventh century when it opted for the static rent-seeking tactic rather than the wider Greek dynamic strategy of commerce, remained, in the words of Thucydides, ‘a straggling village like the ancient towns of Hellas’. In sixth-century Athens the industrial and commercial population, including men, women, and slaves, amounted to about 6,000 out of a total of 8,000–10,000 (Starr 1977:104). Many of the merchants and artisans were foreigners who were attracted to Athens by the lure of profit to be had in this thriving commercial centre. At that time Miletus, Corinth, and Syracuse were probably at least as large as Athens, with a similar proportion of industrial and commercial workers and their families. The rest were certainly smaller. In these Greek city-states slaves 226


were employed in industrial, mining, construction, and household activities, thereby enabling the release of citizens from industrial drudgery to pursue and defend the commerce strategy. The commerce strategy in Greece, therefore, was in the hands of freemen. The Greek polis had a formidable, but essentially defensive, military capability. An earlier (before 800 BC), more flexible form of warfare, which was appropriate to tribal conflict, was replaced thereafter by a heavily armed and tightly formed infantry known as the hoplite phalanx. Its emergence and decline were closely associated with the fortunes of the Greek polis. The hoplites possessed heavy helmets, breast plates, greaves, round shields, long spears, and short swords, fashioned mainly from bronze. They fought shoulder to shoulder in a formation several men deep, in an effort to force the opposing army from the field of battle. It was a form of fighting— involving grim determination as spear-carrying infantry viciously probed the ranks of their opponents looking for a weakness—that could be employed only on level ground. At first sight this appears somewhat anomalous in such a mountainous country as Greece. Basically the idea was to employ the hoplite army to defend the boundaries of the home polis rather than to wage offensive warfare. Hugh Bowden (1993:60–1) argues persuasively that ‘the hoplite phalanx was introduced precisely to maintain the territorial boundaries of the polis, and that the hero was…the guardian of the polis’. Significantly, the hoplite phalanx was developed at the very time the Greek city-state emerged. Its aim, therefore, was to defend the dynamic strategy of commerce rather than to pursue the strategy of conquest, and this had a characteristic impact upon its organization. When the Greeks sought to replace commerce with conquest after 500 BC, they developed a more flexible form of offensive warfare employing a lightly armoured infantry; and, later, when Rome embarked upon its conquest strategy in earnest, it abandoned the spearcarrying hoplite for the sword-carrying legionary. Owing to the intense competition between the Greek city-states, they were constantly at war with each other. Down to the end of the commerce strategy their internecine warfare was motivated by disputes over neighbouring land and by commercial rivalries (Starr 1991:211). The first major war broke out in 700 BC between Chalcis and Eretria over rights to the Lelantine plain, a war joined by Corinth, Megara, Miletus, and Samos for commercial reasons. Over the following centuries many other smaller conflicts erupted in central Greece between Athens, Corinth, and Megara over commercial rivalries; and in the Peloponnesus, Sparta clashed with Argos, conquered Messenia, and exercised hegemony over Corinth. Although deadly serious, these clashes stopped short of total war. The Greek objective was to gain a bit more land or a commercial advantage, not to destroy each other’s cities or armies. It was enough just to force the 227


opposition from the field of battle, just as Japanese sumo wrestlers do today. The Greeks fought for commercial advantage through the pursuit of a deadly game, not for conquest tribute through pursuit of professional butchery. Economic institutions in ancient Greece are not well discussed or understood. Generally, they are treated by historians as subservient to sociopolitical institutions and, as a legacy from Marx, are often seen as ‘a way of ordering social relations’ (Millett 1991: i). But, in reality, economic institutions are central to the objectives and success of societies pursuing their dynamic strategies and, hence, are employed to meet strategic rather than social objectives. From our discussion so far it is clear that the market, both local and international, was central to Greek society. The agora dominated village life before 800 BC and was the centre of gravity around which the polis that emerged thereafter was constructed. For this the Greeks were famous. As is well known, the Persian king Cyrus is reported as saying in the mid-sixth century when told about the vitality of the Greeks: ‘I have never yet been afraid of any men, who have a set place in the middle of their city, where they come together to cheat each other and forswear themselves’ (in Starr 1977:22). And, as we have seen, the Greek polis, both in the homeland and in the colonies, with all its attendant institutions, emerged to facilitate the expansion of commerce during the Greek break-out into the Mediterranean. The agora was a place where buyers and sellers came together to exchange commodities and to arrange finance for commercial activities. Before the sixth century BC much of this exchange took the form of barter for which prices were expressed at first in terms of oxen, but later in terms of gold and silver. Coinage was introduced by private moneyers in Lydia on the eastern edge of the Aegean at least as early as the first few decades of the seventh century, but it was a medium of exchange not much used until the late sixth century BC (Starr 1977:108–9, 74) when the commerce strategy had reached its fullest extent. At this time electrum coins were used in longdistance trade to pay mercenaries, to pay tribute, to distribute some of this tribute to the citizens of the polis, to meet temple obligations, to pay taxes, and to store treasure. Only in the fifth and fourth centuries, when large numbers of low denomination copper coins were produced by all poleis, were coins used in everyday markets. This rather late introduction of coinage suggests that considerable sophistication can be achieved before the introduction of money, as a medium of exchange, is required to reduce transaction costs. Certainly the absence of coinage did not interfere with the unfolding of the Greek dynamic strategy of commerce which reached its peak before coins were in widespread use. Hence, it was the conquest strategy that led to monetization. Markets for factors of production—such as capital, labour, and land— also emerged and changed during the rise and fall of Greek commerce. 228


Capital was essential in providing the infrastructure for, and financing the working of, the commerce strategy. Initially capital came from the modest surpluses generated in agriculture by aristocratic and middling landowners, from tribal raids, and from the ploughed-back profits of commerce (Starr 1977:51–2). Also, on a smaller scale, credit was provided by relatives, friends, and neighbours on a reciprocal basis. The emergence of financial institutions was closely associated with the expansion of commerce as it provided both the demand for and supply of funds. With the growing use of coinage after the early seventh century wealthy citizens, private moneyers and, later, bankers began providing credit to merchants largely to facilitate transactions and investment in commercial operations (Millett 1991:198–9, 202–3). By the fourth century Athenian banks accepted deposits, largely from merchants, either for safe-keeping or relending; they loaned funds to merchants for interest; they invested in commercial enterprises; they introduced clients to would-be lenders; and they changed money (ibid.: 206). With the exhaustion of the commerce strategy after 500 BC and the emergence of conquest, aristocrats moved into land and military activities and out of commerce and banking, leaving the latter to the metics—either foreigners or freed slaves (Starr 1977:75–6). In the fourth century, therefore, most transactions between merchants and bankers were conducted by metics (Millett 1991:206–7). This was due to the exhaustion of the commerce strategy, not to a change in the social attitudes of the ruling elite as is usually argued (Snooks 1996:352–3). The labour market was not well developed in ancient Greece. Moses Finley (1985:73) tells us: Free men were found in all occupations, but usually as self-employed workers, either as smallholders or tenants on the land, or as independent craftsmen, traders and moneylenders in the towns… Free hired labour casual and seasonal, its place determined by the limits beyond which it would have been absurd to purchase and maintain a slave force… It was not well developed because, in the face of plentiful supplies of slave labour, there was only a limited demand for free labour services. In contrast to Rome, slave labour in Greece was employed not in agriculture but in mining and industry. The reason is that, as their dominant strategy was commerce, the ancient Greeks (with the exception of Sparta) never got to the stage of requiring a permanent full-time army. Hence it was not necessary to go to die expense of reorganizing its agricultural system. Instead agriculture was organized on an owner-occupier basis, with smallholders and landless men working for wages on the larger estates. The major exceptions were Sparta and some of the overseas colonies that relied upon slave labour in agriculture. As the rural demand for agricultural workers was sufficient to prevent a flow of landless families to the cities as happened in Rome, the 229


expansion of mining and industry from the sixth century BC was achieved through the use of slaves captured in war or as a result of debt-bondage (Finley 1985:69–80). Slaves were also used for domestic labour in the rural and urban homes of the wealthy. Nevertheless, part-time work existed in the cities on public works around the docks, and for porters. Chester Starr (1977:89) tells us: ‘Day labour did exist in fifth-century Athens, where men gathered each morning at a certain spot for hire much as they do in modern Tehran and other Eastern cities.’ The major demand for wage labour from the fifth century BC was from the military which recruited soldiers and rowers from agricultural areas and from other cities. The institutions associated with the distribution of land are, as we have seen, not entirely clear. It is sometimes claimed that in the early centuries there was little alienation of land, and what there was took place through the growing indebtedness of small landholders (Finley 1985:119). There is, however, some evidence that land transfers and sales did take place (Starr 1977:150–1). The beneficiaries being the wealthier families who enabled the smaller men to get hopelessly into debt. Later it is quite clear that land sales were quite common, as in the fifth and fourth centuries BC some Athenian landowners possessed three to six estates in Attica (Finley 1985:99). Also there is evidence that estates, such as those owned by the temple of Apollo, were leased out to wealthy tenants on ten-year leases for attractive rents (ibid.: 114–15). My basic argument is, therefore, that economic institutions emerged and changed as the dynamic strategies of Greece unfolded or were substituted one for the other. Greek religion was an ordered and rational social activity that supported the merchants’ desire for peace and prosperity. It can be contrasted with the religions of conquest societies that emphasize the darker and more chaotic forces in life and in the human imagination. Instead of reinforcing death and destruction, Greek religion was employed ‘to protect mankind during its life and to secure continuation of the group’ (Starr 1991:238). The polis was under the divine protection of its patron deity, which in the case of Athens was Athena, the daughter of Zeus, housed in a temple overlooking the agora or market-place. At the individual level the local gods protected the dangerous journeys of the long-distance merchants and the activities of the artisans who crafted the goods for exchange. In return the merchants and artisans gave expensive gifts to the temples that housed the gods. Hence the role of religion in the Greek polis was to support the dynamic strategy of commerce, the vital principle in Greek society. The most important Greek gods were those on Mount Olympus, namely the family of Zeus. They included Zeus and his wife Hera; his children Athena, Artemis, Aphrodite, Apollo, Hermes, Ares, and Hephaestus; together with his siblings Poseidon, Hestia, and Demeter. While a city-state might adopt one of these gods as its patron, all Greeks acknowledged the 230


entire Greek pantheon. This they did through festivals and games dedicated to the various gods. The Olympic and Nemean games were held in honour of Zeus, the Delphian games in honour of Apollo, and the Isthmian games in honour of Poseidon. These games, which were presided over by their gods, were public celebrations of the success of the dynamic strategy of Greece. It helped to imprint the commerce strategy on the community consciousness and to reinforce strategic confidence. In addition there were a whole host of local divinities that had their loyal followers. As befitted a commerce society with its more democratic structure, the practice of religion in Greece was less authoritarian than in conquest societies. Priests and other religious functionaries certainly existed, but their role was supportive rather than dominating. Religious ceremonies, involving animal and, sometimes, human sacrifice, were conducted at a number of levels in society by the ‘king’ (who retained religious functions after losing his political role), tribal leaders, and heads of families. As we have seen, this contrasts starkly with the role of priests in conquest societies such as that of the Mexica in the New World. Greek supplicants sought peace, security, prosperity, and support in commerce whereas the Romans and Mexica sought the darker world of chaos in which they might successfully ride with the horsemen of the Apocalypse. The Greek attitude to religion is nicely summarized by an inscription on a black-figure vase depicting the sale of olive oil, which simply says: ‘Oh father Zeus may I get rich’ (in Webster 1972:61). Greek games were also held in honour of Zeus. Every four years the best athletes, musicians, actors, and orators assembled at Olympia to compete with each other to glorify the deities responsible for their prosperity. Even intercity wars were suspended during the course of the scheduled games. To the Greeks, commerce was more important than war. It is highly significant that the first recorded games in 776 BC coincide with the emergence of the Greek polis and the expansion of the Greek commerce strategy throughout the Mediterranean. In effect the games at Olympia were a celebration of the dynamic strategy of commerce. And as such they were characterized by a competitive striving for grace, beauty, order, and a balance between mind and body. They were both a metaphor for the balance and stability required for commerce and a means of focusing the attention of the populace on these values. Contrast this with the games in both Rome and the modern world. The Roman games, as we have seen, embodied the engineered chaos and brutality required by the conquest society. And the modern Olympics, which began in 1896 in imitation of the Greek ideal of a balance between mind and body, has been transformed by the technological strategy into an entertainment extravaganza packaged for the modern technological media. In 1948, for the first time, the rights to telecast the Olympic Games were sold to the BBC for £1,500 (£27,000 in 1996 prices); by 1996 world telecast rights had risen to $900 million; and rights for the period 1996 to 2008 were 231


purchased by NEC (USA) for $4 billion and by EBU for $1.4 billion (Economist, 20–26 July 1996). Finally, the formal philosophy of the Greeks, which emerged for the first time during the sixth century in Ionia, involved a rational analysis of human thought and of the natural world. Like Greek religion, this new way of thinking was concerned with the orderly structure of reality that comes from the worldly pursuit of commerce. The Stoics, for example, wanted to discover the eternal laws of nature so as to create an image of the divine cosmos, or the rational order of God, here on earth. (And when commerce re-emerged in England in the eighteenth century so did Stoicism.) To be successful in commerce we need to understand the mind of man and the wellsprings of the everyday world, whereas to be successful in conquest we need to be in touch with the darker, intuitive forces of the human imagination and of life. Yet, while the Greeks pursued order, they were fully aware of the chaos in life which was always threatening to overwhelm them. This is why they attempted to achieve balance in both religion, where Dionysus is balanced by Apollo, and philosophy, where the world is seen as the outcome of opposing forces. By 500 BC the Greeks had progressed to the point where mathematics, formal logic (involving induction as well as deduction), astronomy, and medicine had attained the status of ‘independent, rational disciplines’ (Starr 1991:268). While Greek philosophy and science developed within the limits set by the commerce strategy, they also possessed, within those limits, a dynamic of their own fuelled by the competitive instincts of intellectuals. But when philosophers stepped beyond these limits, as Socrates (469–339 BC) did, they were called to account with their lives. Today they are just starved of funds. The imperial Greeks The limits of the Greek dynamic strategy of commerce were reached, as we have seen, by the early fifth century in both the western and eastern Mediterranean. These limits were marked by wars with Carthage and Persia as the Greeks aggressively attempted to continue their commercial expansion. It became clear that further expansion, or even an attempt to maintain its existing commercial operations, would require a much greater investment than before in military activity. Indeed, it would be necessary to pass from a defensive to an offensive military stance. It was this realization that led the Greek city-states, during the course of the fifth century, to abandon their exhausted commerce strategy in favour of a new conquest strategy. Naturally this was a complex real-world process that was worked out at the individual and community levels. Also, there was still room in the fifth century for a shift in the balance of commercial power from some citystates (Corinth) to others (Athens). Hence the hegemonic expansion of Athens into the Aegean involved a temporary expansion of trade as well as of tribute. But tribute rather than trade became the main objective. 232


What we are interested in here is how Greek institutions were reformed to facilitate this major shift in their dominant dynamic strategy. The first major change was the decline of the Greek city-state which had emerged to accommodate the development of the commerce strategy. Once that strategy had been exhausted and the Greeks had embarked on the conquest strategy, the city-state was no longer an appropriate form of political organization. In the Aegean region, Athens developed a hegemonic empire similar in many respects to that in Mesoamerica under the Mexica: all subject city-states continued to be ruled by their own citizens, but they were forced to swear an oath of allegiance to Athens and, to make sure they kept their oath, hostages were taken. They were also forced to pay tribute to the imperial city. If they rebelled or refused to pay tribute, Athens sent out a punitive naval force against them. Athens also established garrisons and sent out colonists when and where they were required to stabilize this new imperial economic and political structure. On the mainland, Sparta opted for a more interventionist system, which reflected its experience in the Peloponnesus. This was more of a territorial empire based upon the establishment of garrisons in conquered cities and the imposition of a Spartan governor or a governing board of aristocratic oligarchs selected from local families. This form of imperial government was used by Sparta to extract regular tribute. With the defeat of Sparta in 371 BC, Thebes adopted a federal political system based upon a number of democratic Boeotian city-states; and it attempted to extend this system throughout its empire. Thebes even assisted in the construction of a new type of Greek city called Megalopolis, or Great City, in Arcadia. Yet all these experiments in political unification, which were intended to facilitate the pursuit of the conquest strategy, failed. They failed because the Greeks were unable successfully to substitute the conquest strategy for the commerce strategy owing to the resource limitations of the would-be conquerors and the fluid nature of Greek alliances. It was, therefore, an economic rather than a political failure. This failure, however, left the door open for the final political solution—conquest by the empires of Macedonia and, later, Rome. The failure to develop a viable conquest strategy is also the reason for the survival of Athenian democracy, despite the growing attacks that it attracted during the fifth century. We have seen how Cleisthenes transferred political power from tribal leaders to an assembly of the people. But aristocratic control was still exercised through elected archons and the Council of the Areopagus, which retained traditional powers. During the 480s and 460s BC these surviving vestiges of aristocratic influence were removed and the legislature, the executive, and the judiciary came under popular control. To these changes Pericles in 452–451 BC added the payment of jurors and magistrates by the state, but only for Athenian citizens. This ensured that all citizens—about 14 per cent of the population of Attica, as women, 233


foreigners, and slaves were excluded—irrespective of wealth, could participate in Athenian government. It is ironical that these changes to the Athenian political system, the most ‘advanced’ in Greece, came at a time when the forces responsible for them were being exhausted. Not surprisingly, over the remaining half-century prior to the complete defeat of Athens at the hands of Sparta, this democratic polity was under constant attack by aristocrats and intellectuals. This culminated in 411 BC in an aristocratic revolution that temporarily (until 410 BC) overthrew Athenian democracy. In their turn the democrats alternatively sought the assistance of the aristocrats to conduct Athens’ wars (Jones 1969:126; Davies 1984:128–30) and turned against them in a way that destabilized the Athenian conquest strategy. The assembly undermined their new dynamic strategy when they attacked their military leaders with fines (Militiades), ostracism (Themistocles and Cimon), exile (Thucydides), and sentences of death (Alcibiades). Clearly there was a conflict between a political system that had been shaped by a now exhausted commerce strategy, on the one hand, and the requirements of the new strategy of conquest, on the other. This led to debates about the ethics of a democratic society seeking tribute through military force and the oppression of other Greek societies. And in 443 BC there was even an unsuccessful attempt to ostracize Pericles, the populist leader who had vigorously pursued Athenian imperialism. But material interest triumphed over ethics, as it generally does, and thereafter imperialism was not questioned. There seems little doubt that if Athens had developed a successful conquest strategy the democrats would have lost political power to the oligarchs. The temporary aristocratic revolution of 411 BC would eventually have become permanent, because conquest strategies are always taken over by the aristocratic ruling class. Indeed, ultimately, as the conquest strategy reached its prime, the government of Greece, like that of Rome, would have reverted to a monarchy. Instead, in the fourth century BC, once the dynamic strategies had been exhausted, the political system in Athens degenerated into mob rule as the democrats attempted to grasp an increasing share of a declining GDP (Millett 1995:184–90). This was rent-seeking not by the minority of aristocrats directed at the people, but by the majority of the people directed at the aristocrats. But, clearly, wealthy Athenians, like wealthy individuals in modern society, were able to exert considerable personal influence in this early democracy (Davies 1984). Ultimately Athens, like all other Greek city-states, was absorbed by the Macedonian monarchy of Philip and, later, Alexander. Owing to experiments with the conquest strategy by Athens, Sparta, and Thebes, the military took an increasingly important role in the Greek economy. But rather than use its own citizens to staff the army and navy, as Rome was to do later in its republican phase, the would-be Greek 234


conquerors employed mercenaries. While the dynamic strategy of conquest was directed by the local military aristocracy, its instruments were in the hands of foreigners. This is most remarkable in the case of Sparta which had always prided itself on its militaristic society. The reason that Sparta employed mercenaries in both its army and navy after 404 BC is that the number of hoplites declined from 5,000 in 479 BC to only 2,000 by 371 BC owing to the declining wealth and power of the Equals in the face of their bankrupt rent-seeking tactics in a society that had begun to stagnate from the early sixth century. Being a commerce society in 478 BC when it first embarked upon its conquest strategy, Athens had limited military potential. Hence it employed mercenaries to row its galleys, to man its armies, and sometimes even to lead these forces using funds extracted from the wealthy by populist governments (Millett 1995:186–7). While these military forces were directed by Athenian aristocratic warriors, they were supervised by democratically elected political leaders. This led to the kind of interference in military activities that makes it impossible to pursue a successful conquest strategy over the longrun. Either the political structure must change, with warrior aristocrats taking over government, as they almost did in 411 BC, or the conquest strategy will fail, which is what happened in 404 BC. The transition from a commerce to a conquest strategy is fraught with difficulties in the shortrun. Invariably commerce societies lack the necessary military human capital and infrastructure and possess inappropriate sociopolitical institutions. As we shall see when examining Venice, commerce societies that attempt to build up conquest empires invariably employ mercenaries. Venice also relied entirely on mercenary generals or condottieri, usually with unfortunate consequences. When fighting other commerce societies—the western Greeks against Carthage or Venice against Genoa—this is not a great problem, but when the mercenary armies of a commerce society march against the citizen army of a conquest society of comparable wealth— Carthage against Rome or Venice against France or Austria—the commerce society will generally lose. As the Greeks finally did against Macedonia. The transition from a commerce to a conquest society is theoretically possible but it takes time and, in a highly competitive world, there is never enough time. Evidence of the beginnings of this transformation can be detected, as we have seen, in the changing political structures of these former commerce societies. It can also be seen in the changing military tactics employed by Greek armies. With the shift from defensive to offensive military action, the Greeks developed new and more effective military strategies and tactics that focused upon mobility of action. And Athenian generals made increasing use of the lightly armed infantry (peltasts) wielding short spears, who could fight over broken ground and defeat even the cream of the old Spartan hoplites. With time they may even have introduced cavalry as the Macedonians were to do in the not so distant future. 235


The switch from commerce to conquest ushered in a period of uncertainty, which had a profound effect upon the Greek outlook, particularly upon the arts, religion, and philosophy. During the fourth century all those arts that had been stimulated by the commerce strategy—either directly, such as pottery and painting, or indirectly (through commercial prosperity), such as poetry and drama—declined from the great heights achieved in the fifth century. Only the prose forms of history and biography—intellectual forms that conquest societies such as Rome excelled at—showed any vitality. Conspicuously absent was the sense of order and balance. Greek religion and philosophy of the classical age also expressed an ordered and rational outlook. With the chaos of conquest, Greek thinkers began to challenge the traditional religious and intellectual viewpoint. The sophists of the fifth century, for example, challenged both the ‘artificial’ laws of the polis and loyalty to the old gods who appeared to have lost control of human society. They even openly claimed that the gods had been invented by politicians to justify their laws and authority. These critics of the old ways included Critias (460–403 BC) and Euripides (485–406 BC). There were some who argued that the use of force against other societies could be morally justified. Euripides left Athens for Macedonia where he wrote the Bacchae which, we are told (Starr 1991:354), is ‘an exploration of the wild forces driving men’ and ‘reflected admirably the new temperament born of war’s violence’. While Socrates (469–399 BC) dissociated himself from the views of the sophists and taught that men should seek truth and beauty, he too attacked the conventional ideas about religion and the state. For this reason he was sentenced to death. In the fourth century Plato (428–348 BC) even explicitly rejected the democracy of his day and looked back to Greek tribal origins, when society was ruled by kings who were wise and just, for the ideal political state. These kings were also warriors who led their tribes into war and conquest. And Aristotle (384–322 BC), the tutor of the ancient world’s greatest conqueror, Alexander, also rejected rule by the masses. Hence the door was opening before a new set of secular and religious values that would be required to justify the brutality and the engineered chaos of the dynamic strategy of conquest. CONCLUSIONS The unfolding commerce strategy of the Greeks had a characteristic shaping influence upon their institutional structure. Until the break-out of the Greeks into the Mediterranean in the early eighth century BC, their society was tribal in nature and ruled over by kings who were supported by a small aristocratic class of warrior-landowners. Accompanying the commerce break-out, which coincided with rapid territorial expansion between 825 and 550, was the development of a new institutional structure involving a 236


close integration of economic, political, social, and military elements. At their core was the emergence of the Greek polis which was central to the commerce strategy—central to the finance, supply, and protection of longdistance trade. Closely associated with the emergence of the polis was a new military formation, the hoplite phalanx, which was required to defend the parent polis and its offspring poleis overseas. This military organization was a defensive rather than an offensive force like the later Roman legions. To facilitate, reinforce, and maintain these organizational changes, Greek laws regulating the polis and its inhabitants also needed to be changed. All organizational and institutional matters responded to the changing demands of the commerce strategy.1 As the Greek commerce strategy unfolded, the institutional structure centred on the polis reached its fullest expression. Between the early eighth and mid-sixth centuries Greek commercial influence grew rapidly in the Mediterranean and Black Sea regions. And as it grew, the opportunities and problems facing the dynamic strategists multiplied. These opportunities and problems could only be resolved by further changes to the institutional structure associated with the Greek polis. These changes included the growing adoption of democracy as a higher proportion of the populace was drawn into the commerce strategy, the growing use of slaves in the industrial sector to release citizens for involvement in directing the commerce strategy, the increasing enfranchisement of foreign-born merchants and artisans, the development of monetized markets, and so on. At the same time, religious and intellectual institutions developed to rationalize and support the commerce strategy by projecting order, balance, and reason onto an indifferent world. With the exhaustion of the commerce strategy, which is reflected in the downward movement of the strategic development path from the late sixth century shown in Figure 8.1, Greek institutional structure began to change again, this time quite radically. The polis, as the central Greek institution, began to decline in the early to mid-fifth century as one city-state after another either adopted or came under the sway of the conquest strategy. A new strategy required new institutional and organizational forms. Athens developed a political hegemony over the Aegean city-states between 478 and 454 BC; Sparta fashioned a more territorial empire between 404 and 371 BC; and Thebes briefly experimented with a forced federal political system from 371 to 362 BC. As attempts were made to tie the large number of Greek city-states together into a broader political framework, the political structures of the city-states also began to change towards more oligarchic arrangements or, as in the case of Athens, involved conflict between democratic and oligarchic groups as they fought over who should pay the costs and receive the benefits of the conquest strategy. All these institutional changes were in response to changes in strategic demand. The new strategy demanded a new role for the military. It led to the emergence of a more aggressive military organization that was able to 237


engage in offensive operations over rugged terrain and to storm city fortifications. War was passing from a defensive game to an offensive business. And to support this more aggressive dynamic strategy, leading thinkers challenged the role of the old gods and the old laws of the polis. Even the greatest minds of the age—Plato and Aristotle—were influenced by the fundamental economic changes taking place, rejecting Athenian democracy and favouring more autocratic political forms. But these autocratic forms were not adopted because the conquest strategy failed. Eventually the Greek city-states were absorbed into the all-conquering Macedonian monarchy.

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9 VENICE Apparition of the Adriatic

I stood in Venice, on the Bridge of Sighs; A palace and a prison on each handr I saw from out the wave her structures rise As from the stroke of the enchanter’s wand. (Byron, Childe Harold’s Pilgrimage (1818)) Just as the commerce strategy employed by the city-states of ancient Greece led to a golden age of cultural and political attainments in the classical world, so in the hands of the north Italian city-states of the early modern world the same strategy led to the classical revival we know as the Renaissance. Venice played an important role in these developments because, for the six centuries after the First Crusade in 1095, it was the major commerce society in Europe. It rose enchantingly like an apparition from the waters of the Adriatic. And, as we shall see, Venetian sociopolitical institutions were a function of its unfolding commerce strategy. THE RISE AND FALL OF VENICE In the Roman era, the lands around the northern end of the Adriatic Sea were called Venetia. Even after the collapse of Rome in AD 476, the Venetian coastline continued to be administered by Roman officials appointed from Constantinople and located at Ravenna near the mouth of the famous Rubicon River. In Roman times the lagoons at the head of the Adriatic were inhabited by boatmen and their families who made a living by harvesting fish and salt from the sea. Later, ahead of the waves of barbarians that swept through northern Italy, Roman families sought temporary sanctuary in these quiet lagoons. But most returned to the mainland when the threat had passed. Only with the Lombard invasion of AD 568 did whole mainland communities decide to settle permanently on these scattered islands of refuge (Norwich 1983:4–10). Initially these growing settlements, which regarded themselves as part of the unconquered Roman Empire, were ruled by Byzantine officials at Ravenna through elected military tribunes in the lagoons. 239


By 697 the lagoons were regarded as sufficiently prosperous to be made into a separate district of the Eastern Empire administered by a dux or, in the Venetian dialect, a doge, possibly elected from the beginning by influential local families. Even at this early stage the Venetians possessed a navy, the most powerful in the Adriatic, which came to the aid of the Empire on a number of occasions. Until the Franks attempted to conquer Venice in 810, the capital of the Venetians was at Malamocco, after which it was transferred to the more defendable Rivoalto (later called Rialto), one of a cluster of about sixty small islands that we know today as Venice (see Figure 9.1). Thereafter the influence of the Byzantine emperor declined and Venice assumed independence. It is here that our story begins. The pathway taken by Venice’s unfolding dynamic strategies can be seen reflected in Figure 9.2 which shows the changing territorial portfolio of Venice. We can detect two great waves of about 300 years each in duration: from 1050 to 1350 and from 1350 to 1650. The first of these great waves is associated with the unfolding of the commerce strategy and the second great wave with the conquest strategy. It is interesting that, while most (80 per cent) of the territory gained in the commerce cycle was retained, virtually all the territory gained through conquest was subsequently lost. This is in aggregate terms, not in terms of locality. While the commerce strategy eventually exhausted itself, the conquest strategy failed completely; and after the failure of conquest, stagnation set in. These strategies, each composed of a number of substrategies, will be briefly examined. The commerce strategy During the centuries before the First Crusade, the Venetians established the foundations of a commerce strategy that would lead to their remarkable expansion of economic and political power during the subsequent five hundred years. The Venetian achievement was outstanding, because the only resources they possessed were the fish and salt of the lagoons, which they harvested to pay for imports of grain from the mainland. The Greeks, in contrast, possessed extensive land—even if this was limited to small fertile plains scattered throughout a rugged terrain—as well as sea resources. These simple commodities from land and sea were carried between Venice and mainland cities by boatmen who plied their ancient trade throughout the lagoons and along the rivers of northern Italy. Many of these boatmen worked on their own behalf, while others carried cargoes for the ruling elite of Venice under commission. As their trade expanded, the Venetians also carried spices, silks, incense, and slaves brought to Venice by Greek traders from the Levant. To protect their valuable cargoes the boatmen were forced to arm themselves and to travel in convoys. From the very beginning they were aware that success in commerce depended upon an ability to control transport routes and to eliminate rivals such as the city of Comacchio at the 240

Source: Drawn by Cartography Unit, RSPAS, Australion National University.

Figure 9.1 The Venetian lagoon


Figure 9.2 The territorial expansion of Venice, 1000–1797 Source: Calculated and drawn from data in McEvedy (1961).

mouth of the Po River, which they sacked in 886. The commerce strategy of Venice, therefore, began on the rivers of the Italian mainland before the beginning of the second millennium. But, as the Venetians prospered from this pioneering substrategy of commerce, they turned from the rivers of Italy to the wider world of the Adriatic. Using slaves and timber (from one of the few remaining forests in the Mediterranean located at the head of the Adriatic) the Venetians obtained gold and silver from Moslem societies in North Africa in order to purchase luxuries from Constantinople. These luxuries were much in demand in Western Europe and were exchanged for minerals, wool, and grain. As the Venetians left the rivers for the seas, to begin their second major commerce substrategy, their place was taken by the Lombards who inherited the river traffic and established themselves in the Rialto, the great marketplace of Venice. In this way Venice became the centre of east—west trade in the Mediterranean, even before it had established a presence beyond the Adriatic. Venice’s location in the lagoons at the head of the Adriatic Sea, adjacent to the rivers of northern Italy, played a central role in the development of its 242

VENICE: APPARITION OF THE ADRIATIC

dynamic strategy of commerce (see Figure 9.3). The northern Adriatic was to Venice before AD 1100 what the Aegean had been to the Greeks before 750 BC. Just as the Aegean can be seen as the Greek lake, so the Adriatic can be regarded as the Venetian lake. The hinterland of Venice was not just 25 kilometres around the city, but 25 kilometres around the entire coastline of the Adriatic—a perimeter that was deeply punctuated by numerous rivers on the Italian, if not the Dalmatian, side. Hence, Venice was able to specialize in the production of just a few commodities in order to meet its essential requirements as well as generating a growing surplus to satisfy its material demands. Venice took possession of the entire Adriatic in a number of phases of maritime expansion. Before AD 900 the commerce community exercised control over the northern end of the Adriatic (above Ravenna), but during the tenth and eleventh centuries this was extended progressively to the middle and lower Adriatic. To do so, Venice had to clear the sea of pirates as well as rival fleets from Dalmatia and northern Italy. Hence, Venice’s commerce strategy depended not only on maritime and commercial skills, but also on maritime power and the ability to eliminate, or at least constrain, rivals. As Frederick Lane (1973:27) tells us: The Venetians sought sea power, not territorial possessions from which to draw tribute. Their wars were fought to effect political arrangements which would be disadvantageous to rival sea powers, which would make Venice’s established trades more secure in Levantine waters, and which would gain them trading privileges permitting commercial expansion into new areas. What he does not tell us is why this was so. After three centuries of confinement in the Adriatic—centuries during which their commerce strategy was formed—Venice was ready to extend its reach into the wider Mediterranean world, just as the Greeks had done almost two millennia before. This was the beginning of the third major Venetian substrategy of commerce. Two timely events assisted the Venetian break-out: the granting of trading privileges in the Byzantine Empire by the Eastern emperor in 1082, and the opening of the door to the Levant by the Crusades after 1095. In 1081 Robert Guiscard, the Norman conqueror of southern Italy, turned his burning ambitions against the Byzantine Empire by attacking Durazzo in coastal Albania on the old Roman road through the Balkans to Constantinople. Occupied with the Seljuk Turks in the east, the Emperor Alexius I called upon the Venetians for assistance. Venice responded decisively by attacking and defeating the Norman fleet off Durazzo. In return Alexius issued a charter granting the Venetians trading privileges and exemptions from tolls throughout the Empire. The growing relationship was 243

Figure 9.3 The Adriatic Sea (or Venetian ‘lake’) Source: Drawn by Cartography Unit, RSPAS, Australian National University.


symbiotic, as the Byzantine Empire came to depend heavily on the Venetian navy for defence at sea, and the commune of Venice grew prosperous on privileged access to Byzantine markets. While Venetian merchants paid no tariffs in most cities of the Empire, Greek merchants paid 10 per cent (Lane 1973:68). Here is the key to the commerce strategy—special access to markets, trade routes, commodities, and resources in order to reap extraordinary returns from trade, rather than the ordinary returns from specialization as conventionally held (Snooks 1996:338–44). A new emperor made the mistake, in 1118, of not renewing Venice’s charter, thereby placing its merchants on the same footing as other merchants. Without special access to the markets of the Empire, Venice stood to lose its extraordinary returns. Clearly this was not something that they were prepared to accept quietly because, despite the conventional wisdom (Cameron 1989:9–12; Mokyr 1990:5), commerce empires are not built upon the ordinary returns from trade. Venice’s reaction was swift. If the emperor wanted to remove its privileges then it would turn from profits to piracy in Romania (the Venetian term for the lands of the Byzantine Empire). And it would deny the emperor naval support. Lane (1973:34) explains: ‘Pillaging the Byzantine Empire was always a second best for the Venetians, at least from the point of view of their government. The foundation of Venetian policy was exploitation of Romania through special commercial privileges.’ When it was discovered that it was better to have the Venetians supporting the Empire rather than attacking it, their commercial privileges were reinstated. This, of course, should have been recognized from the beginning. But their relationship, although symbiotic, was troubled. The Greeks were resentful of the special privileges granted to the Venetians, and the Venetians were contemptuous of a society that could not adequately defend itself and which allowed itself to be commercially exploited. Venice always refused to give a foreigner a bargain and its seamen were dismissive of their Greek counterparts and even openly insulted their emperor when on joint operations. They can hardly have been surprised, therefore, when in 1171 the emperor suddenly withdrew Venetian privileges, arrested all Venetians in Byzantium, and confiscated their property. Once again the Venetians made threats of retaliation and, more importantly, on this occasion employed skilful diplomacy. Once again their privileges were reinstated, but with a difference. To the chagrin of the Venetians, other Italian cities were accorded similar commercial status. Naturally the resulting competition within the Empire between Venice and its rivals reduced the return to commerce. Just as naturally Venice became determined to eliminate its rivals and to secure the compliance of an erratic Byzantine administration. The outcome was both remarkable and unforeseeable. Quite incredibly Venice was able to hijack the Fourth Crusade and use it to attack not the infidel in Palestine but the centre of eastern Christianity in 245


Constantinople, to dismantle the Byzantine Empire, to pick up many of the choicest pieces, and to exclude its rivals from commerce in the region. How on earth was this engineered? It came about because of the indebtedness of the crusaders to the Venetian state. It all began with a decision by leading French nobles to embark on a Fourth Crusade, which led them to sign a contract with Venice to provide the transport of men and horses to the Holy Land and to provide all necessary supplies for a year. Negotiations, which demonstrated the far superior diplomatic skills of the merchant over the warrior, were undertaken by Enrico Dandolo, the Doge of Venice, on behalf of the entire commune, and by Geoffrey de Villehardouin on behalf of the crusaders. It was agreed that Venice would transport 33,500 men and the horses for 4,500 knights to the Holy Land in 1202, and provide supplies for a year, in return for the huge sum of 85,000 marks of silver. In addition, Venice contracted to supply fifty fully armed (with 6,000 men) galleys for active service for a year in exchange for half of all the booty taken during that time. No doubt the Venetians could hardly believe their good fortune. This was the greatest commercial contract of the millennium. And it had consequences that thrust Venice into the very forefront of European nations. As it turned out, the French negotiators had been wildly optimistic about the size of their military force and the extent of its financial resources. While the Venetians kept their side of the bargain and committed their entire public and private resources to the construction of 200 ships, the organization of a large army of seamen-warriors, and the stockpiling of the necessary supplies, the French could muster only 10,000 crusaders—less than one-third the agreed number—and they were able to raise only 51,000 marks—less than two-thirds of the agreed amount. This was a great blow to French honour that the Venetians were quick to exploit. Doge Dandolo graciously agreed to a delay in the payment of the outstanding 34,000 marks until the crusaders were able to grab their first booty, but only on condition that the crusaders assist Venice with a difficult local problem—the subjugation of a rebellious city (Zara) on the Dalmatian coast. Once the Dalmatian problem had been settled it was decided to go to the Holy Land via Constantinople where, by placing a pretender on the throne, the crusaders could obtain the funds they needed to settle their debt with Venice. And Venice would be able to arrange with the new emperor for the full restoration of its commercial monopoly. In 1203 the centre of European Christendom was attacked by the crusaders and, for the first time in its 1,000year history, it was taken by force. But after the arrangement with the pretender proved unsatisfactory, the expedition decided to lay siege to Constantinople again, this time for themselves. This was successfully achieved in 1204. On both occasions the Venetians, who were skilled in siege tactics, took the leading role in storming Constantinople through use of their navy. The outcome was very profitable for all concerned, especially Venice. Of the 400,000 silver marks plundered from Constantinople, Venice received 246


half, together with the outstanding 34,000 marks; it garnered an outstanding crop of artwork (including the bronze horses of San Marco); it took possession of three-eighths of the city; it had half the votes on the committee to elect the emperor; it could nominate the Empire’s patriarch; and most importantly of all to the Commune of Venice it received three-eighths of the Byzantine Empire, mainly along the Greek coast, as well as Crete and much of the Aegean. At last Venice, by employing the very highest skills of commercial cunning and diplomacy, had been able to gain the advantage it had long desired—a monopoly over commerce throughout Romania, and the naval bases required to protect its maritime routes throughout the eastern Mediterranean and Black Seas. Lane (1973:43) explains: ‘Consistent with the policy which Venice had previously followed and was to follow for centuries, he [the doge] showed less interest in tribute-paying territories than in control of the seas used by Venetian commerce.’ The reason? Venice was pursuing a commerce, not a conquest, strategy. Venice’s commerce strategy, therefore, had a distinctive shaping influence on the very nature of world politics in the Middle Ages. The other event that assisted Venice’s break-out into the Mediterranean was the First Crusade called by Pope Urban II in 1095. Curiously Venice was slow to exploit this opportunity not only to finance, provision, and transport crusaders to the Holy Land, but also to gain a commercial foothold in the fabled Levant (Norwich 1983:76–83). In part this was due to Venice’s concern not to inflame the emperor’s belated anxiety about a Latin occupation of former imperial territory, in part because they wanted to retain the good will of the Arabs and Seljuk Turks for reasons of trade, and in part because Genoa and Pisa were better points of departure for the French taking the sea route to the Holy Land. Hence Genoa and Pisa rather than Venice provided transport and naval support during the successful sieges of Antioch and Jerusalem in 1098 and 1099. But once the Venetians saw their rivals gaining property rights and special trading privileges in these cities, they threw off their other concerns and in 1099 sent a fleet of 200 ships to Jaffa to assist Godfrey of Bouillon in return for commercial rights in all subsequent cities taken by the crusaders (Luzzatto 1961:73; Lane 1973:32– 3). In this way Venice established its first colonies outside the Adriatic, the maritime nursery for its commerce strategy. Venice had learnt the hard way during its period of incubation on the rivers of the mainland and the waters of the Adriatic that the extraordinary returns from commerce could be reaped only if one possessed the maritime power to insist on trading privileges. Clearly this required a strong navy. After the fall of Constantinople, Venice built up its fleet of warships to provide the protection required by its merchant ships travelling to Romania and the Levant. And after 1330 they even assembled a separate fleet to patrol the Adriatic. Yet, despite the size and skill of their navy, the Venetians never achieved complete command of the seas outside the Adriatic in the way that 247


Britain could claim to have ‘ruled the waves’ in the period between the Napoleonic and Great wars. Venice’s objective was more modest. It merely aimed to protect its merchant ships, support its colonies, disrupt the trade of its competitors, and to raid the coastline and colonies of its rivals. While some historians (Lane 1973:67–8) have trouble explaining this contrast, it can be accounted for in terms of the different strategies pursued by Britain and Venice. Venice, which pursued the commerce strategy, was no more technologically advanced than its rivals, whereas Britain, which was the first nation to pursue the industrial technological strategy, had thereby a great advantage over its rivals. Until other European nations caught up with Britain technologically, it continued to rule the waves, but thereafter Britain was in a similar position to that of Venice in the Middle Ages. Venetian commerce was based on trade with Romania and the Levant in the east, and with Europe in the west—a trade that grew rapidly during the first great wave of economic change in Western Europe, between the eleventh and fourteenth centuries (Snooks 1993a: Chapter 7). The major part of the Romanian trade involved handling the imports and exports of Constantinople, but it also included the interregional trade of the Aegean and Black Seas. In this first period of European economic growth Venice came to dominate east—west trade in the Mediterranean world. From Romania came raw silk, silk fabrics, cotton, wheat, wine, furs, and slaves; from the Levant came spices, silk, and other luxuries; and from Europe came minerals, raw wool, woollen textiles, and timber. Much of the trade with Europe went overland, but by 1300 Venice, and Genoa, were sailing regularly to the North Sea. By the mid-fourteenth century, Venice’s commerce strategy was approaching exhaustion. While trade continued to be an important part of the Venetian economy until the fifteenth century, the extraordinary returns of earlier years had evaporated with the Moslem take-over of European settlements in the Holy Land by 1291 and of much of the Byzantine Empire by 1400; and with the increasing encroachment of Aragon (later of Spain) into the western Mediterranean from the mid-fourteenth century. As the limits of the commerce strategy were reached, Venice became involved in increasingly severe conflicts with its main commercial rival, Genoa. Thus Venice embarked upon its final commerce substrategy. In the mid—and late thirteenth century these two states were content to attack each other’s ships and colonies as they competed for the extraordinary gains of commerce, whereas in the fourteenth century this struggle became more serious, determined and, eventually, deadly. In the war with Genoa between 1350 and 1355, the Venetians employed not only mercenaries as the scale of the conflict escalated, but also a third party, the Catalans, who were keen to restrain the maritime power of the Genoese. While the war was inconclusive, it betrayed a new sense of desperation in their long competitive struggle, which reminds one of the opening round of the Peloponnesian wars between 248


Athens and Sparta as they struggled to capture the lion’s share of an exhausting strategy. In both cases there would be only one survivor. By the narrowest of margins the Genoese war of 1378–1381 ended with a victory for Venice—but only after it had repulsed an attack by Genoa that was carried in 1380 to the sandbars off Chioggia (Figure 9.1)—and with the exhaustion and collapse of Genoa. From the late fourteenth century there was room for only one Italian maritime power, and Venice was fortunate to be that one. Fortunate because of its maritime power and its geographical position (Van der Wee 1990:20). But maritime power was not enough in the face of expanding conquest societies from the east and the west. The Ottoman Empire squeezed Venice out of the eastern Mediterranean, and the Spanish did the same in the western Mediterranean. While Venice continued to trade in these areas and to earn normal profits, it lost privileged access to markets that had previously generated supernormal profits. Hence, if Venice was to continue to grow rapidly, it would need to find an alternative dynamic strategy to commerce. And it would need to find it quickly as, with the exhaustion of the commerce strategy, Venice would not be able to support the size and wealth of its metropolis for long. The conquest strategy Like Athens more than 1,800 years before, Venice in the early fifteenth century turned from commerce to conquest. The Venetians began with conquests in Dalmatia, a traditional sphere of influence, using their maritime power in which they had a comparative advantage. But if they were to make a living from conquest, sooner or later they would have to turn their attention to land warfare in which they had a comparative disadvantage. As early as the 1420s there was a faction in Venice that urged the waging of war in Lombardy for land and tribute. Responding to this mounting pressure in 1423, the retiring doge, Tommaso Mocenigo—an 80-year-old leader who had presided over the conquest of Dalmatia and Friuli (the latter is immediately north of the lagoons)—warned the nobility about the dangers of this land warfare. The old doge is said to have ‘described with statistical detail the flow through Venice each year of goods worth 10 million ducats and compared Lombardy to a fertile garden from which the Venetians, through commerce, gathered the fruits but to which war would bring devastation’ (Lane 1973:229). But these words fell on deaf ears. The ruling elite of Venice, who were not content with the normal profits of trade, wanted to restore their extraordinary earnings of old, if not through commerce then through conquest. Accordingly, they elected Francesco Foscari, leader of the warlike faction, as doge and immediately embarked upon three decades of almost continuous warfare in Lombardy to grow richer through conquest. 249


War in Italy meant the use of an army led by experienced generals, which were resources Venice did not possess. Venice’s position in 1423 was similar to that of Athens in 478 BC when it turned from the sea to extend its empire by land. And the ultimate end, if not its timing, was the same and for the same reasons. It is extremely difficult for a commerce society to switch to a conquest strategy owing to a lack of specialized resources and infrastructure. War in Italy required the use of mercenary forces commanded by mercenary captains or condottieri. An army under contract. This was a very risky way of pursuing conquest because of the frequency and secrecy with which the condottieri changed sides. It all depended upon who had promised to pay them the most. In this way the most successful mercenaries could amass fortunes comparable to those of the Medici, made through commerce and banking. But equally, if discovered plotting before they moved to the other side, condottieri were executed, as happened to Carmagnola in Venice in 1432. The mercenary army was a precarious instrument for a conquest strategy. Venice, however, was successful in its wars against Milan (and its ally Genoa) after 1425 and was able to extend its empire westward into Lombardy (Figure 9.3). But these wars were directed against other commerce societies that also employed mercenary armies. In this respect neither side had an advantage. The situation changed radically after 1494, however, when France and, later, Spain invaded Italy, because Venice then faced armies of citizen warriors that had been forged in a highly competitive conquest environment. Venice soon realized that conquest was no substitute for its old commerce strategy. Following a series of disastrous encounters in the early sixteenth century against the League of Cambrai—a union of nearly all Europe—Venice lost all of its earlier territorial gains and would have been invaded had the League not split in two. Always the opportunist, Venice allied itself with France against the Papal State and Spain and in 1516 won back most of the territory it had conquered in the previous century. Thereafter Venice used its army for defensive purposes only and in 1529 wisely decided to pursue a policy of neutrality and diplomacy in Europe. The abandonment of its conquest strategy in the west left Venice free to face the growing power of the Ottoman Turks in the east. Venice did so not by challenging the Turks on the land, but by exercising its considerable power on the seas. It attempted to control maritime trade routes, to defend colonies that could be protected from the sea, to make further conquests using its navy, and to raid Turkish coastal possessions. While Venice was back in its element and exploiting its own comparative advantage, this maritime action against the Ottoman Empire was costly and contributed little to prosperity. Even to hold its own against the Ottoman and Spanish navies in the sixteenth century, Venice’s fleets had to be four or five times as large as those a century before (Lane 1973:248), and they were largely crewed by mercenaries, conscripts from Dalmatia, Crete, and Lombardy, 250


and after 1571 even convicts. It was more a matter of survival than of material gain. Venice did have some early victories against its mighty opponent, but from the mid-sixteenth century it was on the retreat, and within a century it had been driven completely from the Aegean that it had entered some five centuries earlier. Thereafter its influence was confined to the Adriatic and Ionian Seas (Norwich 1983:449–542). After half a millennium in the Mediterranean, Venice was forced back into the nursery of its old commerce strategy. And this despite the superiority of Venetian arms and armour (Mallett and Hale 1984:400; Parker 1991:175–6). As on the mainland, Venice was not able effectively to compete with serious conquest societies even on the seas. But why did Venice fail to substitute a viable conquest strategy for its exhausted commerce strategy? Basically, Venice had a comparative advantage in commerce but not in conquest. And this comparative advantage is measured in terms of factor endowments—in both quantitative and qualitative terms— of land, labour, and capital both physical and human; not in terms of institutional structure. While institutional arrangements can and, as we have seen in this chapter, do change in the short to medium term, factor endowments are difficult, even impossible, to change, even in the long term. This can be seen in the difficulty that Venice—a small city of only 120,000— 160,000 people—had in raising a sufficient number of crew for its war galleys, or soldiers for its army, as early as the mid-fourteenth century. Its resource endowment was suitable for commerce, but not for conquest. The same had been true for Athens in the fifth century BC. Hence we must reject the argument that Venice failed in its conquest ambitions because ‘the extent and direction of development were limited by her political system… She did not develop a hierarchy of real professionals supported by a naval bureaucracy.’ This merely begs the further question: why? The answer, as we have seen, is more fundamental than institutional structure. For example, Rome, which had the resource endowment necessary for conquest, was able completely to transform its institutional structure, both political and bureaucratic, in order to meet the demands of an unfolding conquest strategy. And, as we shall see, the institutional structure of Venice was equally capable of change but it was not subjected to the continuing demands of a viable conquest strategy. Strategic exhaustion Venice experimented with the conquest strategy in the fifteenth and early sixteenth centuries, and almost came to grief. There was no chance of rediscovering its earlier role in commerce because the sixteenth century saw the emergence of north-western Europe as a dominant trading power. In the early decades of that century the Portuguese drove the Venetians from the spice market by disrupting trade between India and Egypt, thereby denying 251


Venice its traditional source of supply. Although Venice regained some of this trade in mid-century, it was forced out again by the French and Spanish after 1570 and by the Dutch after 1590. Similarly, and possibly more importantly, Venice was driven from the sugar, dyestuffs, and bullion trade by the Portuguese from 1470 (Van der Wee 1990:27–33). And increasingly during the sixteenth century, Italy was unable to compete with the North Sea economies in woollen textiles and metal manufactures, which were carried in their own ships. In fact by the mid-sixteenth century, Venetian ships no longer sailed to the North Sea, and by 1600 Dutch and English ships were sailing unchallenged throughout the Mediterranean. Hence, the uncertain profits of commerce in the fifteenth century fell even further in the sixteenth. As Lane (1973:331) explains: There were still many Venetians prepared in the sixteenth century to venture to far-away lands in search of profits… But no big fortunes were made in such ventures; returns were higher on investments nearer home… What had been an aristocracy of merchant princes was by the end of the sixteenth century largely converted into a landed nobility. Venetian nobility looked to their lands in Lombardy and Friuli, which had been gained through conquest in the fifteenth century, because there was no viable alternative. Initially they invested in improving these lands in response to rising grain prices in the 1590s with the closure of the Black Sea region and developed commercial crops of rice, wheat, and silk that were exported overseas. For the first time in its history, Venice became a net exporter of food. At the same time, in the city, new manufacturing industries such as woollen and silk textiles, lace-making, jewellery, leatherwork, arms, soap, and printing emerged and flourished under the supervision of former merchants who had traded in these commodities. This turning inwards to develop existing resources appears to have generated a steady increase in prosperity during the sixteenth and part of the seventeenth centuries. While the population of the city remained static at about 140,000 people, the mainland population increased from 1.5 to 2.0 million between 1550 and 1770. But even this attempt to use existing resources as efficiently as possible was not without its disruptions, such as the economic downturn after 1602 and particularly after 1620 (reaching its nadir in the 1630s) owing to economic crisis in both Western Europe and the Ottoman Empire. And this road was a short one, ending once Venice had caught up with best-practice technology in agriculture and industry. In effect, after 1529 Venice abandoned not only the conquest strategy but all dynamic strategies. Its attempt to extract extra income from existing resource was a static strategy. It involved the adoption of the optimal mode of production (or movement to the production possibility curve), not a change in the mode of production through an increase in resources from commerce or conquest or an improvement in best-practice technology. 252


Technological change would come only after the Industrial Revolution that was emerging in the North Sea economies—which had a different resource endowment—and after Venice had become part of a unified Italy, which widened its resource base. In 1718 Venice finally concluded its hostilities with the Ottoman Empire and was at peace with the world for the first time in its 1,000-year history. But it was a peace that foretold of death for Venice rather than of life. By the late seventeenth century the economy of Venice had stagnated, even if it had stagnated at a high level of GDP per capita. And during the eighteenth century Venice was, in the absence of any strategic alternative, forced to live off the interest on its past accumulated capital. The landed aristocracy, which no longer included any merchants, lived off its rents, while the middle-class merchants and industrialists continued to make small profits in an increasingly competitive world. The only reason that the Republic did not collapse as other empires had done in the past, owing to an overexpanded empire infrastructure that could not be maintained by a neolithic technological base, is that it had already been forced to divest itself of much of its empire. As can be seen from Figure 9.2, the area of Venetian territory had been reduced from 350,000 square kilometres at its peak in 1520 to only 140,000 square kilometres in 1715 (a reduction of 60 per cent), approximately equivalent to the size of the Republic in the mid-thirteenth century before the conquest strategy had been embarked upon. Venice did not collapse, but it was only a ghost of its former self waiting for the end. An end that came in 1797 at the hands of the last great conqueror in the Mediterranean, Napoleon Bonaparte, who, by one of history’s bitter-sweet ironies, was born in Corsica which was owned (until 1768) by Venice’s great rival Genoa. The role of dynamic strategies in the viability of human society in general and Venice in particular is not widely understood. In ‘judging’, rather than evaluating, Venice’s record in the eighteenth century, John Norwich (1983:584) writes: Is the pursuit of pleasure, which creates much that is beautiful and harms nobody, really more reprehensible than the pursuit of wealth, territory or military glory, which kills thousands and devastates and destroys wholesale? Eighty years of peace is, in itself, no small tribute to wise government and successful diplomacy. It is a period, more-over, when the average citizen seems to have been no less happy or contented than in former times. This, of course, misses the point entirely. It is not a moral issue, but an issue concerning the dynamics and survival of society. By the late seventeenth century Venetian society had lost its dynamic impulse. Its struggle for survival was over. The end was only a matter of time. Despite the wishful thinking of historians like Norwich (ibid.: 634) there was no alternative to what happened in 1797. Venice had run out of dynamic strategies. 253


THE CHANGING STRUCTURE OF VENETIAN SOCIETY Venice is probably the most successful case of the ‘pure’ commerce society. Because they had no land resources the Venetians were traders right from the beginning. In order to survive they had to trade the sea resources of fish and salt for grain and other foods from the mainland. But the Venetians were able to turn their poverty of resources into a major asset. As the inhabitants of the lagoons grew in number and maritime power, they were able to transform their primitive trading activities into a commerce strategy that generated extraordinary returns. The city of commerce From the very beginning the inhabitants of these lagoons lived in small fishing-trading communities on insignificant featureless islands just feet above the high water mark. The focal point for each of these communities was a market square, or campo, around which were built a church, boatyards and workshops, the houses of the rich and poor who harvested and traded the resources of the lagoons, and, later, the shops that supplied a growing consumer demand; and in which were built the wells that supplied the community with fresh water. The economic activities of these communities were both small scale and individualistic as there was no scope for economies of scale. Fishing and trading were conducted in owneroperated vessels, with boatmen carrying either their own goods, or the goods of others under consignment. Owing to the individualistic nature of their commerce, the small Venetian communities governed themselves through assemblies consisting of all the male inhabitants, which were responsible for electing local officials. Although the emperor attempted to administer the lagoons through his officials in Ravenna and resident military tribunes, by the early ninth century the Venetians had assumed independence under an elected doge. At the time of their independence the Venetian commune consisted of about sixty small communities, or parishes, most of which were located on their own separate islands that were connected to each other by bridges and footpaths as well as the sea (see Figure 9.4). Each parish, subject to approval and supervision by the doge, elected its own chief (Capo di contrada) from the wealthy local families, and he was responsible for raising taxes, for organizing the selection of citizens for naval service, and for local police duties (later taken over by central officials). The focus of this network of parishes was the central market place known as the Rialto, where the main inter-parish and international commerce was conducted. Later it became the centre of east-west trade between the Levant and the North Sea. The Rialto is connected by a short canal to the Piazza and Piazzetta—the central community squares in Venice—adjoining the Ducal Palace (the residence of 254

Source: Drawn from data in Norwich (1983).

Figure 9.4 Venice in 1400


the doge) and the church of San Marco (the private chapel of the doge). In turn the Piazzetta provides access to the Bacino di San Marco, where the larger ships moored and transferred their cargoes onto lighters which were then unloaded at Venice’s main dock. The close proximity of the main dock of Venice and the Ducal Palace symbolizes the equally close relationship between the commerce strategy and the political and administrative institutions of the Republic. Just as local officials were elected by parish assemblies, so the doge, in the beginning, was elected for life by acclamation of the General Assembly consisting of all the male inhabitants of the lagoons. While the doge derived his authority from the entire community, in reality his election was controlled by the leading merchant families. And before the revolution of 1032, when the ruling Orseolo dynasty was overthrown by the leading nobles, the doge was, in effect, a monarch for life with unlimited powers. Venice in the early centuries, therefore, was a dukedom rather than a commune. After the revolution the doge’s powers were constrained, in theory at least, by a council of elected advisers. In this way the Venetian nobility, which built their grand houses around the Piazza to be near the seat of government, moved a step closer to a merchant oligarchy. With the growing wealth and power of the leading noble families following the Venetian break-out into the Mediterranean in the late eleventh century, it is not surprising that they should wish to control the source of their prosperity by taking over the direction of the commerce strategy that was still largely in the hands of the doge. For most of the twelfth century the Michiel family had occupied the Ducal Palace and had regularly ignored the advice of its councils. This was the cause of much frustration and anger amongst the wealthy merchants. But their growing hostility was not converted into action until in 1172 the punitive expedition against the Byzantine emperor, led by Doge Vitale II Michiel, not only returned home empty-handed but also brought back a decimating pestilence. This finally demonstrated to the leading nobles that Venice’s dynamic strategy could not be left safely in the hands of a single family. The doge was promptly deposed and assassinated. The unfolding commerce strategy had, by the late twelfth century, reached the stage where it needed to be managed by a board of directors rather than a life-time chairman. There were too many interests involved in the commerce dynamic strategy to be satisfactorily taken into account by a single individual. This, as we have seen, contrasts with management of the conquest strategy which, owing to its singular objective, requires centralized management. From this time forward, the leading merchant families agreed to share the responsibilities of government. They decided that the doge would be elected directly from their ranks and that in future he would never be permitted to reject the advice of those they chose to represent their interests and views. To ensure this, in 1172 the wealthiest merchants established an official 256


nominating committee—to replace the more ad hoc procedures of the past— that would nominate only one person to be doge when the position fell vacant, and that this nomination would be automatically acclaimed by the General Assembly. By this act Venice became a merchant oligarchy with a republican form of government that suited a rapidly expanding commerce society. The new form of government was justified by the rapid growth of prosperity that followed Venice’s take-over of the Byzantine Empire in 1204. Unlike Doge Vitale II Michiel, Doge Enrico Dandolo, who enjoyed the confidence of the ruling elite, did not come home empty-handed after attacking the emperor! This remarkable success brought great wealth to the leading merchants, who had invested heavily in the Fourth Crusade; and to the doge. In order to prevent the doge becoming too wealthy and powerful, the nominating committee imposed increasingly restrictive conditions on his powers, which had to be accepted by each incumbent in his oath of office. The oligarchs also established committees to examine the financial affairs of the doge when he died, and if it was found that he had broken his oath of office or improperly received income, his heirs were required to pay heavy fines. We should take stock of the political system of Venice in the early to midthirteenth century, because this was the high tide of its dynamic strategy of commerce. The institutional characteristics of the political system were embodied in the doge’s oath of office, the statutes sworn to by other magistrates, and those customs defining various powers and procedures that had emerged in previous centuries. The core of this political structure remained in place until the end of the Republic, but the orientation and detailed operation changed in response to the needs of Venice’s dynamic strategies. Essentially, the main organs of government formed a pyramid of power, with the General Assembly providing the base from which were derived a series of bodies progressively declining in size but increasing in influence. The General Assembly gave rise to the Great Council, which elected the ‘Forty’ (Quarantia) and the Senate (Consilium Rogatorum), the Ducal Council and, at the peak, the doge. The General Assembly met in San Marco only when it was summoned to ratify basic legislation or to acclaim the choice of doge made by the nominating committee of leading nobles. By the early thirteenth century the Assembly had little real power and in 1423 even this was removed when the Assembly was abolished. The real power resided in the Great Council, which in the thirteenth century had 300–400 members drawn from the nobility. This body not only passed laws, but also possessed judicial functions and was responsible for electing the members of all higher councils together with all the magistrates. As the size of the Great Council made it unwieldy, higher councils were established to debate issues, form policy, and prepare legislation. These higher councils included the Forty, which was responsible for preparing legislation concerning money and finances and for acting as a court of appeal for the judicial system; and the 257


Senate of sixty men who were responsible for the operation of the Republic’s dynamic strategy of commerce—trade, maritime issues, and foreign affairs. At the pinnacle of Venetian government was the Ducal Council consisting of six men (after 1178) who held office on an annual basis but were eligible for re-election after two years. This supreme council, which met with the three heads (capi) of the Forty under the chairmanship of the doge, was responsible for governing Venice on a daily basis and for overseeing the operation of the entire legislative, executive, and judicial systems. Effective government, therefore, was in the hands of ten men from the most influential merchant families in Venice. This body, called the Signoria, was not only responsible for initiating proceedings to select a new doge, but was designed to ensure that the reigning doge took the advice of his councils. The determination of the merchant nobility to retain control of Venice’s dynamic strategy is reflected not only in the various checks and balances introduced into their political and judicial system—whereby each council and committee had limited tenure and was carefully supervised by another council or committee—but also in their refusal to hand over administration to a separate hierarchy of professional administrators. Venice did not possess a separate central bureaucracy, as existed in the Roman and Chinese Empires, and hence its dynamic strategy was not in danger of being hijacked by professional administrators. The execution of government policy—such as tax collection, ship inspection, management of government enterprises such as the mint, the Arsenal, and the central grain stores—was the responsibility of small committees of three to six nobles elected by the Great Council and supervised by the Signoria. While members of these small executive committees were not paid for their services, they usually received a proportion of any revenues raised. Quite clearly the efficiency of administration within this non-professional system would have been lower than under a permanent civil service, but it was more than offset by the benefit accruing to the merchant elite of retaining complete control of Venice’s dynamic strategy. The Venetian Republic was, in effect, a benefit society for mercantile interests. As Lane (1973:144) says of Venice’s system of government, ‘its decisions were aimed at enabling Venetians to make profits by commercial investments’. This system was liberalized during the final phase of Venice’s unfolding commerce strategy towards the end of the thirteenth century. While it did not lead to the wider form of franchise achieved at a similar stage in the commerce strategy of Athens, it did result in the admission of more families into the Great Council and, hence, into the nobility. The rapid expansion of commerce during the thirteenth century led to an increase in Venice’s population by 50 per cent from 80,000 to 120,000 (ibid.: 18), and to an increase in the wealth of a growing number of middle-class families. From 1250 those who shared in the prosperity of the commerce strategy wanted increased involvement in its direction. This demand is known as the ‘rise of 258


the people’ (il popolo) and included the ‘fat people’ (popolo grasso) who were wealthy merchants, and the ‘little people’ (popolo minuto) who were the shopkeepers and artisans. But it did not include tenant farmers, unskilled labourers, females, or slaves. This growing demand for reform, which was finally introduced in 1297, established a mechanism by which new families from the popolo grasso category could take their place on the Great Council. Nominations were made by a committee of the Great Council and had to be approved by about one-third of the members of the Council of Forty. As a result, the size of the Great Council more than doubled to over 1,100 members, representing the leading 200 families in Venice. No further attempts were made to increase the size of the Great Council because thereafter the rate of commercial expansion declined as the limits of the commerce strategy were increasingly approached after 1300 and were finally reached by the middle of the fourteenth century. After the Genoese wars some thirty new families, who had provided considerable financial assistance, were admitted, but only to replace declining merchant families. Instead of moving towards democracy as Athens had done, liberalism in Venetian politics was cut short by the attempt to substitute the new conquest strategy for the old and exhausted commerce strategy. After 1323 membership of the Great Council was limited to those families whose ancestors had held high government office, and from this time nobility was defined rigidly as hereditary membership of the Great Council. Social and political mobility in Venice ceased with the exhaustion of the commerce strategy. By the middle of the fourteenth century political power was exercised by a small group within the nobility. This occurred as effective control passed from the Great Council to the Senate which, having absorbed the Forty, consisted of about 100 men representing no more than thirty families. As we shall see later, during the fifteenth century the Senate took over responsibility for Venice’s new conquest strategy. With the exhaustion of the commerce strategy and the increasing preoccupation with war (with Genoa), there was a contraction in the number of nobles who had direct involvement or expertise in the new conquest strategy. Also, to conduct its new strategy there was a need to centralize political control as wars cannot be fought by large assemblies of decision-makers. This growing concentration of power was also associated with a change in the balance of power between the old families linked with the exhausted commerce strategy and the new families that were emerging with the profits from war. Clearly the socioeconomic and political structures of Venice were closely integrated. The leading merchant families were not only the wealthiest, they were also the social and political elite. We have seen that those who pursued and benefited most from the commerce strategy strove the hardest to gain political control of it and to exclude those—such as bureaucrats, artisans, and shopkeepers—with different economic interests who might hijack and 259


distort it. But, by distributing the gains from the commerce strategy widely, the ruling elite avoided any possibility of popular revolution. The only attempts to take over the government came from the very highest levels in the ruling elite, such as Doge Marino Falier, who failed to assume dictatorial control of Venice in 1355. Successful dynamic strategies in Venice led to successful outcomes, including successful institutions and, hence, to order and stability. By the end of the fourteenth century, the nobility consisted of about twenty to thirty great families and a further one hundred lesser families. Among the lesser families were a number that were not at all rich, because after 1323 the definition of membership was determined not by wealth but by membership of the Great Council which was determined by past wealth. For the same reason not all rich families were counted among the nobility. A growing middle class in the fourteenth century, consisting of merchants and lawyers, adopted the rank of ‘citizens’ (cittadini). From the ‘native-born’ amongst them were drawn legal practitioners, notaries, and clerks of the Ducal Chamber. They were also involved in commerce and manufacturing. Foreign-born residents had to wait for twenty-five years before they were accorded full rights of citizenship. In this respect Venice was more liberal than Athens except, possibly, in the time of Pericles. Finally, the commoners who could not achieve the rank of citizen sought mutual support and a sense of dignity through a proliferation of craft guilds. The economic institutions of Venice are particularly interesting, because this brilliant society is a rare example of the ‘pure’ commerce society. Its uniqueness arises from the absence of virtually any productive land. Unable to develop an agricultural industry, Venice was forced to extract resources from the sea and trade these for the agricultural commodities it was unable to produce for itself. Hence Venice developed markets for commodities, labour, and capital, but not for productive land. The sea was a free good, available to all who owned boats and ships. As with the Greek polis, the Venetian parish was constructed around a market-place where goods were bought and sold from the very beginning using either barter or coins minted by the Eastern Empire. The Rialto emerged as the central market-place in Venice and eventually the very centre of international trade between the North Sea and the eastern Mediterranean. With the growing commerce of Venice, and the growing role that Venice played in international trade, Doge Enrico Dandolo ordered the minting of the big silver penny, or grosso, at the very beginning of the thirteenth century. The grosso quickly became the major medium of international exchange and was used as a unit for wholesale prices, as the unit of credit in finance, as the means to pay government obligations, and as the method of paying mercenaries (Lane 1973:148–50). Even the gold ducat, first minted in 1284, was only to supplement the grosso, and the smaller silver penny (piccolo) 260


was used for retail transactions in Venice from the beginning of the thirteenth century. Funds for investment in the infrastructure of the commerce strategy were largely provided by ploughed-back profits. This involved investment in fixed assets such as ships, docks, warehouses, office buildings, and the Venetian navy. Loans supplied by wealthy individuals, family, and neighbours were employed mainly for working capital such as goods on consignment, commodity purchases, and wage-payments. Where formal contracts for loans were entered into, interest was paid. In the twelfth century, Venetian merchants ignored the directives of the church about the sin of usury and charged up to 20 per cent on even well-secured loans. When the church persuaded the Great Council to pass laws against usury, they merely defined usury as rates of interest that were over and above the usual market rate. Provided interest rates were not too high, the Justices could be relied upon not to interfere. And bills of exchange were not even questioned. In Florence at the same time, bankers accepted deposits from merchants and gave their clients ‘gifts’ of money. Moral laws in Italy, and elsewhere, did not affect the economic laws of commerce. Banking arose in response to the demand not for loans but for more efficient ways of facilitating commercial transactions in the Rialto. Bankers, who held large quantities of coin kept in the State Treasurer’s palace beside the Rialto bridge where they had their booths, provided short-term credit by making book entries rather than using money. This reduced the costs of undertaking large exchanges of goods coming into the Rialto from all over the world. These credits continued to be transferred between clients until one or more wanted settlement in cash. The reserves of coin came from the banker’s own assets and from the deposits of merchants. As the volume of credits normally exceeded these coin reserves, in times of crisis, such as 1499, bank runs and bank crashes occurred. To ensure that banks focused upon transactions rather than loans, the Venetian government imposed regulations on the banks concerning dealings in credit. It also attempted to establish a state giro-bank. While the first attempts made in 1356 and 1374 were rejected by the Senate, the Banco della Piazza was established with a monopoly over giro-banking in 1587, following a banking crisis. It was to be privately operated under a restrictive licence to be renewed every three years. A second state bank, the Banco del Giro, was established in 1619, with the additional function of financing the government debt (ibid.: 329). Through commerce, therefore, Venice became a leading financial centre in the sixteenth century and a leader in girobanking, a financial instrument adopted by other European countries in the seventeenth century. Hence, Venetian banks were giro-banks facilitating commercial transactions rather than providing the infrastructure of the commerce strategy. Why? Because the commerce strategy was self-financing, and 261


because the ruling elite did not want a new class of financiers competing with them for control of Venice’s dynamic strategy. Venetian bankers played only a subsidiary role, mainly acting as bankers to the government. In this respect they were an instrument of Venice’s dynamic strategy. As the commerce strategy was largely self-financing, institutional change in finance was not central to the Venetian dynamic, it merely reduced the costs of commercial transactions. Institutional change was driven by the commerce strategy rather than the other way around. The contrast in labour market experience between Venice and Athens is largely due to the fact that Venice had virtually no land and, hence, no agricultural industry. This land constraint, in effect, set Venetian labour free to work not only in commerce but also in industry. We have already seen that in Athens most citizen labour was employed in agriculture and the armed forces, while slaves were used in manufacturing, mining, and as domestic labour. Owing to the plentiful labour supply in Venice, slaves were employed only by wealthier families as domestic labour and generally not in manufacturing or even in war galleys. From the very beginning of settlements in the lagoons markets existed for wage labour, largely unskilled, in the city, its merchant ships, its war galleys and its manufacturing industries. Skilled labour was supplied by craftsmenmanagers in their own small businesses on land and water. Crews for both merchant ships and war galleys were, before the mid-fourteenth century, raised voluntarily in Venice, by stipulating a given wage and paying all takers an amount equivalent to three or four months wages in advance (Lane 1973:168). These contracts were closely supervised by the state because maritime activity was the life-blood of the Venetian Republic. After the midfourteenth century the labour market changed dramatically. Owing to the impact of the Black Death on labour supplies, the wars with Genoa in the 1350s and 1380s had to be fought with conscripts from Venice (on a parish basis) and mercenaries from Dalmatia and Greece. After 1500, with the escalating wars against the Turks, conscripts were also raised from Lombardy and conscription was reintroduced in Venice in 1539 (on a guild basis), and even convicts were used in the war galleys from the mid-sixteenth century. Finally, during the seventeenth century prisoners of war and captives from raids in the Aegean were used as galley slaves (ibid.: 373, 415). It was the adoption of the conquest strategy that led to a major change in labour institutions. Venice was a city not only of merchants but also of craftsmen. A large proportion of the city’s industrial workshops were operated by craftsmenmanagers, who were assisted by family members and possibly one or two apprentices. Only in the larger establishments, particularly the stateoperated Arsenal and mint, were unskilled labourers extensively employed (Davis 1991). These were the wage labourers who worked in the timber yards, the stone mason’s workshops, the foundries, and the building sites, 262


carrying heavy materials and tending the furnaces. Very few slaves were employed in these industries, and even slaves used as domestic labour ran only into the hundreds in the sixteenth century, working alongside indentured labour from Dalmatia and Albania (ibid.: 129, 332–3). The craftsmen and shopkeepers constituted a lower middle class in Venetian society. From the early centuries their activities were regulated by government rules and were supervised by the Justices. And they were kept in their place by the merchant ruling elite. As Lane (1973:312) tells us, ‘while government regulations were entirely favourable to commercial capitalism, they often restricted a capitalist’s freedom of operation in manufacturing enterprises’. Hence, while the merchants had no need of special occupational organizations—the entire state was there to serve their interest—the artisans found material comfort in scuoli and guilds. The scuoli that had emerged by the twelfth century provided mutual aid and fellowship for artisans, although not necessarily on an occupational basis. As these organizations became more occupation-specific and began to regulate their professional activities in the thirteenth century, they took on the functions of guilds. While the guilds were permitted by the state to improve the quality of work in their trades and to restrict the working of excessive hours into the night, they could not indulge in price-setting, boycotts, or political activities. They did, however, give craftsmen a public voice and they were able to present petitions to government bodies and even to go on strike. While these economic institutions responded to strategic demand, they were not central to the success of the dynamic strategy. They affected the costs of transaction on the periphery, but were not influential at the strategic centre of the dynamic society. The system of education reflected the Republic’s preoccupation with commerce. There were no primary or secondary schools in Venice, with children being educated instead in the home and the family business. If their families were wealthy, children received their initial instruction from tutors and, if not, then from their parents. They were trained in reading, writing, arithmetic, and book-keeping (one of their textbooks on mathematics explained double-entry accounting). Even when this education was extended to include literature, logic, and philosophy, the stated intent of families was that this training should make the children more skilful merchants (Lane 1973:217). When old enough, boys from merchant families accompanied their fathers or uncles to work at the Rialto or on overseas business trips; those from political families were taken on political and naval missions; and those from artisan families entered apprenticeships with their relatives. Only in the fourteenth century did the community provide public lectures on philosophy and literature at the Rialto, and in the fifteenth century on Greek literature at San Marco. Essentially the education of a merchant was a practical affair which could best be learnt not from books or institutions, but from direct experience in the family business. 263


Institutionalized education occurred only at the tertiary level, and only for the tiny minority wanting to practise law, politics, or medicine. To do so they had to attend die University of Padua, which Venice regarded as its local tertiary institution. The main faculty at Padua taught law and it was attended by those who wanted to pursue a political career as well as those who wished to practise as a lawyer. Those wanting to become diplomats or public servants trained in the classics, at first in Latin and later, from the fifteenth century, owing to the influence of humanism, in Greek. This revival of classical ideas, which was the basis of humanism, involved a rational analysis of human beings and of the natural world. Like the classical thought of ancient Greece it sought balance and order—just those conditions required for the successful pursuit of the commerce strategy. Any attempt made by individuals to provide education that was regarded as incompatible with order and balance and, hence, with commerce, was quickly suppressed. In the early fifteenth century, for example, a series of lectures on natural science and philosophy given at the Rialto by private endowments became so popular they were suppressed by the secret police of the feared Council of Ten because they were not considered suitable for young nobles (ibid.: 216). The Venetian authorities appear to have stopped short of asking the lecturer to take hemlock, probably because he agreed not to offend again. Education’s role was limited to meeting the requirements of the dynamic strategy of commerce. In this it was no different to the systems of education developed by other societies examined in this book. Religion in Venice also bore the characteristic features of the commerce strategy both in terms of its forms and role. It will come as a surprise to many that the beautiful Romanesque church of San Marco is not the cathedral of Venice. Venice’s cathedral is the church called San Pietro in Olivolo in the Castello district tucked away, symbolically, behind the Arsenal (Figure 9.4). San Marco is in fact the former private chapel of the doge of Venice—the symbolic head of the dynamic strategy of commerce. It was Saint Mark the evangelist, rather than Saint Peter, who became the patron saint of those Venetians who went out into the world and preached the gospel of commerce. And when they went out they brought back the body of the evangelist from Alexandria and laid him finally to rest in the church that bears his name, under the mercenary eye of the doge, and not in the cathedral under the other-worldly supervision of the bishop. We are told that: ‘The doge and civic officials administered the wealth attracted by veneration for the saint’s relics, and it was the power and the glory of the Venetian state which were symbolized by the Lion of Saint Mark’ (ibid.: 88). Religion in Venice was subordinated to the commerce strategy not the commerce strategy to religion. The role of public religious observance was to advance and to rationalize the commerce strategy and to reinforce strategic confidence. This is seen reflected in the Republic’s major religious festival, the Wedding of the Sea on 264


Ascension Day. A day of great celebration when the wealthy dressed in all their sumptuous finery and patronized specially built shops that crowded the Piazza. The anniversary of Christ’s ascension into heaven—symbolizing the promise of His return to reward the faithful—was celebrated in Venice by a curious ceremony in which the doge, on behalf of this merchant commune, wed the sea. During the ceremony the doge, dressed in glittering splendour, boarded a gilded galley called the bucentoro to be rowed out into the sea through the port of San Nicolò (Figure 9.4). Leading members of merchant families, together with important foreign dignitaries, all richly robed, looked on. The doge then cast a golden ring into the waves to symbolize, he said, the dominion of Venice over the seas, as a husband over his wife. The obvious implication is that on Ascension Day the Venetians were seeking not so much a reward in heaven but a reward in this world through commerce over the seas. Religious festivals and pageants, therefore, were used by the leading families of the Republic to focus publicly the attention of all Venetians on their dynamic strategy. In this they were not unique. Only the outer forms of public ritual vary between different societies. Interestingly, in the eighteenth century, after the exhaustion of the commerce strategy and the failure of the conquest strategy, the public festivals of Venice degenerated into meaningless frivolity. Once the city had lost its material, and hence spiritual, purpose, it ran after superficial pleasure. And waited for the end. Like Athens, that other great commerce society, Venice was a major centre of culture. This contrasts with the great conquest societies of Rome and Tenochtitlan which are noted more for their practical achievements than for their cultural attainments. As I argued in The Dynamic Society, commerce societies are greater patrons of the arts than conquest societies, because their dynamic strategy embodies a creative rather than a destructive spirit—a search for balance and order rather than imbalance and chaos. This is true also of technological societies. Further, the dynamic strategists in commerce societies—merchants—are accustomed to dealing with finely crafted objects of luxury, whereas those in conquest societies—warriors—deal with weapons of destruction and with death. It is no accident that the classical revival from 1330 to 1530, which we call the Renaissance, was centred in the north Italian cities that became prosperous through commerce. While Florence became internationally famous for its sculpture, Venice was renowned as a great centre of painting. The original inspiration of the Venetian school can be found in the workshops making mosaic tiles that are the source of the richly reflected light of candles in darkened Byzantine churches. This appears to mimic the reflected light from the gently undulating green waters of Venice’s many canals. Painters used this special feeling for reflected light and colour in the decoration of wooden altarpieces with tempera in a style influenced by Byzantine painting. The influence of Byzantium on Venice was pervasive, 265


which accounts for the delay in absorbing the ideas of humanism that first transformed the culture of the cities of the mainland (Norwich 1983:341; Lane 1973:209–13). But the classical revival in Venice, like that on the mainland, had its roots in the commercial subsoil, and it flourished with a brilliance fed by its Byzantine past. In response to the growing demand for internal decoration in churches and other public buildings, a number of large firms employing hundreds of apprentices emerged in Venice and its sister-city Padua. The most important of these painting factories was headed by Jacopo Bellini who, through his sons Gentile and Giovanni and his apprentice Andrea Mantegna (who married Jacopo’s daughter), had a major influence on the glory of Venetian painting. These firms of painters were established largely by the sons of artisans such as glassblowers and tinsmiths. The renaissance in Italian painting, however, was forged in Florence between 1420 and 1440 by Alberti, Brunelleschi, Donatello, and Masaccio, using the new Flemish technique of oil painting on canvas. Nevertheless, by the 1470s the Venetian school rapidly assimilated this technique into its own style. Painters of the calibre of Giovanni Bellini and his two outstanding apprentices, Giorgione and Titian, gave the Venetian school a brilliant reputation which, by the midsixteenth century when it could count Veronese and Tintoretto among its members, outshone all the rest including those of Florence and Rome (Janson and Janson 1970:344, 371). This period, like the fifth century BC for Athens, is regarded as Venice’s ‘Golden Age’. A golden age never experienced by a conquest society. This outburst of innovative painting, which is an essential part of the permanent glory of Venice, was stimulated by merchant demand for fine decorations in the public and private buildings that jostled each other along the crowded waterways of the Republic. Venetian paintings reflect the sense of balance and order that marks classical culture, and which was required by the dynamic strategists of commerce in the early modern world as well as the ancient. Venetian art reflected the dynamic principle of the maritime republic. Initially artists responded to a public demand from merchant princes for paintings that embodied these qualities, but after the 1470s this was supplemented by a growing private demand for smaller oil paintings to decorate the walls of merchant houses. Giorgione was the first to cater for this private demand, while Vittore Carpaccio found a flourishing market amongst the artisan guilds. The merchants of Venice also sought sophisticated entertainment, not in the war-games that fed the lust for conquest and plunder, but in music, dancing, plays, and opera, which provided the order, balance, and peace that they sought in their world of commerce. Later, with the decline of commerce and the emergence of conquest, the classical revival gave way to a more frivolous and melodramatic romanticism in art and music. But, of course, the ultimate Venetian work of art was the city itself, which shimmered like a beautiful 266


apparition above the translucent green lagoons. An apparition that did not long survive the exhaustion of the dynamic strategy of commerce that had shaped it so lovingly. The city of conquest As Venice turned during the early fifteenth century from commerce to conquest, its political system was transformed from a city-state to an imperial state. Yet it remained a republic despite the growing centralization of decision-making within the government and the fact that its major competitors were societies ruled by kings or sultans. With the expansion of its territorial base through conquest in Dalmatia, Friuli, and Lombardy, the city-state of commerce became a territorial state of conquest. Despite the fact that the population of the conquest territories soon outnumbered the city’s population, government continued to be exercised from the lagoons. No attempt was made to amalgamate the nobility of the conquered territories with that of Venice. Instead, local nobles were permitted to rule their own cities subject to Senate directives that were communicated and supervised by a small number of Venetian officials. This arrangement has more in common with the hegemonic empires of Athens and of the Mexica than with the territorial empire of Rome. Venice’s interest in these territories centred on the landed estates that could be used for the production of food and raw materials, the extraction of tribute, and the supplies of labour to man the war galleys. In 1500, for example, the budget of Venice shows that of the total receipts of 1.15 million ducats some 46 per cent came from the mainland cities and overseas domains, while an amount equivalent to only 25 per cent of receipts was spent on these captive territories (Lane 1973:237). That was before events overseas turned against them with expenses skyrocketing and territorial acquisitions declining as rapidly as they had previously expanded. Why did Venice retain its republican government when all its great competitors were monarchies? We are told that outside ‘observers of that century found it amazing that Venice could hold up its head among the great powers while still a republic’, and the local explanation in the sixteenth century had to do with ‘the Venetian nobles’ devotion to duty and to public welfare’, or, as Montesquieu was later to say, ‘republicanism required virtue’ (ibid.: 251–2). Lane feels more comfortable with a broader explanation that includes the ideal of virtue (even if rarely achieved in day-to-day politics), together with the quality of Venice’s naval, diplomatic, and administrative abilities. The observers of the day, both within and without Venice, were mistaken. It is not necessary to possess a monarchy to pursue the conquest strategy in its early stages. As seen in Chapter 7, the Roman Republic was able to conquer the entire Mediterranean before the scope of the exercise became so great that some form of centralized control was required. Venice 267


abandoned its experiment with the conquest strategy long before that point had been reached. And, of course, the continued existence of the Republic had nothing to do with virtue, as the ruling class were motivated by selfinterest rather than duty. They were successful while they pursued dynamic strategies based upon comparative advantage. None the less, a considerable degree of centralization of strategic control was found to be necessary and expedient during the fifteenth and sixteenth centuries. The conquest strategy does require more centralized decisionmaking and less dissent, because it is necessary to focus all the resources of the society upon a well-defined and consistent set of objectives, whereas the commerce strategy must be pursued in a more individualistic and entrepreneurial way. The first formal step towards centralization occurred in 1423 when the General Assembly was abolished and the Great Council declared that neither its various decrees nor the selection of the doge required the approval of the people. This fundamental change in the nature of Venetian polity was fully recognized in 1462 when all official references to the ‘Commune’ of Venice were removed, and all pretence about community rule was abandoned. In 1500 the Great Council consisted of 2,500 members, which was far too large to make effective decisions about the fluctuating fortunes of war. The body that had taken over this function was the Senate, which was elected by the Great Council. At this time the Senate’s numbers had increased from the original 60 to about 300 after it had absorbed the Forty and admitted all the naval commanders and ambassadors who had become the key dynamic strategists. While membership was, as always, formally limited to one year, continuity was achieved by shuttling the same men between important posts on interlocking committees. It was well recognized that this method of preventing the same small group of men from retaining power was a farce, being referred to as ‘musical chairs’. The deliberations of the Senate, however, were strongly influenced by its steering committee, which included the doge, his six Ducal Councillors, the three heads of the Forty, and a number of chief ministers (Savii Grandi) responsible for preparing the agenda, framing resolutions, and executing decisions. But the real power in Venice was held by the Signoria, or governing council, which included the first ten members of the above-mentioned Senate steering committee. In times of crisis, which became increasingly frequent as the conquest strategy unfolded, the Signoria was able to bypass the Senate by taking its proposals directly to the Council of Ten who handled urgent and secret matters. The Council of Ten, which was established in 1310 to deal with politically sensitive exiles, became increasingly useful over the intervening centuries in handling crises, in suppressing internal insurrection, and in defending the constitution. It became, in other words, the main instrument for implementing the dynamic strategy of conquest.

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As the conquest strategy emerged in Venice, its social structure solidified. The last new admissions to the Great Council took place in 1381, and when, in 1403, it was proposed by the Great Council that old families that died out be replaced by an equal number of native-born wealthy families, the proposal was rejected by the Ducal Council. The ruling elite became even more elite as war replaced commerce as Venice’s dynamic strategy. This increasingly exclusive ruling elite refused to hand over the administration of the conquest strategy to professional bureaucrats. Although permanent secretaries were elected from the ranks of the ‘citizens’ to handle the details of administration, their appointment and work were supervised by small boards of officials elected for short terms from the aristocracy of Venice. While the professional secretaries had greater expertise and knowledge of administration in their areas of experience, the boards of nobles prevented them from exercising covert control over the conquest strategy, as they had prevented it over the commerce strategy. Hence, Venice never possessed a bureaucratic empire within its strategic empire. This partly accounts for its success over some eight centuries. An inward-looking city With the exhaustion of the commerce strategy and the failure of the conquest strategy, Venice sought peace and refuge from war. In 1718, as we have seen, Venice finally concluded all hostilities with its neighbours. For the first time in its history the city of Venice began to turn its back upon the world and to look inward. It adopted the policy of isolation. It is interesting to see how this new attitude, which was the outcome of strategic bankruptcy was rationalized at the time. Paolo Paruta, a diplomat and official historian of Venice, wrote: To enjoy the sweet fruits of peace is the true purpose to which all military institutions and operations should be directed… Therefore that prince or that republic which directs all of its thoughts and attentions to wars, making one give birth to another so as to enlarge the frontiers of its empire, is not on the path that can lead to well being (felicità), which consists not in dominating many peoples but in ruling with justice and keeping its subjects in peace and tranquillity. (Lane 1973:392–3) This is not the type of statement that an official historian could have made in earlier centuries when the wellbeing of Venice critically depended on its ability to enlarge its frontier and to dominate many people. And even in the eighteenth century this was wishful thinking because the Republic’s future depended entirely on the whims of its powerful and warlike neighbours. Venice, from this time on, was engaged in a precarious holding operation.

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And this was reflected in the city’s sociopolitical organization. During the seventeenth and eighteenth centuries, Venice’s political structure became increasingly inflexible and oppressive as the landed rural elite attempted to retain their existing assets in the absence of a viable dynamic strategy. Like other elites faced with strategic bankruptcy, they turned from profit-seeking to rent-seeking. The non-noble families, who were occupied in trade and industry, earned only modest incomes and were not in a position to challenge the nobility effectively. In the absence of any new economic opportunities, Venetian political institutions could only stagnate. During the last two centuries of the Republic the power base within the nobility became even more concentrated. As there was no longer any dynamic strategy to direct and manage, the doge and his Ducal Council became increasingly involved in ceremonial activities and members of the Great Council, and even of the Senate, became increasingly apathetic about political matters as they had little to gain materially from the deliberations of government. This is very strong evidence for the argument in The Dynamic Society that political power is pursued by the majority not for its own sake but merely to gain control of the dominant dynamic strategy that determines the wealth of society. Government in Venice fell to a minority of nobles who gained some utility from possessing the vestiges of political authority. This began in the late sixteenth century with the growing power of the Ten over foreign and internal affairs. But at that time the issues of the day were still sufficiently important materially for the rest of the aristocracy to oppose their power. In 1583 the Senate reasserted its authority in the centrally important areas of finance and foreign affairs. Thereafter the Ten focused their attention on state security by establishing a special committee of three State Inquisitors. While the initial intention was to guard state secrets, they soon extended their activities to monitoring and punishing nobles who abused their privileges. Over the following century the three State Inquisitors (one Ducal Councillor and two representatives of the Ten), who controlled a network of informers and secret police, suppressed any individual or organization suspected of plotting to change the existing political structure. This role, which is characteristic of all antistrategic societies, made them much feared by the nobility and the general populace alike and led to exaggerated stories, particularly in foreign circles, about their clandestine activities. In a similar way a small group of chief ministers (Savii Grandi)—six in number— assumed control of Venice’s foreign and internal affairs. Increasingly they neglected to report the detailed basis for their decision-making to the Senate. Hence, these nine men—the Savii Grandi and the State Inquisitors—became the effective government of Venice during the eighteenth century. While there was no attempt in the closing centuries of the Republic to establish a professional bureaucracy, the permanent secretaries appointed by 270


the Ten and the Senate from the commoners (‘citizens-by-birth’) became quite powerful. This power lay in their knowledge of the departments in which they worked and in the dependency of the ruling elite on this knowledge, particularly once they had ceased to regard the outcomes as materially important. And, as normally happens in administrative structures, the secretaries attempted to build their own empires. In the absence of an effective dynamic strategy in the seventeenth and eighteenth centuries, the need for and supply of dynamic strategists declined for the reasons discussed above. Accordingly, the size of the Great Council declined from 2,500 members in 1550 to 1,660 in 1631, to 1,300 in 1775, and to only 1,090 in 1797. While the major fall was due to the plague in 1630–31, numbers failed to recover as they did after the Great Plague of the fourteenth century that occurred when Venice was still actively pursuing a dynamic strategy. And this despite the addition between 1645 and 1718 of 127 new men who were prepared to pay 100,000 ducats each for the privilege (Lane 1973:430). Apart from this handful of status seekers, the middle classes in Venice and on the mainland expressed little interest in an institution that lacked any economic purpose. When, for example, after an angry debate in the Great Council, membership was offered to forty mainland noble families in 1775, only ten showed any interest. This was not a matter of the alienation of mainland nobles as some (ibid.: 431) have suggested, but of the absence of any material incentive. The same families, and many others besides, would have been very keen to accept such an offer in earlier centuries when the material returns, or dividends, from directing Venice’s dynamic strategy were highly attractive. Government in Venice became an empty institutional form when its dynamic strategies finally collapsed. When Alexander the Great laid siege to Tyre, and when the Romans surrounded Carthage, these great commerce societies fought to the last man, woman, and child. But when Napoleon Bonaparte challenged Venice in 1797 its government gave up without a fight. This is also in marked contrast to the attitude of the Venetians in 1380 when, at the height of their commerce strategy, the Genoese landed on the sandbars of Chioggia. In 1380 the citizens of Venice were prepared to fight to the end, just as vital commerce societies always had. In 1797, however, their dynamic strategy was dead, and so was their spirit. CONCLUSIONS The course taken by institutional change in Venice over the eight centuries from AD 1000 is far from simple. As we have seen, the Venetian Republic emerged from a scattering of small local fishing/trading communities that became united under a dukedom headed by a doge theoretically elected by the populace for life but in reality inherited in perpetuity by the generations 271


of a single family. In the late twelfth century Venice came under the control of an oligopoly of merchant nobles who adopted a republican form of government that derived its authority from a General Assembly of Venetian citizens. Until the end of the thirteenth century this was a flexible structure that admitted wealthy merchants into the higher ruling councils. By the middle of the fourteenth century, power had become the prerogative of a small group of leading noble families. In the early fifteenth century the General Assembly was abolished, and in the sixteenth century the Senate assumed control of the conquest strategy. Only rarely were small new additions made to the Great Council. In the seventeenth and eighteenth centuries a mere handful of men took the government of Venice into their own hands and oppressively restricted any change to the sociopolitical structure. There is no simple linear progression here. Venice experienced four major changes in its sociopolitical institutions. The first two, involving the rise of an elected monarchy followed by the emergence of a republican oligarchy of wealthy merchants, coincided with the rise of the city-state; while the second two, involving growing oligarchy within the aristocracy followed by the hijacking of the Republic by a handful of noble families, coincided with the shift from a city-state to an imperial state. No simple model of evolving complexity or of neoclassical efficiency can explain these advances and retreats, these institutional twists and turns. An adequate explanation can be cast only in terms of the adoption, unfolding, and exhaustion of a series of very different dynamic strategies. Once again, this time in the commerce society, we can see that the major explanatory force in institutional change is the unfolding of the dominant dynamic strategy. As the commerce strategy rose and fell, the sociopolitical structure of both ancient Greece and Venice changed in predictable ways. As it rose, sociopolitical institutions became more flexible and liberal, and as it fell and was replaced by conquest, these same institutions became more inflexible and conservative. Rather than a linear progression, institutional change in the commerce society comes full circle. Also with the rise of commerce, religion and culture express the vital balance between order and chaos that is necessary in the pursuit of this dynamic strategy, whereas with the fall of commerce this balance is lost and chaos or irrelevance emerges. Clearly social evolution is a myth.

272

TECHNOLOGICAL SOCIETY

The wisdom of the ancient world embraced the apparent futility of human aspirations. It accepted that even the greatest civilizations would eventually stagnate and collapse to be born again anew in a different yet familiar form. Nothing, it was thought, could alter the eternal recurrence. The ruins of past civilizations were there for all to see. They did not even consider the possibility that a technological strategy would enable human society to break out of its endlessly repetitive pattern because, in their epoch, there was no material incentive to do so. And so the great wheel of civilisation turned slowly, but not endlessly, in historical time. The industrialized technological society is an entirely new society. It marks a great break with our ancient past. By pursuing the technological strategy once material incentives made it practicable, we have been able to escape from the eternal recurrence and have been able to achieve continuous material progress. The dynamic pathway of the modern world is linear rather than circular. Institutions, therefore, no longer re-emerge in familiar forms, but develop in entirely new and strikingly different ways. To show how and why institutions of the technological society have changed, this section will focus first on the rise and fall of the nation-state as exemplified by England, the first society successfully to adopt the technological strategy; and second on the rise and rise of the pioneering mega-state, the USA. We will see that the institutional transformation of Western civilisation over the past millennium is the outcome, not of evolutionary forces, but of the unfolding of the dynamic strategy of technological change, a dynamic that is transporting us all into the future, and will continue to do so provided we avoid making the wrong choices.

273

10 ENGLAND Albion awakening

Time was Finished! The Breath Divine breathed over Albion Beneath the Furnaces & starry Wheels and in the Immortal Tomb, And England, who is Brittannia, awoke from Death on Albion’s Bosom. (William Blake, ‘Jerusalem’ (1804–20)) The rise of Western civilization was the outcome not of the actions of a single state, but of all European states interacting closely with each other. For the past millennium Western Europe has been a highly interdependent entity owing to the fiercely competitive environment both within and without its boundaries. And while it is necessary to narrow our focus to include only one of these nation-states so as to explore the nature of institutional change in adequate detail, the wider competitive environment must be kept in view. While England/Great Britain, as the first technological society, is the subject of our focus here, wider Western European comparisons will be made wherever possible. The nature of Britain’s interaction with its neighbours makes this inescapable. England or, after 1707, Great Britain, provides a fascinating case-study. For some seven centuries this society struggled desperately with its neighbours for political survival in the pressure-cooker environment of Western Europe. In the process, England was so transformed that in the early seventeenth century it suddenly broke out of its immediate environment into all parts of the world to form the largest, most widespread empire the world has ever known. Yet within just three centuries the British Empire—on which the sun never set—rose, flourished, basked in its own glory for a brief season, and then fell. While the ancients would have been impressed by the speed and range of the rising British Empire, they would have been astounded, not by the rapidity of its fall, but by the unique fact that after the dust had settled, Great Britain was still a viable society with a standard of living higher than during the greatest days of empire. And still growing. The ancients would have been astounded because Britain had achieved what no former empire could ever hope to achieve—a life after empire. In the ancient world a collapsing empire meant a collapsing society. Why had Britain survived? Because part way through the process of empire-building 274

ENGLAND: ALBION AWAKENING

Britain, for the first time in the history of mankind, adopted the industrial technological strategy which, as far as longrun prosperity was concerned, rendered imperialism redundant. It led to the awakening of Albion. THE CHANGING FORTUNES OF ALBION To understand fully the rise and fall of the British Empire we need to go back to the very beginning of the kingdom of England in the late tenth century. England’s strategic pathway traced out three great waves between 1000 and 2000 AD, each being up to 300 years in duration. As can be seen from Figure 10.1 these great waves of GDP surged forward during the periods 1000 to 1300,1480 to 1750, and the 1760s to 2000, and were generated by three very different dynamic strategies—conquest, commerce, and technological change. In turn, each of these strategies was composed of a series of substrategies. With the exhaustion of each of these strategies, England was fortunate enough to be able to replace them, albeit after a lapse during which economic stagnation or decline was experienced, with a new dynamic strategy. Hence England was able to avoid the collapse that had occurred in all ancient societies. Yet this was due more to fortunate timing, coming as it did at the very end of the neolithic paradigm, than to superior strategic skills. These great waves provide a timescape depicting the unfolding and transformation of England’s dynamic strategies throughout the past millennium. And it is this strategic unfolding and transformation that generated the demand for institutional change to facilitate the materialistic pursuit of survival and prosperity. When analysing the impact of an unfolding dynamic strategy in a conquest or commerce society, it is possible to represent the strategic pathway with a graph showing fluctuations in territorial acquisition, because it was central to their success. In the case of a technological society, however, an index of territorial acquisition is totally inadequate. Instead, we need indexes of real GDP and real GDP per capita, because efficiency rather than territorial acquisition is central to the success of the technological strategy. In other words, technological change, broadly conceived, can generate the extraordinary profits relentlessly pursued by mankind without the need to acquire additional territory. If such territory is acquired, it is for very different reasons. The pattern of real GDP and territorial acquisition shown in Figure 10.1 suggests that the interaction between these two variables went through three main phases: 1000 to 1450,1450 to 1780, and 1780 to 2000. The first period, 1000 to 1450, was the conquest strategy phase. While there is a longrun correlation between these two measures of growth, there are shorter periods when a slump in one is compensated for by a boom in the other. As we shall see, before 1300 the difficulties of pursuing a conquest strategy in a highly competitive environment required the generation of the surpluses needed to finance wars through increases in productivity and trade. After 275

HISTORY: TECHNOLOGICAL SOCIETY

Figure 10.1 The income, prices, and empire of England, 1000–2000 Sources: Snooks (1993a:257); McEvedy (1961); Maddison (1995); and Mitchell (1988). Notes: GDP is in £m; GDP per capita in £; wheat in shillings per quarter; coal in pence per ton; area in 100,000 sq. km.

1300 the slump in the wool trade led England to focus to a greater degree upon territorial acquisition. The second period, 1450 to 1780—the commerce strategy phase—also saw a change in leadership between these two variables. Until 1600, commerce-generated increases in real GDP per capita led the increase in territorial acquisition, whereas thereafter, as Britain won its struggle against the Dutch, the roles were reversed. Only during the third period, 1780 to 2000—the technological strategy phase—was it possible to achieve a longrun inverse relationship between these two variables, demonstrating for the first time in human history that prosperity no longer depended upon territorial acquisition. From the mid-nineteenth century, although continuing to acquire territory (to defend the technological strategy), Britain granted self-government to its Europeansettled colonies. Despite granting self-government, real GDP per capita continued to increase rapidly, and when Britain completely dismantled its Empire after the Second World War, the growth rate actually accelerated. 276


And throughout the ebbing and flowing of these great waves of economic change, prices echoed the longrun fluctuations in aggregate demand or real GDP (see Figure 10.1). The most representative prices before the Industrial Revolution are wheat prices, and thereafter coal prices. Before about 1300 even wheat prices are too unreliable to be employed here.1 The so-called ‘price revolution’ of the sixteenth century was merely part of this overall pattern, which is driven by demand rather than supply (usually identified as the amount of gold and silver brought back from the New World) forces. Our evidence shows that prices had been rising rapidly for about two generations before the flow of Spanish silver reached ‘full flood’ in the 1560s, and that the supply of silver was not sufficient to satisfy demand, thereby requiring the use of gold (not previously used) as well (Goldstone 1991; Kindleberger 1993:30–1). The dynamic mechanism envisaged here, which is different to all previous explanations, is of real GDP being driven by the pursuit of a sequence of dynamic strategies by decision-makers attempting to maximize their prospects of survival and prosperity. In other words, aggregate demand in the economy at any point in time is the static outcome of strategic demand, which in turn is the dynamic outcome of the unfolding and replacement of a society’s dynamic strategies. And prices are driven in the longer term by changes in aggregate demand. In the shorter term it is possible that a sudden increase in bullion—the pursuit of which is driven by the unfolding dynamic strategy—might lead to an increase in prices but in the longer term the money supply will adjust to the requirements of strategic demand. Money is merely a facilitating institution. Establishing a nation The early kingdoms of Western Europe emerged during the late fifth and early sixth centuries as the Germanic tribes overran and settled in the former Western Roman Empire. In a highly competitive environment these kingdoms waxed and waned until, about 1000 AD, they bore some resemblance to the political entities of medieval Europe (Figure 10.2). At this time Europe’s warring kingdoms were sustained by agricultural activity and by windfall gains from sporadically successful bouts of conquest. In the centuries before 1000 AD the most successful conquest societies were the Franks in the eighth and ninth centuries, the Vikings in the late ninth and early tenth centuries, and the Saxons (the German Empire) in the tenth century. While the windfalls from conquest were substantial for the victors they were not regular. In order, therefore, to finance both defence against potential aggressors within and outside Western Europe and conquest against their neighbours, these kingdoms found it necessary to specialize according to comparative advantage so as to improve their agricultural performance and to trade their surpluses. It was this strategy that generated 277

Source: Drawn from data in McEvedy (1961).

Figure 10.2 The kingdoms of Europe, AD 998


a steady increase in technological and organizational change in Western Europe throughout the medieval period. Technological change in Western Europe, just as in Song (Sung) China at much the same time, was a subsidiary strategy required to support the dominant dynamic strategy of conquest. It is in this environment that the kingdom of England emerged. With the withdrawal of the Roman legions from Britain around 410 AD, the Romano-British population looked to Celtic regional warlords for protection against the Picts and the Scots in the north and Saxon pkates in the east. A short-term expedient that had adverse long-term consequences was the use of Anglo-Saxon mercenaries to help defend Britain. Within a generation these mercenaries had become permanent settlers, thereby encouraging further uninvited migrations from their homelands that reached large-scale proportions by 450. In this way the invaders had occupied the south-east of England by 500, the entire eastern half of the country by 550, and the whole of England by 600 (Stenton 1971: Chapter 1). So successful was this settlement that by 650 these Germanic tribes had formed themselves through incessant warring into the major kingdoms of Northumbria and Mercia, together with the minor kingdoms of Wessex, Sussex, Kent, Essex, and East Anglia (ibid.: Chapters 2–3). During the seventh, eighth and ninth centuries, the various kingdoms of England waged continuous war against each other and against the British in Cornwall and Wales, the Scots and the Picts in the north, the Danes in the east, and the Norsemen in the north-west. Only because of their organization for, and experience in, regular warfare were the Anglo-Saxons able to survive the invasions from the Danes and Norsemen. Danish attacks began on the east coast in the 780s and continued with increasing severity for the following century. During this time the Danes overwhelmed most of the Anglo-Saxon kingdoms and by 878 even pushed Alfred, king of Wessex, back as far as the Somerset marshes. But this was the turning point. From here Alfred began a successful campaign to overwhelm the Danes and later the Norsemen—a campaign continued by his son Edward (899–924) and his grandson Athelstan (924–939) who became the first king of all England (Loyn 1962:51)—a king who exercised considerable control through instruments of central government over his kingdom. Hence, the tenth century must be regarded as the beginning of the nation-state of England, rather than the sixteenth century as some institutionalists have maintained (North and Thomas 1973). Hence, right from the very beginning the English adopted the conquest strategy as the dominant means of acquiring further land, livestock, grain, wives, slaves, and treasure. Once acquired, these resources were used largely in subsistence agriculture and to finance further wars of conquest. While there is some evidence of limited external trade (including textiles) in the eighth century (Stenton 1971:221–3), it does not appear very extensive until

279


the tenth century, by which time England had become a large-scale exporter of raw wool and tin (McEvedy 1961:59). Contrasting the dynamic strategies of the Anglo-Saxons and the ancient Greeks is instructive. Both societies emerged from invasions of warring rival tribes sharing a common language and culture. Both were a seafaring people. Yet the Greeks adopted the commerce strategy, whereas the Anglo-Saxons retained their early conquest strategy. The reason is that, while both societies experienced intense internal competition, only the Anglo-Saxons (at least before the Persian invasions of Greece) faced severe and continuous danger from external societies. Life for the Anglo-Saxons, right from the very beginning, was a continuous struggle for survival, whereas in their formative years the Greeks enjoyed relative isolation. Because they adopted different strategies these two societies developed different economic and political systems. The small city-states of ancient Greece are characteristic of commerce societies, whereas larger kingdoms and empires are characteristic of conquest societies. The conquest strategy The first great wave of economic change (1000–1300) experienced by the newly formed kingdom of England was powered by the dynamic strategy of conquest. In The Dynamic Society I argued that Western Europe provided a highly competitive environment consisting of a relatively large number of kingdoms struggling for survival and prosperity against each other and against potential invaders from the south and the east. To raise the necessary funds for investment in the conquest strategy they had to shape their economies according to prevailing economic forces. Hence they specialized according to comparative advantage; they looked for ways of improving the efficiency of their farms, workshops, and institutional structures; and they traded their surpluses with each other, when not engaged in hostilities, and with merchants from eastern and southern Europe. Accordingly, some kingdoms, and regions within kingdoms, specialized in rural production, while others specialized in urban activities. England exported raw wool on a large scale and imported textiles and other manufactured commodities from Flanders and northern Italy (Lloyd 1977; Carus-Wilson 1987:626–7). Through this specialization and trade the kingdoms of Western Europe grew richer together. Throughout the Middle Ages, England and France were locked together in a deadly struggle to acquire territory at the expense of each other. While this mutual pursuit of the conquest strategy gave rise to handsome shortrun dividends for each kingdom in turn, it was not only a zero-sum game but also a costly exercise that had to be financed by heavy taxes on agriculture and trade. And while certain individuals made impressive gains, in the end it provided neither combatant with a permanent territorial advantage. But 280


there was an unintended spin-off for both countries. In order to meet the heavy demands of the English and French kings for taxes, there was a considerable, continuous, and effective pressure to increase agricultural and trading surpluses through steady improvements in technology. It is significant, therefore, that the expansion in the number of watermills and windmills between 1086 and 1300, the decline in the early fourteenth century that persisted until the early to mid-fifteenth century, and the increase in numbers from the late fifteenth century, parallel the first and second great waves in Figure 10.1 (Langdon 1991). The burden of taxes and customs duties is reflected in Figure 10.3, which shows the relationship between royal revenues in nominal terms, real GDP per capita, and territory acquired by England. Royal revenues have been left in nominal terms because the available price data (grains, livestock, wool) are, in my opinion, totally unrepresentative and unreliable before 1500 and cannot be used to deflate annual data.2 Let me add that real GDP was calculated directly and does not rely upon the use of annual price data (Snooks 1993a: Chapter 7). As we would expect prices to rise and fall with aggregate demand (real GDP), the nominal revenue series will understate both the increase in the real tax burden between 1150 and 1400, and its reduction from 1400 to 1450. All this suggests that the real tax burden rose rapidly at a time, 1300 to 1400, when real GDP per capita was falling and caught in a low-level trap. The only compensation was that for part of this period territorial acquisitions increased moderately. Added to the pressure provided by central governments was the determination of warrior aristocrats to finance their territorial expeditions on both sides of the English Channel by farming their estates and exploiting their urban interests as effectively as possible. Medieval landlords were not the conservative forces they are usually portrayed to be. It is not true that they had little interest in agricultural, manufacturing, and trading returns, or that they merely employed fortuitous surpluses for conspicuous consumption (Jones 1988). There was too much at stake to be profligate. Agriculture, industry, and trade were the ultimate financial sources for the considerable investment in the dynamic strategy of conquest throughout the Middle Ages. True, some of the profits of conquest were reinvested in further conquest, but these profits were irregular and uncertain and, when abundant, were also converted into agricultural land which was the only asset that could supply a steady stream of secure income. Increasing surpluses could be reliably obtained only through the pursuit of greater efficiency. Between the tenth and the twelfth centuries, the initiative in this life-anddeath struggle between the ruling elites of Europe lay outside England. Initially the major threat came from the Scandinavians who, despite their defeat by the Wessex dynasty, kept up a steady stream of attacks that culminated in the brief Danish rule of Canute from 1016 to 1035 and the 281


Figure 10.3 English average income and taxes, 1150–1625 Sources: Figure 10.1 and G.D.Snooks and C.Fenwick, British taxation project 1066–1700, Australian National University. Notes: Revenue is in £m; GDP per capita in £; area in 100,000 sq. km.

abortive attempt by Harold Hardrada of Norway to invade England in the north in 1066, just weeks before the landing in the south of William the Conqueror from Normandy. While Harold Godwinson defeated the Norwegians, he failed against the Normans. For the first century of its existence, therefore, the Kingdom of England was constantly under attack and continuously on a war footing. In this struggle to survive, the English warrior-landlords were keen to undertake continuous agricultural improvement involving: clearing the forests and marshes; adopting a two-field rotation system (one field always left fallow); bringing the heavy lowland soils into effective production; developing a complex system of meadowlands; and applying fertilizers in the form of animal manure, compost, marl, and lime (Loyn 1962:146–63). This agricultural system, which was a considerable improvement on that bequeathed by the Romans, owed its emergence to the demands of the conquest strategy. This was the Kingdom of England’s first major conquest substrategy. 282


For the century or so following the Conquest of 1066, the political fortunes of England were closely associated with the conquest aims of the Norman and Angevin dynasties in France. This was the second main conquest substrategy. The rich agricultural surpluses of England, largely obtained from the growing and exporting of raw wool (Lloyd 1977), were used to finance regular wars on French territory. After securing his conquest of England by 1073, William the Conqueror spent most of his time in France fighting wars against the forces of Maine in 1073, the Bretons in 1076, the Angevins in 1077–8 and 1081, and the French in 1087. It was during this last war that William, at the age of 60 years, died from injuries received in battle. Like his father, Henry I spent much of his life after 1105 fighting in France to maintain the English Empire: including the battle at Tinchebrai in 1106 to take Normandy from his older brother Robert; subsequent battles against Robert’s son William; and war with the rulers of Anjou, Flanders, and France (Clanchy 1983:45, 72). The problem with the conquest strategy is that each generation has to refight the wars of the past in order to hold on to their possessions. And it is always exacerbated if the dying monarch fails to leave the crown to a capable adult son. Henry’s only legitimate son had died as early as 1120, and when Stephen, the old king’s nephew and favourite, was crowned in 1135, he was immediately challenged by Henry I’s daughter, Matilda. Matilda had married Emperor Henry V in 1114 and, after his death, Geoffrey, Count of Anjou, in 1128. This struggle for succession led to sporadic fighting between Stephen and Matilda until 1147. Only with the death of Stephen’s son Eustace and the agreement with Matilda and Geoffrey that their son Henry would be the next king of England was the struggle for succession resolved. By the time Henry II (1154–1189) acquired the crown of England he was already master, through force of arms, of half of France. For the next half century England was the centre of an empire that included the western half of France, most of Wales, and the south-eastern half of Ireland. England was central to this empire because it supplied most of the funds (Figure 10.3) required in the struggle to hold these possessions against the French, Spanish, Scots, and Irish—and even against a conspiracy led by his four sons. Sons could be even more of a problem in abundance than in scarcity. With the death of Henry II in 1189 Richard, who had outlived his two older brothers Henry and Geoffrey, inherited his father’s empire. Richard I (1189–1199), even more than his father, used England’s resources to pursue his European interests. Of his ten-year reign Richard spent no more than ten months in England as he battled against Philip II of France, fought on behalf of the Norman kingdom of Sicily, effectively led the Third Crusade that defeated Saladin and captured Acre, and languished in the prisons of the Emperor Henry VI awaiting the payment of a huge ransom. Only the wealth of England, effectively administered by a bureaucracy under Hubert Walter, made this possible. 283


Despite this costly attempt to maintain the Angevin Empire, it began to unravel during the subsequent reign of John (1199–1216). This was due to John’s inept struggle against Philip II of France, who reclaimed former French territories and went on to conquer Anjou and Normandy in 1204. Only England’s territories in Gascony and the south-west of France under the Duchy of Aquitaine remained intact. As we shall see, the cost of attempting to regain these territories led to Magna Carta in 1215 as the king’s nobles made an effort to curb the extravagant expenditures of a king unable to provide successful leadership of the dynamic strategy of conquest. Although John’s son, Henry III (1216–1272) and grandson, Edward I (1272–1307), attempted to regain these lost territories, they failed and were even forced to recognize French overlordship of Aquitaine. Indeed, Edward I’s costly attempts not only to regain French territories but also to conquer the rest of Wales and Scotland, at a time when real GDP per capita had stagnated (Figure 10.3), led to a serious tax rebellion in 1297 (Seaman 1981:98). Future monarchs, however, were not daunted by these failures, because conquest was still the only viable dynamic strategy in a world of depressed trade after 1300 and of pestilence after 1348. It is not surprising in these circumstances that a new chapter in the conquest strategy of England began during the reign of Edward III (1327–1377)—a chapter that might have been devoted to commerce had the Black Death not intervened. This was the third conquest substrategy. Conquest was pursued in the fourteenth and fifteenth centuries to fulfil the objectives not of a transplanted ‘French’ elite, but of an aristocracy that had come to regard itself as English. The ruling elite of this period derived its income from English soil and began to use the English language that had been kept alive by the lower strata of society. By the time of Edward’s son, Richard II (1377–1399), English had re-emerged as a literary language, as in Chaucer’s Canterbury Tales, and it was habitually spoken in court circles by the time of Henry V (1413–1422). Some trace this Englishness, on the criteria of self-identification through history and laws, back at least to 1200 (Davies 1995:12). The point I wish to make is that the Hundred Years War, which waxed and waned over the 116 years between 1337 and 1453, essentially was an English war of conquest that, under Henry V, led to an English empire that included the north of France and the promise of the French crown. The Hundred Years War, which began slowly as Edward III attempted to obtain funds in England from his subjects and the wool trade (Lloyd 1977:144–92) and to raise allies in Flanders and the Rhineland, gained momentum in 1346 with a great victory over the French at Crécy, and further victories in 1347 in Brittany and Calais. Only the onslaught from a new invader, the Black Death, halted the English momentum in 1348. It was not until 1356 that Edward’s son, the Black Prince, celebrated another great victory at Poitiers which led to the capture of the French king. Following 284


further English raiding, the treaty of Brétigny in 1360 recognized Edward’s rule over south-western France and Calais, amounting to about one-third of the country. That this success was the outcome ‘of a sophisticated strategy involving political destabilization, economic attrition, and open battle’ has been well established (Rogers 1994:102). The profits from Edward’s conquest strategy were considerable. In addition to the plunder—including precious jewels, gold and silver plate—there was the huge ransom paid by the French (and Scottish) for the return of their king (equivalent to five years income for the king of England), the smaller but still substantial ransoms paid for the return of a large number of royal princes, and the income paid to feudal lords possessing vast areas of French territory (although this was largely lost again by 1375). This was a massive return for the Black Prince’s generation on England’s investment in the conquest strategy. As one observer has commented: Like their marauding Saxon, Viking and Norman forebears, the English of the fourteenth and fifteenth centuries made substantial material gains as a people out of invading and capturing other people’s lands and properties. And the great English landed aristocracy came out of it richer than ever. (Seaman 1981:167) The fact that the following generation lost it all does not detract from the rate of return enjoyed by the first generation of investors in the dynamic strategy of conquest. Before the reign of Henry V, England’s unsuccessful and costly attempts to regain lost territory in France led to a tax rebellion at home in 1381 known as the Peasants’ Revolt (as much urban as it was rural), a palace revolution by Bolingbroke (who became Henry IV, 1399–1413) against Richard II, and a number of rebellions in the early years of Henry IV’s reign. The underlying problem arose from the impact of both the continuing presence of plague and the disruption of the wool trade by the French on English real GDP per capita, which was either stagnant or falling in this period while taxes (in nominal terms) were rising (Figure 10.3). This made success in war absolutely essential. While Richard II was able to keep the French out of Flanders and to deliver booty to his aristocrats, taxes were not a major issue. But once the tide turned against the English in France, as it did between 1370 and 1413, the larger real burden of taxation became intolerable and led to rebellions—by aristocrats in the Lords, by merchants in the Commons, and by the lower classes in town and country—when the king attempted to bypass Parliament and impose a poll tax on the people (Mrs Thatcher learnt nothing from this!). This shows how important agricultural progress and commercial prosperity were to the pursuit of conquest by England. A turnaround in the fortunes of England’s conquest strategy occurred briefly under the leadership of Henry V (1413–1422). This was due to the 285


determination of Henry to recover England’s former position of wealth, to the incompetence of the French king, Charles VI, and to the conflict between Burgundy and France. By successfully reviving England’s conquest strategy, and resuming the inflow of booty, Henry hoped both to divert the aristocracy from their intriguing and to placate the merchants in the Commons. His success is legendary. In 1415 at Agincourt Henry won the greatest of all English victories on French soil, and followed this up with the conquest of Normandy between 1417 and 1419 and, with the support of the Duke of Burgundy, the capture of Paris in 1420. Had Henry not died in 1422 at the age of 35 years, just before the French king, he would have become king of both France and England. Instead there was a costly struggle between the English supporters of the infant Henry VI (1422–1461,1470–1471)—the son of Henry V and the old French king’s daughter Catherine—and the French supporters of the Dauphin. With the involvement of Joan of Arc, this struggle, in the eyes of the French, took the form of a great national crusade, which was guaranteed success once the English alliance with Burgundy broke down in 1435. In 1436 the English were driven from Paris, in 1450 they were routed at the battle of Formigny, and in 1453 the only remaining English territory in France was Calais. By this time it had finally become clear to English strategists that it was just not possible permanently to hold on to conquests in France against competent and determined opposition without the support of strong allies. The time for systematic conquest in France had passed. The English conquest strategy had been exhausted. The generation after England’s retreat from France experienced riots (including the 1450 rebellion in Kent) among the lower classes and rebellion among the aristocracy. Why? Because, at a time when the English conquest strategy had finally exhausted itself, there was no other dynamic strategy to take its place as a generator of extraordinary profits. English commerce still suffered from the prevalence of plague and the disruption of trade. The wool and cloth trade declined during the first half of the fifteenth century and did not recover again until after die 1470s (Lloyd 1977:257–87). This is why real GDP per capita stagnated during the fifteenth century and did not begin to rise again until the 1480s (Figure 10.1). None of this was helped by a king, Henry VI, who did not come of age (at 16 years) until 1437, fifteen years after he became king, who was influenced by the last forceful person to speak to him, and who was thought unlikely to produce any heirs. In these circumstances the aristocracy, who had lost their military occupation, began fighting among themselves in an effort to gain power and assert strategic leadership. This led to a decline in societal order as a number of pitched battles took place around Bath and Taunton between the Boleyns and the Courtenays, in Yorkshire between the Nevilles and the Percys, and in Suffolk between the Tailboys and anyone else of consequence. It was a time also of general lawlessness, which included brawling, assaults, 286


trespasses, and sieges of country houses (Seaman 1981:170). The so-called code of chivalry had broken down, not because the prevailing ideology had changed of its own volition, but because it was no longer needed to justify an economic system that was obsolete. Out of this growing chaos, which often marks the interval between the effective pursuit of dynamic strategies, two major factions emerged. These were the ruling Lancastrians and the disaffected Yorkists who, in 1455, met in a pitched battle at St Albans. This battle, won by the Yorkists, is regarded as the beginning of the Wars of the Roses that eventually, and surprisingly, led to the seizure of the crown from Richard III by Henry Tudor in 1485 at Bosworth. The commerce strategy The second great wave of English economic change (1480–1750) was driven by a new dynamic strategy—commerce. In the earlier growth phase, commerce had played a subsidiary role to the dominant conquest strategy, but now, in the face of an exhausted conquest strategy, it moved onto centre stage. And it is from this time that real GDP per capita began to grow rapidly, for the first time since the mid-thirteenth century (Figure 10.1). But, as was realized at the time, the commerce strategy was a zero-sum game, with the gains made by England being at the expense of other trading nations such as the Dutch (Engerman 1994b: 197). The timing of the emergence of commerce has much to do with the declining grip of pestilence, the revival of the cloth trade in Flanders under Burgundian protection, and the European break-out into the rest of the world. And in the wake of this commercial break-out came an expansion of English manufacturing, not due to technological innovation but rather to the exploitation of new markets for traditional commodities such as textiles, paper, linen, leather-working, glass, iron, alum, tobacco processing, sugar refining, shipbuilding (Coleman 1975:11–18). like the development of manufactured tradeables in Phoenicia, Greece, and Venice, this had nothing to do with an industrial revolution. In view of this growing prosperity, it was possible for an ambitious but careful monarch of England to consolidate his wealth and power by supporting the new commerce strategy without either seeking taxes from a parliament that always wanted to impose restrictions on royal actions and without recourse to the, by now, extremely risky business of war. Henry VII (1485–1509) was the king for his time. We are told that Henry himself had no taste for foreign adventure, if only because its cost would put him at the mercy of both lords and commons. like Edward IV, he put troops on to French soil and withdrew them on being offered, at the treaty of Etaples of 1492, an annual pension. (Seaman 1981:155) 287


The point is that Henry did not need to develop a taste for foreign adventure because he, and the entire Tudor dynasty, were able to maximize their wealth and power by supporting and taxing the rising gentry and by confiscating part of the wealth of the declining feudal aristocracy. Henry VII, for example, swept away his aristocratic opposition and took over their estates and, in 1486, he resumed control over many crown lands that had been disbursed by earlier monarchs. He also imposed fines on great nobles for breaches of the law, and revived earlier feudal dues. Henry was able to do this because, unlike earlier monarchs who pursued the conquest strategy, he no longer needed the feudal lords to achieve his objectives. The Tudors turned from the declining feudal aristocracy to the rising gentry. Henry VII’s council, for example, consisted not of great magnates but of new men of the knightly class. The other major Tudor monarchs, Henry VIII (1509–1547) and Elizabeth I (1558–1603), appeared to appreciate that they could rule effectively only if they had the support of the gentry who looked to the expansion of commerce, not to the aristocracy who had formerly looked to war and conquest. Accordingly they worked with the gentry in the Commons and attacked the privilege and property of the lords both lay and, under Henry VIII, ecclesiastical. Curiously the Stuarts did not appear to understand the importance of the commerce strategy and ruled only grudgingly, if at all, through the gentry. This failure to appreciate the role of commerce led to civil war and the execution of Charles I in 1649 and, after the restoration of the still uncomprehending Stuarts in 1660, to the Glorious Revolution of 1688. At last, in the form of William of Orange, the merchants of England obtained a king who was a recognized leader and defender of the commerce strategy in Europe. How did this new dynamic strategy emerge? We have seen from earlier chapters that large lakes or small enclosed seas have played an important role in nurturing the commerce strategy. In the formative years, small maritime societies begin to exploit the resources of their ‘lake’ as a basis for trade with other societies bordering this body of water or accessible to it by navigable rivers. As trade grows these small societies begin to specialize, with some providing raw materials and others using these to produce crafted goods. In the process, commercial, industrial, and maritime (including naval) skills develop, and towns that form the focus of commercial activity grow rapidly. Beyond a certain threshold these societies break out of their ‘lakes’ and, using the skills they have patiently developed, aggressively pursue the commerce strategy in the rest of the known world through the establishment of trading posts and colonies. This was the pattern of events for ancient Greece in the Aegean and for Venice at the head of the Adriatic. It was also a pattern shared by the Dutch and English from the late fifteenth to the mid-eighteenth centuries in the North Sea—the Anglo-Dutch ‘lake’. Of course the North Sea had long been a focus for local maritime 288


activities, but before the sixteenth century it was not the basis for a dominant and continuing commerce strategy. It was always subordinated to conquest. While trade in the region ceased with the departure of the last Roman ship around 422 AD, it was revived again by Frisian traders during the seventh and eighth centuries (McEvedy 1961:42). With the eclipse of the Frisians by the expanding Frankish empire in the early ninth century, the Scandinavians took over the raiding and trading activities of their predecessors, which included the exchange of fish, salt, wine, beer, metals, and wool. In turn, during the prosperous years from the eleventh to the thirteenth centuries, the North Sea trade was taken over by Flemish merchants who grew rich through commerce based on wool. They imported raw wool from England, transformed it into finished cloth, and exported it throughout the North Sea and Baltic region and along the adjoining navigable rivers. Flemish control, however, passed to the German Hanse centred on Lübeck during the fourteenth century, and at this time England’s export of raw wool declined while that of woollen cloth increased. By the late fifteenth century, North Sea trade had passed into Dutch and, later, English hands and by the sixteenth century the North Sea could be regarded as the Anglo-Dutch ‘lake’ (see Figure 10.4). The Dutch, like the Venetians in the Adriatic, began their trading activities in the region by exploiting the abundant fish of the North Sea. In the fifteenth century they caught, dried, and salted their catches from the large schools of herring and exported this substitute for fresh meat around the shores of the North Sea and along its rivers. In the early seventeenth century, one-quarter of the Dutch population depended directly or indirectly on this resource of the sea. By the sixteenth century this trade, which was centred on Amsterdam, had expanded to include the Baltic and southern Europe (Cameron 1989:119, 152). In exchange for dried fish the Dutch brought back salt from Portugal and the Bay of Biscay, together with grain, timber, flax and hemp from the Baltic. And like the Venetians the Dutch also carried the goods of other nations. At the same time the English became increasingly involved in the wool trade on which their economy depended so heavily. So important was this trade that when it declined in the second half of the sixteenth century, owing to the effects of war in Europe, the rate of growth of England’s real GDP per capita halved (Figure 10.1). London was the centre of English commerce, which was facilitated by the establishment in 1407 of a chartered body called the Merchant Adventurers. By the end of the seventeenth century, London was challenging Amsterdam as Europe’s leading financial and commercial centre (ibid.: 167–8). The development of the commerce strategy during the late fifteenth and the sixteenth centuries on and around the North Sea provided the foundation (as the first major substrategy of commerce) for the Dutch and English break-out into the rest of the world during the seventeenth century (the second commerce substrategy). In the case of England, the Tudors began challenging the Spanish 289


Figure 10.4 The Anglo-Dutch ‘lake’, AD 1600 Source: Drawn by Cartography Unit, RSPAS, Australian National University.

and Portuguese monopolies of long-distance trade: by attacking treasure convoys from the New World; by Francis Drake’s circumnavigation of the world in the years 1577–1580; and by establishing trading companies including the Muscovy Company that dealt with Russia, the Levant Company that dealt with the Middle East, the Africa Company that dealt in the slave trade, and the East India Company that dealt with the Far East. In the seventeenth century, building on these earlier commercial explorations, the English finally broke out of their North Sea environment by establishing garrisons, trading posts, and colonies throughout the world. By doing so England also built up a merchant navy that enabled it to compete with, and then to displace, the Dutch as the world’s major trading nation. This break-out 290


was not, as some have claimed, the result of the removal of technological barriers (Kuznets 1966: Chapter 1), but of a strategically driven boil-over of European competition into the rest of the world. Not surprisingly the intense commercial struggle between the English and the Dutch in the seventeenth century led to open hostilities, just like the clashes between the Venetians and Genoese in earlier centuries. Between 1650 and 1674 the Dutch and the English fought three maritime wars which, together with the English Navigation Acts of the 1650s and 1660s, led to the dominance of British naval and commercial power. Thereafter the English and Dutch found common ground, particularly after William of Orange accepted the English crown in 1688, in defending their joint commerce strategy against the French (the League of Augsburg, 1689–1697) and the Spanish (the War of the Spanish Succession, 1702–1713). These wars of commerce excluded the French from the North Sea, broke the Spanish monopoly on trade with Spanish America, provided England with bases in the Mediterranean at Gibraltar and Minorca, and established an English base at the mouth of the St Lawrence. And they left the Dutch economically exhausted, never again to be a serious threat to English commerce. This closely parallels the outcome of the conflict between Venice and Genoa. The eighteenth century was truly ‘the English century’. It was the century when the English led a united kingdom, acquired a widespread empire, and dominated the high seas. This was the period of commerce’s third substrategy. The object of eighteenth-century imperialism was to gain a monopoly of world trade in order to achieve extraordinary profits. And the evidence clearly shows that many British participants in this empire-building made remarkable fortunes (Kindleberger 1993:230–2; Marshall 1995:111– 28). The chief architect of this strategy was William Pitt the Elder who, with the assistance of Frederick the Great, used England’s wars against France from 1740 to 1748 and again from 1756 as a diversionary tactic to give England a free hand in North America and India. In this way the British captured Canada, Guadeloupe, Senegal, Quebec, Martinique, and French possessions in India. And when the Spanish joined in to assist the French in 1762, Britain also took Havana and Manila. All these acquisitions not only strengthened British maritime power around the world, but brought in fabulous profits in the form of coffee, ginger, cocoa, cotton, rum, sugar, ivory, slaves, loot, ships, and other colonial assets. With the Treaty of Paris of 1763 peace between the warring parties was negotiated: Britain kept Minorca, other West Indian islands, Florida, Canada, Louisiana east of the Mississippi, and became dominant in India; the other captured territories were given back to France and Spain. While Britain, through its ineptitude, lost much of its North American territory south of the Great Lakes in 1783, it gained further territory in Australia and New Zealand from 1788. By then the great English break-out into the oceans of the world was complete. 291


The technological strategy The third great wave of English growth, beginning in the late eighteenth century, was driven by the dynamic strategy of technological change. This renewed drive to prosperity came merely a generation after the commerce strategy had exhausted itself. Between the 1750s and the 1780s the English economy stagnated, and the lower strata of society was plunged into poverty, as shown by the increase in poor relief from about 1 per cent of GDP in 1748 to 2 per cent by 1800 (Lindert 1994:383). As argued in The Dynamic Society, the final burst of commercial expansion brought England not only to the limit of the commerce strategy but also to the limit of the neolithic technological paradigm. Evidence for the latter can be found in the wellknown slow-down and gradualism of technological change after 1500 (Mokyr 1990:57–8), the exhaustion of organic materials and fuels from the seventeenth century (Wrigley 1994:32–8), the shortage of fodder for horses that provided the major source of power and transport, and the scarcity of natural chemicals for a modern urban society (Seaman 1981:352–5). The response of dynamic strategists in Britain to the changing factor endowments and relative resource prices from the seventeenth century was initially the substitution of inorganic for organic materials and fuels, and ultimately, from the late eighteenth century, the introduction of a new technology to utilize these new resources effectively. The outcome was the modern technological paradigm shift known as the Industrial Revolution. What was the nature of the Industrial Revolution? The usual scholarly response is either to emphasize the ‘industrial’ in Industrial Revolution, or to agonize over whether the rate of change that took place from 1780 to 1830 was sufficiently rapid to be called ‘revolutionary’ (Landes 1993). There is no need to discuss these matters in detail as they have been dealt with adequately elsewhere (Snooks 1994b; 1996). What does need to be said is that the usual treatment is misconceived. First, the emphasis on ‘industrial’ change misses the real point. The essence of the Industrial Revolution is that it involved a technological paradigm shift, the first since the neolithic technological paradigm shift some ten thousand years earlier (Snooks 1996:402–5). And the chief characteristic of this paradigm shift is that the potential for further economic growth is dramatically extended by increasing the productive capacity of natural resources. It was a potential that could be exploited through the continued pursuit of the dynamic strategy of technological change. This is what is revolutionary about the Industrial Revolution. Taking this approach we avoid the temptation to identify earlier periods of manufacturing development in the sixteenth and seventeenth centuries as phases of so-called ‘proto-industrialization’, often regarded as an urban anticipation of the Industrial Revolution (Nef 1950:13). This type of spotting 292


game, of course, can be extended back into the past indefinitely. As we have seen in the chapters above, there have been many earlier periods of impressive manufacturing and urban development in human civilization, usually associated with the commerce strategy. Our examples include ancient Greek city-states, particularly Athens, from 750 BC; Venice from the early thirteenth century; Flanders from the thirteenth to the early sixteenth century; and London and Amsterdam during the sixteenth century. And in a number of these societies there were large-scale government factories usually associated with the production of strategic materials such as ships and weapons. In all these cases objects were manufactured, using traditional techniques, as inputs of the commerce strategy. This took place within the neolithic paradigm and had nothing to do with the technological strategy. In other words, there was no danger that these earlier periods of ‘commercial industrialization’ would lead to an industrial revolution. They were terminated when the commerce strategy in each of these societies was exhausted. The second issue, which I have raised elsewhere (Snooks 1994c), is whether the rate of growth achieved during the Industrial Revolution has any bearing on its revolutionary character. As the essence of the Industrial Revolution is the technological paradigm shift, the answer is no. But there is a dimension to the growth-rate issue that has been overlooked. When deciding whether the growth rate during the British Industrial Revolution was fast or slow, we must look forwards in history rather than backwards. In other words, we should compare the rate of growth achieved in Britain during the Industrial Revolution (0.4 to 0.5 per cent per annum) not with the present (1.5 per cent per annum), thereby pronouncing it slow, but with growth during the earlier Neolithic and Palaeolithic Revolutions. As I demonstrate in The Dynamic Society, the speed with which technological paradigm shifts occur in human society is increasing exponentially, and the time period between them is declining in a geometric fashion. Hence, when looking forward in time it is clear that the Industrial Revolution occurred at far greater speed and was accomplished in much less time than the Neolithic Revolution, which in turn was a much more expeditious affair than the Palaeolithic Revolution. But let us return to the past. As far as Britain’s dynamic strategists were concerned, the essence of the Industrial Revolution was that it devised cheaper ways (both technically and institutionally) of producing old products, such as cotton textiles, and new products such as consumer durables, and cheaper ways of transporting those products to markets at home (by canals and then railways) and abroad (by steam-driven steel ships) (Floud and McCloskey 1994: I). By providing ways of achieving favoured access to resources and markets other than the exhausted traditional ways of force, diplomacy, and physical proximity, the British Industrial Revolution imparted a new impetus to commercial expansion. But this time commercial expansion was the outcome of the technological rather than the commerce strategy. Through the 293


Industrial Revolution, Britain for the first time became the commercial and maritime master of the world. Britannia really did rule the waves during the half-century following the Industrial Revolution. And even as late as the period 1876 to 1880, when other European countries were attempting to overhaul Britain, it still exported 38 per cent of the world’s trade in manufactured goods and imported 30 per cent of the world’s trade in primary products (Kenwood and Lougheed 1983:98). It is no exaggeration to say, therefore, that during the middle decades of the nineteenth century Britain was indeed the ‘workshop of the world’. The technological strategy adopted immediately after the exhaustion of the commerce strategy made her so. This new phase of maritime dominance, based upon a clear superiority in naval technology, led inevitably to the expansion of the former British commerce empire. But as a by-product rather than as a central element of the technological strategy. The unique feature of the technology strategy is that it can generate a rapid increase in income and wealth without the need, as under the conquest and commerce strategies, to acquire additional territory and resources. At a time when much of the world is pursuing the technological strategy there will be little scope or need for colonization, but when one country or a small group of countries has a monopoly (oligopoly) over the technological strategy, it (they) will also have the capacity to impose itself (themselves) on the rest of the world if this adds to its (their) material profits. Even if territorial expansion is not profitable in itself, technologically advanced societies may pursue imperialism in order to defend their technological strategy from competitors in their home environment. Britain massively extended its dependent empire between 1875 and 1914, at a time when it was shedding its earlier commerce empire, by taking a leading part in the European grab for territory in Africa and East Asia, by occupying Egypt in 1882, and by a growing presence in the Middle East as the power of Turkey declined. The net effect was that the total area of the British Empire increased to a peak in the 1850s and then declined just as rapidly (Figure 10.1). But not as rapidly as would have been the case had Britain not experienced the First Industrial Revolution. Also, this new imperialism was of a very different kind to that of the seventeenth and eighteenth centuries. The old imperialism was driven by the commerce strategists in government who regarded colonization as essential to the generation of extraordinary profits in commerce, whereas the new imperialism was driven by the technological strategists who saw colonization as useful in the defence of extraordinary profits that were generated through heavy fixed investment in innovation. Territorial acquisition after the Industrial Revolution was no longer a central part of the dominant dynamic strategy. Accordingly, colonization was of less urgent concern to the British government in the nineteenth century. The best way to defend the technological strategy of Britain in the late nineteenth century was to extend the territorial balance of power concept in 294


Europe to the rest of the world. Not to be involved in the European grab for territory throughout the world may have changed the power balance in Europe to Britain’s disadvantage. This argument is not challenged by the fact that some of the prime movers for extension of the Empire were private individuals, such as Cecil Rhodes in southern Africa, because they were able to consolidate only as much territory as the British government, wanting to defend the technological strategy, was prepared to administer. With the declining importance of European imperialism after the turn of the twentieth century, owing to the rise of the mega-states of the USA and USSR and to the development of collective security after the First World War, the defensive need for colonies became less urgent at a time when the costs of their administration were rising. The British Dominions of Canada, Australia, New Zealand, and South Africa had already achieved responsible government. India, which after 1858 was governed in part by the British Secretary of State for India and in part by a number of Indian princes subject to the supervision of the British ‘Resident’, had long been regarded as capable of responsible government. And after the First World War the British began the process to achieve that end—limited self-government was achieved in 1935 and independence in 1947. The British even intended to grant responsible government to the dependent empire—which included the non-European societies of Africa, the Caribbean, and those possessions governed from Westminster that were scattered throughout the oceans of the world, including St Helena, Malta, Cyprus, Aden, Singapore, and Hong Kong—when they finally demanded it and were considered suitably responsible (Seaman 1981:528). But this was thought to be many generations in the future. Even the Middle East—including Egypt, Palestine, Transjordan, and Iraq—was regarded as a candidate for independence despite its strategic importance (militarily and as a source of oil), provided it remained on friendly terms with Britain. The British government was able to hold this ‘enlightened’ attitude only because the technological strategy did not depend on territorial acquisition and control. Under the earlier commerce strategy, it was not an option. As it turned out, the British dismantled their empire more rapidly than most would have predicted. With the unfolding of the twentieth century not only did the strategic benefits of empire decline but also its costs rose, particularly after the Second World War. These excessive costs arose from Britain’s unsuccessful attempts to contain the rise of nationalism in its empire. The British government finally acknowledged in the 1940s and 1950s that the costs of empire exceeded the benefits to a modern technological society, particularly after the development of the atomic bomb. India and Burma were the first to go in 1947 and were followed, after the Suez crisis of 1956, by the systematic dismantlement of the rest of the empire (Figure 10.1). Recently Cain and Hopkins (1993) have claimed that British imperialism 295


after 1850 was driven by vested interests in both the ‘service’ sector and the bureaucracy. They base this hypothesis on the size of the service sector in the British economy (33.1 per cent), on the substantive proportion of ‘gentlemanly capitalists’ (finance and commerce) among the non-landed wealthy (42–9 per cent) or their location in London (36–7 per cent) around the turn of the twentieth century, on the supposed influence of the gentlemanly capitalists on bureaucrats and government, and on the role of services and capital exports in British trade (ibid.: Chapters 3–7). What they fail to realize is that the fortunes of commerce and finance were dependent not upon territorial acquisition and control but upon technological innovation (in its widest sense). In other words, their role in the wider world of foreign investment and trade did not depend fundamentally upon the existence of a formal empire, but upon Britain’s ability to penetrate overseas markets through innovation. British foreign investment and trade in services as well as commodities throughout the world would not have been significantly less even in the absence of a formal empire, as its financial and service involvement in the USA and South America (and the self-governing ‘Dominions’) at the turn of the twentieth century provides witness (Edelstein 1994a: 174–80). In fact, in the late nineteenth century, of a total investment of £5 billion, about 70 per cent went overseas, and of this only one-third went to the Empire and only 10 per cent to its dependent colonies (Davis and Huttenback 1986:308). The very foundations for British foreign investment and trade depended on the saving and access to markets generated by the new technological strategy. This is why the City of London did not suddenly collapse after the post-Second World War dismantlement of Britain’s Empire, and why Britain from the early years of the twentieth century had always intended to grant self-government to its overseas possessions. It is essential to realize that the commercial interests in Britain after 1850 were very different to those before the Industrial Revolution. As the seventeenth—and eighteenth-century commercial interests relied heavily upon imperialism to generate extraordinary profits, they faced a bleak future after the commerce strategy had exhausted itself by the 1750s. At this time they held on desperately to the Empire—symbol of their successes in the past. But at the end of the eighteenth century the Empire was a hollow symbol, and had it not been for the unanticipated emergence of the technological strategy, the British Empire would have collapsed. In this event, London would have suffered a substantial decline, and many of its men of trade and finance would have been forced out of business. With the new technological strategy of the Industrial Revolution, Britain’s role as a maritime and commercial nation depended on innovation and not territorial acquisition. The new men of commerce, therefore, became dependent upon the new technological, and not the old commerce, strategy. This point is missed not only by Cain and Hopkins but other scholars (for example, Rubinstein 1993). And when the technological strategists, in both the middle and 296


working classes, attempted in the early nineteenth century to gain political control of this new strategy, they were generally supported by the new men of commerce. Hence, the reason the struggle between the old and new strategists did not lead to revolution or civil war was that the new technological strategy provided new commercial opportunities for the first time since the exhaustion of the commerce strategy. It is not valid, therefore, to use data on the size of services in the economy or the relative importance of their agents, as evidence that this was the driving force behind British imperialism after 1850. The Cain and Hopkins (1993) thesis may appear to draw some support from Davis and Huttenback (1986:301–18) who attempt to challenge the more optimistic view of the economic benefits of empire held by those like Edelstein (1982). On the basis of detailed statistical estimates Davis and Huttenback claim that: • while the average rate of return on investment in the Empire was greater than that in either the UK or the foreign sector before 1885, it was lower thereafter; • the real beneficiaries of the British Empire were residents in the Dominions, who received substantial subsidies for defence and nondefence activities; • British defence costs per capita were twice those of France and Germany as Britain had two defence establishments, one for the home islands and a second one for the Empire (which, as we saw in Chapter 9, was also true of Venice)—this has been challenged (Offer 1993:222–32); • Britain subsidized the colonies to prevent the type of rebellion that occurred in America in the 1770s; • in Britain those who gained most from the Empire (through profitable investment) were members of the upper class (peers, gentlemen, and financiers) and that those who paid most in taxes were members of the middle class; • in Westminster there was no correlation between the way Members of Parliament voted on imperial issues and their own apparent economic self-interest. In addition to recent challenges (Offer 1993) to the underlying quantitative work of Davis and Huttenback, these findings and conclusions give rise to a number of strange implications. First, it would seem that after 1885 Britain was acting in an economically irrational way by subsidizing the living standards of the Dominions. As we shall see, the argument that economic policy was determined by an upper class concerned about the possibility of a rebellion in the colonies—just as the Americans rebelled when taxes were marginally increased there after 1763—does not bear scrutiny. In Chapter 11 it is shown that the American rebellion was not the outcome of a tax increase, but of the attempt by the British to prevent the colonialists 297


following their own dynamic strategy of territorial expansion. If it was true that the upper classes were oppressing the middle classes in Britain in this way, the only rebellion they had to fear was one much closer to home. But, in addition, we are told that they did not vote according to their own selfinterest on imperial matters—that they too were economically irrational. This brings us to the second implication: that the small upper class was able to hoodwink the larger and, collectively, more wealthy and powerful middle class into carrying the burden of empire for the benefit of an obsolete aristocratic ‘elite’. What this implies is that the middle class was either strangely altruistic, politically powerless, or stupid. None of these alternatives is true. The middle class not only invested in the technological strategy (which is the reason they did not invest directly in the Empire), but, as we shall see later in the chapter, they also controlled this strategy through their representatives in Parliament. They had fought bitterly during the first half of the nineteenth century to gain strategic control. By the 1880s the old upper class (that is, excluding those who had earned their fortunes through industrialization), who were members of the former commercial strategic group, had lost control of the dominant dynamic strategy. The real explanation is that the middle classes were recipients of benefits that Davis and Huttenback do not take into account. Like all neoclassical benefit—cost studies theirs includes only the static benefits. The dynamic benefits of empire—the security of Britain’s technological strategy which accrued to the middle classes—are excluded entirely. If, in the process of defending the technological strategy, the upper classes in Britain and the residents of the Dominions also made some gains, then this could only strengthen the technological strategy. We can see this in the way the Empire came to Britain’s aid when their dynamic strategy was under attack during the First and Second World Wars, and when, in the face of fierce economic competition, Britain called in its colonial debts by attempting to create a protected Empire economy. This dynamic-strategy interpretation receives support from the empire-defence argument of Avner Offer (1993:234–6). And by allowing the old commercial strategists a slice of the action, the new industrial strategists were able to reduce the costs of strategic struggle, which could have led to civil war as it did in the USA in the 1860s. Recently Michael Edelstein (1994b) has reconsidered the static benefits and costs to the British from their empire between 1870 and 1913. He approaches the task from a different perspective to that of Davis and Huttenback, and he reworks some of their estimates. Edelstein views the net returns from empire—at two points in time, 1870 and 1913—as the difference between what Britain did gain materially and what it would have gained by trading with and investing in the same countries without exercising any hegemony over them. These net returns are then expressed as a proportion of GNP and compared with the contribution made by technological change. This contrasts with the rate-of-return approach 298


employed by Davis and Huttenback, and by Edelstein (1982) in his earlier work. This new perspective of Edelstein’s is probably a response to the attack on his earlier work by Davis and Huttenback. Two main conclusions emerge from this imaginative but rather rough benefit—cost calculation. First, Edelstein claims that the net contribution of empire was 50–100 per cent greater in 1913 than in 1870; and second, he concludes that the relative size of these gains was not very large, ranging from 1 to 4 per cent of GNP in 1870 and from 2 to 6 per cent of GNP in 1913 (Edelstein 1994b:205). By way of comparison, railways generated a return of 10 per cent of GNP. As with all static benefit-cost calculations, the measured returns from largescale human endeavours are not very impressive, and once again the real dynamic benefits that drive these endeavours have been ignored. At the society level this dynamic benefit encompassed the continuous growth of real GDP per capita owing to the successful defence of the technological strategy. Once we take a dynamic rather than a static approach to this issue all these anomalies disappear. The middle classes were prepared to bear the cost of empire because, in the competitive world of European imperialism, it was seen as the best way to protect their heavy investment in the technological strategy. And they were prepared to pay more in per capita terms than either France or Germany (at least from the late 1890s), because they realized (as Venice before them) that it could be necessary to take on more than one adversary at the same time. It is for the same reason that Members of Parliament were willing to vote for expenditure on the Empire despite the fact that the burden would fall upon themselves and their electoral supporters. And it explains why such a large-scale endeavour was pursued even though the net returns were less than modest. The dynamic-strategy model, therefore, provides a more persuasive and consistent interpretation of both the old and new imperialism of Britain than any of the conventional explanations. The old imperialism was an integral part of the dominant dynamic strategy of commerce, whereas the new imperialism was a way of defending the heavy fixed investment of the technological strategy—an extension of the balance of power concept of Europe at the same time. This model predicts that, while the dismantlement of an empire based on the commerce strategy leads to stagnation and collapse of the metropolis, the dismantlement of an empire based on the technological strategy will not, other things being constant, adversely affect economic prosperity and performance. In fact, rather than economic decline and collapse, Britain experienced rates of growth of real GDP per capita of 2.5 per cent per annum between 1950 and 1973 and 1.4 per cent per annum between 1973 and 1992. This exceeded even those growth rates achieved during the earlier eras of industrial (1.4 per cent per annum during the period 1830–1870) and commercial (1.6 per cent per annum during the period 1492–1561) expansion (Snooks 1993a:247–8; Maddison 1995:62). And despite considerable pessimism by the experts (Feinstein 1994; Supple 1994), 299


there is no reason to expect Britain to fare any worse than its European partners in the future. Clearly the new imperialism had a defensive rather than an income-generating purpose. Finally we need to consider the related issue of the alleged failure of Victorian Britain. The more rapid growth achieved by Britain between 1950 and 1973 in comparison with the period 1870 to 1913 has led many economists, and even some economic historians, to brand the earlier period as one of Victorian/Edwardian entrepreneurial failure (Aldcroft 1964; Levine 1967; Landes 1969). This judgement appears to gain support from the relatively faster growth in this period of Britain’s major competitors, Germany and the USA. But the hypothesis has no real basis. First, it is hardly surprising that Britain’s competitors should achieve higher rates of growth during a period of technological catch-up, or that they would eventually surpass Britain in terms of total production or trade, because of their larger resource bases and populations. Second, the rate of growth actually achieved by Britain in the period 1870 to 1913 of 1.0 per cent per annum stands up rather well when compared with British performance in periods other than the atypical golden era of the 1950s and 1960s. Only three periods of comparable length—a total of 150 years out of 900—have experienced higher rates of growth: 1492 to 1561, 1830 to 1870, and 1950 to 1992. And the difference is not all that great. In a wider historical perspective, a growth rate of 1.0 per cent per annum for about two generations is a respectable achievement and is definitely not an indicator of entrepreneurial (or strategic) failure. Modern economists have been misled into thinking that the golden era is a sensible benchmark for comparisons with the past and the future. Third, it must be taken into account that during the period 1870 to 1913 Britain was involved in the new imperialism which was directed not at increasing the gains of commerce as under the old imperialism but rather at defending the dynamic strategy of technological change. As the major benefit of the new imperialism was a form of insurance against future loss, the cost would have reduced the rate of growth of real GDP per capita. We have akeady seen that the rate of return on investment in the new empire was much lower than that on investment in the technological strategy in Britain. Also, the export of capital, only one-third of which went to the Empire as we have seen, kept the supply price of capital higher in Britain than it would have been (Mathews et al 1982:342). All this provides good evidence for my interpretation. We can agree, therefore, with those scholars who argue that there was no failure of Victorian/ Edwardian entrepreneurship (Wilson 1965; McCloskey and Sandberg 1971; Chaloner 1983–84; Rubinstein 1993; Pollard 1994; Magee 1997). But the main issue, overlooked by all commentators on British economic performance, is that growth rates change as dynamic strategies emerge, unfold, become exhausted, and are sometimes replaced by new strategies. 300


Also, within these strategies there will be separate phases of growth associated with a series of substrategies. We have seen how growth rates increased after the 1480s as the commerce strategy emerged, reached a peak in the sixteenth century, slowed during the seventeenth, and finally stagnated in the mid-eighteenth century. Only to rise again with the Industrial Revolution, reach a peak in the mid-nineteenth century, slow during the period 1870 to 1913 (but particularly the last decade or so), maintain that level until 1950, accelerate to unprecedented levels until 1973, and then slow again to a level that could be regarded as the longrun rate for the technological strategy. I will argue that the slower growth of late Victorian Britain can be explained largely as the inevitable outcome of the transition between the first and second technological substrategies. The pattern of growth rates exhibited by the unfolding of the technological strategy reflects the outcome of a number of different substrategies employed by British entrepreneurs. The initial substrategy, which gave rise to the First Industrial Revolution and its aftermath, was to focus on the production and export of goods in which England had long had a comparative advantage—textiles, coal, and iron—together with those industrial commodities that were required to produce and distribute these staples—the steam engine for factories and transport, machinery, simple engineered objects, and chemicals. This rough and ready tactic turned out to be highly successful in a non-industrialized world, supporting an accelerating growth rate to the mid-nineteenth century. During this first phase of expansion, Britain’s growth rate exceeded the average for Western Europe by one-third, and was similar to that achieved by the USA (Maddison 1995:62). As other European nations imitated and improved upon Britain’s technological success, generally behind tariff barriers, this first-generation substrategy became progressively less effective until it largely exhausted itself in the early twentieth century. It could be perpetuated only in the interwar period by calling on the support of the Empire—through preferential tariffs for British goods and through the attempt to develop an Empire economy—after generations of colonial subsidization. And then without great success. For Britain the 1920s (with unemployment rates up to 11 per cent) were more difficult to bear than the Great Depression of the 1930s (with unemployment up to 16 per cent), because the former was the result of the exhaustion of its own initial technological substrategy, whereas the latter was imported from America. From 1870 to 1913 Britain’s growth rate fell to three-quarters of the average for Western Europe and just over half that of the USA—a set of relativities that persisted until 1950. Yet during the interwar period a growing number of entrepreneurs began imitating the practices employed in Germany and the USA—the gradual adoption of a second generation of industries such as chemicals, electrical engineering, consumer durables (radio, motor car), and household appliances; the adoption of large-scale operations through vertical and 301


horizontal integration; and the use of the more scientific management practices pioneered in America. Why was the transformation delayed until after the First World War? My answer is that it was due more to the costs of making the transition, owing to the accumulated investment in the initial industrial substrategy and to a different set of factor endowments, than to deficiencies in entrepreneurial abilities. In any case, this transition to the second-generation substrategy, which eventually superseded the backwardlooking empire-protection approach, made it possible for Britain to participate fully in the boom of the ‘golden age’ following the Second World War. The ‘golden age’—when British growth rates rose to unprecedented historical levels and finally re-achieved parity with the USA—was in part a reaction to the sudden release from decades of restriction, in the form of two world wars and a major depression. It was similar to the sixteenth century when the vice-like grip of a century of pestilence and ineffective warring was suddenly released. In both cases the shortrun effect of this release probably was to double the normal growth rate. The most appropriate growth-rate benchmark for Britain during the 1950s and 1960s is the USA rather than Western Europe. Both Britain and the USA were mature industrial nations and neither had experienced the destruction of invasion during the Second World War. The rest of Europe as a whole could be expected to grow more rapidly than the UK and the USA, because it was less advanced in the 1930s and because much of its older industrial and institution structure was destroyed during the war (Feinstein 1994:115–22). Not only could Europe take advantage of the stock of existing technology, but its adoption of this technology would not be impeded by vested interests. Clearly the deceleration of growth in Britain since 1973 is not unique. With the exception of the newly industrializing Asian nations, all other groups—Western Europe, Southern Europe, Eastern Europe, the regions of recent European settlement, Latin America, and Africa—experienced a marked slow-down in growth rates. In my judgement the growth rate achieved during this period in the advanced nations approximates the normal longrun rate that can be generated from the competitive pursuit of the technological strategy. Despite this there is a strange pessimism among the British that has more to do with the nation’s rapid transition from the world’s leading power at the beginning of the twentieth century to a secondrate power at its close (Supple 1994:343–6). It is a perception that has probably eased Britain’s entry into the European Union: if the nation cannot hope to regain its earlier supremacy, at least it can be part of one of the world’s most powerful mega-states.

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THE CHANGING STRUCTURE OF SOCIETY A conquest society English society emerged from war and was shaped by conquest. Tribes from north-western Germany gradually established themselves throughout England from the mid-fifth century. When they drove out the RomanoBritish settlers the Anglo-Saxons did not occupy the Celtic hill-top farms, but established their villages on the heavy soils of the valleys. They rejected the existing stone farmhouses and buildings and constructed simple timber or wattle-and-daub dwellings with thatched roofs. And, apart from London, Canterbury, Lincoln, and York, they avoided existing towns and built new ones to suit their requirements. The vill, or village, was the main feature of early Anglo-Saxon settlements, as it was to be until the Industrial Revolution some thirteen hundred years later. Simple one-roomed timber and thatch dwellings that reeked of ‘miserable squalor’ crowded around the tribal chief’s slightly larger multi-roomed house or royal hall (Loyn 1962:42–3). And surrounding the vill were the open fields—a system probably introduced by the Anglo-Saxons—containing the scattered strips that were worked by the village inhabitants on a two-field basis whereby one field was left fallow to replenish nutrients extracted in the previous year. Grazing rights were held in common. The economic system The open-field system, which provided a form of insurance for families against local variations in climate and soils, was widely adopted throughout England south of and including the East Riding of Yorkshire and the Vale of York (McCloskey 1976; Loyn 1962:161). While free peasant-warrior families were responsible for farming their own strips of land in the open fields, this system required a considerable degree of community cooperation to plough the land with the jointly owned eight-oxen ploughteam, to harvest and thresh the crops, and to graze the livestock. Their objective was selfsufficiency. It was a system purpose-built for the tribal warfare and colonization that prevailed in the early centuries of Anglo-Saxon settlement. This early economic system based on communities of free peasants began to change during the seventh century as tribal leaders who were particularly successful in war grew in economic and, hence, political power. These warlords, some of whom established themselves as kings over sizeable territories, began to impose their will upon free communities. And warriorpeasants began to look to these lords not only for protection but also as the ultimate source of economic resources and wellbeing. This development accelerated with the Scandinavian invasions from the ninth century. Henry Loyn (ibid.: 196) tells us: ‘In an age of peril it was indeed natural for men to 303


seek lords, and lords to seek men.’ Through this process of commendation, the ability of the peasants to dispose of their land and to go where they pleased was restricted. And as the Scandinavians were driven back, the economic power of these lords and their priestly advisers increased, so that when the danger of invasion had passed, this elite continued to exercise economic, political, and ecclesiastical power over the peasantry. By exercising tight control over the scarce resource of labour, and exploiting its productivity, warrior-lords were able to maximize the surpluses needed to finance their conquest strategy. In the tenth century this change in economic reality was given legal support by making it obligatory that every man should have a lord (ibid.: 195–8). The manorial system based upon dependent agriculture, therefore, was firmly established before the Norman Conquest of 1066. What the Normans did was to tighten up the hierarchical system that we know as feudalism. By right of conquest the king asserted property rights over all the land of England which he in turn granted to his tenants-in-chief, both lay and ecclesiastical, ranging from great lords to free peasants, in return for specified military services. In their turn the larger tenants-in-chief granted part of their lands to sub-tenants in exchange for military support, and so on down to lords of individual manors. At the manorial level the lord could either lease the whole property, including the peasantry, or could work the demesne (or home farm) through a reeve using a dependent labour force of villeins, bordars, and cottars who were paid by the allocation of just enough capital and land for subsistence purposes. The workforce also included slaves. By the end of the eleventh century, England’s economic system comprised three main elements: the feudal state, the manorial economy, and the market economy. This is shown in Figure 10.5, which has been reconstructed from data in Domesday Book (Snooks 1993a:197–205). The feudal state exchanged property rights, jurisdiction, and security for taxes, dues, and military service from both the manorial and market economies. The manorial economy, in turn, was based upon an exchange of land, capital, justice, and protection from the demesne sector in return for labour—a scarce resource—and military service from the dependent sector of unfree peasants. Within both demesne and peasant sectors there was a further interchange between the household and the farm, consisting of an exchange of labour for sustenance. Finally, the market economy was based upon an exchange of primary products, rent, and interest by the demesne sector for manufactured goods, military equipment, luxury goods, and capital from the urban sector and, hence, the ‘international’ economy. Within the urban sector there was a further exchange of labour and wages between households and employers in manufacturing, trade, and services. A distinctive feature of this economic system was the unequal relationship between the demesne sector and the dependent-peasant sector. While both sectors were based upon the production of agricultural products, they were 304

Source: Snooks (1993a:203).

Figure 10.5 Diagrammatic model of the English feudal economy, 1086


in fact segmented markets. Generally speaking, there was an exchange of resources—land and capital in one direction, labour in the other—but usually not of commodities or cash. However, commodities and services were exchanged within the subsistence sector. It was therefore largely through the exchange of factors of production that commodity ‘prices’ were brought into equilibrium between the two sectors. Each also tended to specialize. The demesne sector specialized in a combination of commercial products (wool, wheat, malting barley, oats for warhorses, and wine) and subsistence crops. The most important of these was wool which, during the twelfth and thirteenth centuries, played a key role in the flourishing trade around the North Sea. The dependent-peasant sector specialized largely in subsistence crops (the less expensive grains such as rye, barley, and oats, and other non-traded food) that were bartered between peasant households. Further, Domesday Book suggests that manorial lords and free peasants had a monopoly over commercial livestock and that unfree peasants raised livestock for subsistence purposes, including ploughing, hauling, and as an occasional source of food and clothing. Even tithes were paid by landholders rather than dependent peasants (Loyn 1962:253–7). The contribution of unfree peasants could always be adjusted by varying the amount of land made available to them in this feudal system. In these respects Domesday England possessed an economic system which contrasted markedly with that of the early eleventh century, and even more so with that of 1300. Beginning in the early twelfth century, this economic system was steadily transformed over the following few hundred years. The impetus for this transformation was the need to fund the conquest strategy in the highly competitive European environment, while the main shaping force was the change in relative factor prices. The commodity market, which was well established by the late eleventh century, evidently continued to spread throughout the economy during the following two centuries. As it is not possible to measure the size of the market in 1300, evidence for this is indirect. Towns, for instance, increased in number and in size, and the mounting volume of market transactions was facilitated by an increase in the per capita supply of money in circulation (Britnell 1995:9–14). But the most significant and neglected aspect of changing commodity markets from Domesday Book to the Black Death was the change in the socioeconomic structure of these markets. In 1086 the unfree peasantry was effectively excluded from the market sector by an oppressive feudal military elite. The commercialized sector was largely synonymous with the demesne sector, which included the free peasants and excluded the dependent sector of unfree peasants who were preoccupied with self-sufficiency. The Conquest effectively reversed any trend towards peasant market participation. Only with the decline of feudalism in subsequent centuries did the unfree peasantry regain and then advance beyond their pre-Conquest position (Hilton 1969:32–59). Their eventual participation in the market was little 306


short of a revolution. To understand this change it is necessary to understand what was happening to factor markets at the same time. Although the commodity market was well developed by the late eleventh century, factor markets in labour, land, and capital appear to have been very restricted in scope and operation. At the time of Domesday Book the manorial system was based upon a tightly controlled form of dependent agriculture in which labour was not free to sell its services to competing employers. Bonded peasants were compelled to work on the lord’s demesne in exchange for sufficient land to provide bare subsistence. There was effectively no market for labour in rural areas in 1086. Markets for land and capital were similarly primitive and restrictive. Land changed hands in the feudal hierarchy largely through a process of subinfeudation by which it was exchanged for military support. Sales of land did take place, but they occurred on the margins of this feudal economic system (King 1973:52–4, 168). The capital market was also rudimentary. The Jews who entered England in small numbers after the Norman Conquest seem to have had no effect upon the credit structure by the time of Domesday Book (Stacey 1995:82–3). Most manorial investment appears to have been financed by ‘ploughed-back’ agricultural surpluses. Over the following centuries this situation changed dramatically, as markets for labour, land, and capital developed rapidly. The emergence of such factor markets was to prove a major source of economic growth through the more efficient allocation of resources and, thereby, fuller elaboration of productive forces. Many historians have commented on the growing substitution of waged for customary labour along with either the commutation of labour services or their outright replacement by money rents during the thirteenth century (Dyer 1980:99–101). By the fourteenth century, rudimentary labour markets had come into existence (Poos 1991). Although these markets were highly localized and dominated by the coercive power of manorial courts, wage payments were nevertheless a genuine reflection of the local demand for and supply of labour. Often local land markets emerged alongside these labour markets. No longer were the purchase, sale, and leasing of land restricted to lords and freemen; customary tenants increasingly transferred land by sale or lease among themselves and took portions of demesne on lease (Harvey 1984:338–56). Much subdivision resulted, but some peasants also succeeded in building up larger holdings more appropriate to the changing economic conditions. These were not modern land markets: except in the vicinity of large towns they were highly localized, they were subject to seigneurial jurisdiction, and they were geographically uneven in their development. But there can be no doubt that they contributed to a more flexible economy in 1300 than had existed in 1086. Development of these labour and land markets was facilitated by the emergence of rural credit facilities as a rudimentary capital market was brought into being. Jews became the most conspicuous, if not the only, social group involved in moneylending and 307


some attained great wealth in the first half of the thirteenth century, before their loss of royal patronage, expulsion in the 1290s, and eventual replacement by Italian financiers (Stacey 1995:90–101). Probably the most important effect of these moneylending facilities, which were less localized than other factor markets—although they did not extend to banking as in Italy—was a decline in interest rates during the thirteenth century. Underpinning and generating the development of these three key factor markets during the twelfth and thirteenth centuries were fundamental changes in both demand and supply forces. Changes in strategic demand— an outcome of the unfolding conquest strategy—for agricultural and commercial surpluses to pursue conquest objectives led to the pursuit of improved efficiency. And changes in factor endowments and, hence, relative factor prices, once again due to the unfolding conquest strategy, helped to shape the institutional response. These developments operated to varying degrees on all aspects of the existing feudal manorial economy but were spatially differentiated in their impact. For instance, manorial labour services, particularly week work, declined during the thirteenth and fourteenth centuries in precisely those regions where local peasant land markets developed, thereby redistributing both land and labour between producers. It has been argued that local land markets emerged to satisfy a variety of motives that might induce the late-medieval peasant to wish to enlarge his holding: ‘economic ambition, immediate provision for an expanding family, provision for non-inheriting children after his death’ (Harvey 1984:353). Nevertheless, such aspirations had presumably long been latent; what was new, therefore, was not the aspirations but the opportunity for realizing them. The co-emergence of local land and labour markets—and, by implication, of the capital markets and credit facilities which serviced them—therefore represent a particular regional response to this shift in underlying economic forces and served to reinforce the trend towards growing peasant involvement in commodity markets. The contribution of later centuries was to transform these regional trends into national trends and unify their character. The growing influence of factor markets, as a response to strategic demand, provides a major explanation of the progressive decline of feudalism and the slow and uneven emergence of capitalism over the five or six centuries after 1086. The determining characteristic of feudalism as an economic system is the restriction of participation in commodity markets to the ruling elite, who control the factors of production, and the concomitant non-market organization and deployment of the productive factors of labour, land, and capital within the unfree-peasant sector. Within capitalism, by contrast, not only is participation in commodity markets open to all sections of society, but factor markets are also well developed. Even under conditions of restricted technological change the emergence of factor markets is a major source of economic growth. This is partly because land, labour, and capital are more 308


efficiently allocated, but more particularly because the overall costs of organizing the economic system decline. By 1300 factor markets for land, labour, and capital had all been established and much growth had occurred. In subsequent centuries, once pestilence had released its vice-like grip on European society, further growth resulted from improvements in the efficiency of those markets and an increase in their activity. The political structure The vehicle of change for the conquest society in Western Europe was the nation-state, strategically directed by a hereditary monarchy. In England the nation-state, as we have seen, emerged in the ninth and tenth centuries as the Anglo-Saxons attempted to repel the invading Scandinavians. Hence the nation-state was an outcome of the conquest strategy as well as its vehicle of change. The dynamic strategists in this political system were the king and his great magnates, who struggled against each other for control of the conquest strategy. They financed conquest down to the mid-thirteenth century largely by imposing taxes on the growing surplus generated by agriculture, and increasingly thereafter by additional taxes on the profits of commerce. But to tax the growing commercial interests the king found it necessary to gain their formal approval by inviting their representatives to attend Parliament at Westminster. While the political institution of parliament was developed initially to serve the conquest strategy, in the late fourteenth and early fifteenth centuries, it became the stage for desperate struggles between the aristocratic supporters of the old conquest strategy, on the one hand, and the middle-class supporters of the new commerce strategy, on the other. These struggles were not finally resolved, in favour of the supporters of the commerce strategy, until the seventeenth century and then through civil war. As we shall see, the political history of England, like that of any other European kingdom, was the outcome of both the struggle for control of the prevailing dynamic strategy and the struggle between alternative dynamic strategies. In the beginning, the invading Anglo-Saxons had no sense of belonging to one nation, although they carried with them the memory of their Germanic origins. At first they came in small groups in their open longboats led by warrior chieftains. They made their way inland along the rivers that fed the North Sea to form small settlements. As these settlements grew in numbers they coalesced and formed cohesive communities under the rule of successful regional warlords who liked to call themselves kings. For the first few centuries following the Anglo-Saxon invasions, these kings struggled continuously with each other to survive and prosper. But even the most successful among them was unable to provide political unity at a time when communications were poor and the education required to create a bureaucracy was totally absent. 309


Not until the mid-sixth century did a number of consolidated kingdoms emerge in what had begun to be called Engla land (England)—the land of the Angles. The names of these kingdoms carried with them memories of their Germanic origins. Over the next few hundred years these kingdoms warred unceasingly with each other until, by the ninth century, the smaller kingdoms had been absorbed into Northumbria in the north, Mercia in the midlands, and Wessex in the south. Despite the briefly enjoyed victory of Wessex under King Egbert over Mercia and Northumbria in 829, it was the impact of the Scandinavian invasions in the ninth and tenth centuries that created a military reaction that led to the formation of the Kingdom of England under Athelstan of Wessex in 927. The English nation, therefore, was given birth by the conquest strategy which brought great material rewards to the victors. The Anglo-Saxon warrior-king, from the victory of Athelstan to the defeat of Harold Godwinson some 139 years later, was the supreme symbol of the nation-state. He personified the nation’s dynamic strategy of conquest. He was expected to direct the nation’s struggle for survival and prosperity by personally leading his thegns and their men into battle, by defining the law based on ancient custom, by administering justice, by guaranteeing proper title to land, by regulating commerce and the supply of money, and by defending the church (Loyn 1962:214–15). All this was symbolized in the solemn rites that were introduced at the coronation of Edgar in 973, and which have come down to the present even though they have long ceased to reflect the original dynamic strategy of conquest. The Anglo-Saxon and, later, the Norman and Angevin kings were unable to rule without the active support of their nobles. Together they planned, executed, and shared in the rewards and losses of the conquest strategy. The greater among them, the ealdormen, not only advised the king through his witan, or council, and stood beside him in battle, but they also presided over the shire courts that administered the king’s laws and raised his taxes (such as Danegeld after 991). Wessex had been divided into shires as early as the eighth century, with the rest of England (excluding Danelaw) in the tenth. The hundred courts, which were subordinated to the shire courts, were an older institution that arose to administer customary law in private pleas, to dispense justice, and to raise taxes (Stenton 1971:299). They were supervised by thegns who were nobles of lesser standing. The administrative officer of the hundred courts was the reeve, and of the shire court the shire-reeve or sheriff, who became a most effective instrument of administration not only under the Anglo-Saxons but of English government down to the modern era. To activate this system of local government machinery, the king’s chancery, which was by now staffed with educated clerics, issued commands to the sheriffs in the form of a ‘writ’. The writ was an important AngloSaxon administrative innovation because it was easily understood and immediately recognized as a royal command. It was a clear and concise statement written in English (Anglo-Saxon) rather than Latin and authorized 310


by the king’s personal seal. After 1066 the Normans converted the writ into a permanent instrument of English law and government (Pollock and Maitland 1968:150–1). It was used not only to issue administrative demands to the counties, but also to raise Danegeld. While Danegeld is traditionally thought to have been a land tax, it may have been England’s first income tax (Snooks and McDonald 1986:73). This tax, which was first raised by Ethelred in 991, was another Anglo-Saxon innovation at a time when the king was expected to restrict his expenditures to the income from royal properties. The tax’s original purpose was to bribe the Danes to raid other kingdoms—an alternative to establishing a standing army and navy in England—but was later used by the Normans and Angevins to finance their wars against France. Competing with this system of royal administration and justice in the provinces were the manorial courts, particularly those presided over by the great magnates (baronial courts). While freemen could, in theory, appeal to the king’s court for justice, in practice they, along with the dependent peasants—villeins, bordars, cottars, and slaves—had to be satisfied with the justice handed down by the manorial lord. In the more remote parts of the country, manorial lords wielded more power than the king in local matters. Even in this highly centralized form of feudalism, considerable tension existed between the powers of kings and nobles (Maitland 1987:107–28). Indeed, there were times, particularly in the early centuries of the Kingdom of England, when some of the shire officials attempted to pursue their own interests at the expense of the king. This threatened to undermine the strategic control of the monarchy. In order to reassert control, in the early twelfth century Henry I devised a way to economize on the shortage of trained and experienced administrators by establishing panels of royal ‘judges in eyre’, who were sent out at regular intervals from the king’s court to preside over the shire courts. At these times the shire courts became part of the curia regis or king’s court. Through this expedient, feudal, or private, law was displaced by the king’s law or ‘common’ law—law common to all parts of England and to all its people. During Henry I’s reign the common law was extended to all offences against the king’s peace and to felonies—originally the betrayal of one’s lord—which had formerly led to blood feuds. By the reign of Henry II all criminal and many civil cases had come under the king’s jurisdiction. Under the Norman and Angevin dynasties, therefore, the monarchy asserted its control over the conquest strategy by imposing the king’s order upon the counties. Needless to say, the king’s barons became increasingly concerned about their loss of income and power from the administration of justice—a concern that surfaced in Magna Carta in 1215. But, by the end of the thirteenth century when Edward I abolished baronial courts and attempted to control the feudal process of lordship known as subinfeudation, there was little aristocratic opposition. The tide had begun to turn against the old feudal aristocracy (Harding 1973:32–85). 311


While much of the Anglo-Norman machinery of government was highly decentralized, the Normans did devise an institution that was to grow into a major instrument of central strategic control—the exchequer. In the AngloSaxon period, the king’s finances, or treasure, were supervised by men of his chamber known either as chamberlains or servants of the wardrobe. Initially they were probably laymen, but the rapidly increasing territorial acquisitions required more complex accounts for the receipt and disposal of income and plunder. At least one educated person, usually a royal chaplain, was required for this role. Known as the treasurer, he had a detailed knowledge of the sources and uses of the king’s income and kept detailed accounts in order to prevent embezzlement. These financial details were recorded by cuts and notches on wooden tallies, a method of accounting that continued until 1834 (Poole 1912:91). Interestingly, the early name for the Treasury—which also held documents used for revenue purposes including hidage (taxation) lists, Domesday Book, and the pipe rolls—was the Tallies. In the late eleventh and early twelfth centuries this fundamentally important government institution, under the driving influence of an unfolding conquest strategy thirsty for taxes (Figure 10.3), experienced two revolutionary changes—one improving the information about taxable capacity and the other transforming the system of numerical computation (Snooks 1993a: 101–4). In their day these changes were as important as the modern census and the electronic computer are today. The first of these was the Conqueror’s great economic survey known as Domesday Book (1086), which provided an incomparable database for the Treasury for centuries to come (Snooks and McDonald 1986:25–36). And the second was the introduction in Henry I’s reign of a new institution called the Exchequer; it had a tripartite foundation: a new system of calculation, the exchequer table (a type of abacus consisting of a chequered tablecloth—hence the name—and counters); a system of receipts received, the tally sticks; and a written record to be housed in the Treasury, the pipe rolls (Clanchy 1983:77–82). While the individual elements in the exchequer system may have been used before Henry I’s reign, it was their combination under pressure from an expanding conquest strategy—empire-building was beyond the administrative abilities of one man—that fashioned a major new instrument of strategic control. With the reorganization of the king’s finances under Henry I came a new administrative professionalism. Owing to the conflict of interests between the church and the state, Henry decided to dispense with the traditional reliance on monastic officials in favour of secular clerics—men who had trained in the leading French cathedral schools but who wanted to follow a secular rather than a religious career despite their acceptance of ecclesiastical titles and incomes. Such men were clerics in name only. The first of these was Roger of Salisbury who, as the king’s chancellor and, later, justiciary, was responsible not only for the establishment of the Exchequer, but also for a bureaucratic dynasty. When Stephen followed Henry I as king, Roger’s son 312


Richard became chancellor and his nephew Nigel became treasurer; and in Henry II’s reign Nigel’s son Richard—who wrote the famous Dialogus de Scaccario (Dialogue of the Exchequer), the first modern administrative handbook—became treasurer. This growing professionalism of government was a direct response to the demands of strategic leaders who had to be absent from England for years on end pursuing the conquest strategy in France. The day-to-day process of government had to proceed without the presence of the king. The unfolding conquest strategy not only generated a demand for the above instruments of strategic direction but also for institutions that embodied both the struggle for control of the dominant dynamic strategy and the struggle between competing dynamic strategies. The most important of these political, as opposed to administrative, institutions was Parliament. The struggle between the king and his nobles can be traced back to the earliest Anglo-Saxon times. A tribal chief, a regional warlord, or a king of all England could command the support of his nobles only for as long as he was successful in battle and could provide not only the opportunity for more land and plunder, but also a guarantee of security for their possessions. Even so there was always tension between the king and his nobles either because the king attempted to increase his control over the wealth and power of the his great men, or because ambitious and powerful barons attempted to gain control of the dynamic strategy for themselves. The most famous of these strategic struggles occurred between the Angevin king, John—the youngest son of Henry II—and his barons. This struggle was largely an outcome of John’s incompetent strategic leadership which reduced rather than increased the wealth and income of his nobles. Foolishly King John made enemies of Europe’s two most powerful men: Philip II of France who, because of his considerable strategic abilities, became known as Philip Augustus; and Pope Innocent III, who had territorial ambitions for the Papacy. Because of their quarrel, Philip declared all of John’s French lands forfeit and by 1204 had even conquered Anjou and Normandy. John’s nobles, who had lands in France as well as England, were less than pleased. The error was compounded when John attempted to reverse his fortunes by forming an alliance with Emperor Otto IV against Philip. To finance the reconquest of French territory, John resorted to regular heavy land taxes (carucage, a revival of Danegeld), a military services tax (scutage) imposed eleven times during his 17-year reign, a tax in 1207 amounting to a thirteenth of the value of all ‘chattels’, increased feudal dues, and the confiscation of the estates of those nobles and bishops who opposed him. While these unusually heavy imposts (see the first large peak in royal revenues in Figure 10.3) might have been grudgingly accepted had John been successful against Philip, the failure even to mount an attack before the French king defeated the German emperor at the battle of Bouvines in 1214 313


led John’s long-suffering barons finally to rebel and to force their king to sign Magna Carta in 1215. But within months John repudiated the great charter and was preparing for battle against his barons when, in 1216, he conveniently died. The regents of the infant king, Henry III, accepted the great charter on his behalf in 1217 and Henry, on attaining his majority in 1227, adopted a shortened version of the original, which has ever since been part of English law. The great charter was an attempt by the English barons, both lay and ecclesiastical, to maintain a balance between the rights of the king and their own rights. They supported his role as leader of the conquest strategy, but only on the grounds that he refrain from using his privileged position in the law to attack their material possessions and liberties. They wanted safeguards against the arbitrary exercise of power by overly ambitious kings. The main intent of the 1215 charter can be gauged from the fact that twentyfour of the sixty-three clauses are about taxation. Despite the mention of the rights of the ‘free man’ and the ‘judgement of his peers and the law of the land’, this is not an abstract document about human rights. It is all about the material rights of a tiny fraction of the people of England. And the only way these material rights could be enforced was by force of arms against the king. Only once the conquest strategy had been exhausted and laid to rest in the mid-fifteenth century did this matter resolve itself. But by then the struggle had been widened to include the new men of commerce. The shadow of Magna Carta fell across the thirteenth century, a period of intense strategic struggle between king and magnate. Because of baronial opposition to royal requests for taxation, the king turned increasingly to those on the land—the knightly class—and those in the towns—the merchants—who grew rich on the profitable wool trade. It is one of history’s fascinating ironies that the aristocratic warriors, in attempting to assert their power over the king, were responsible for driving him into the arms of the new men of commerce who, for the first time, were able to express their opinions about the nation’s dynamic strategy. Henry III (1216–1272), who grew up in the shadow of Magna Carta, was understandably keen to rule through the royal household rather than through institutions such as the Chancery and Exchequer that were dominated by aristocratic clerics. In reviving the royal household, which was staffed by personal servants of the king, Henry attempted to take the instrument of the conquest strategy back to the eleventh century. His barons, however, made it clear that there was no going back. The world of the thirteenth century was more complex, and empire-building was more expensive and certainly beyond the administrative capacity of the individual. In 1258, following the failure of Henry’s expensive support of papal territorial ambitions in Sicily and elsewhere, the barons imposed upon the king the so-called Council of Fifteen, comprising both lay and ecclesiastical magnates led by Simon de Montfort, which was to make all major 314


administrative appointments. After reasserting his personal control in 1262, Henry was faced with a baronial rebellion in 1264 led by de Montfort who was finally killed in battle in 1265. In the end Henry III regained power and the right to choose his own ministers, but the point had been made—the barons would not permit the king to pursue an expensive conquest strategy that was either unsuccessful or not in their material interests. During the thirteenth century, the struggle between the king and his nobles for control of the dynamic strategy was widened to include an emerging middle class on the land and in the towns. The reason for this radical new departure was the increasing prosperity of those families involved in the growing and trading of wool for export in the North Sea economy, and the inability of the aristocracy to meet the king’s demands for finance at a time when war was a very risky business. In the 1230s and 1240s Henry III attempted to raise taxes with the consent only of his nobles; but in 1258 and 1264 two knights from each shire, and in 1265 an additional two burgesses from each of the main boroughs, were summoned to meet with the king’s council to approve the taxes raised on the profits of commerce. True, the burgesses and knights met at the summons of the rebellious Simon de Montfort rather than the embattled Henry III, but when Edward I called the ‘Model’ Parliament in 1295 to approve taxes for his projected wars against Scotland and France, knights and burgesses were included. From the mid-thirteenth century, therefore, the monarchy was only able to raise the funds required to finance the conquest strategy by taxing and consulting the emerging commercial interests. And by the 1330s, when Edward III was raising funds to fight what became the Hundred Years War, Parliament, although an ad hoc institution that met only when the king wanted money or needed to explain his policies, had achieved the institutional form that was to remain largely unchanged into the seventeenth century—the Commons consisting of knights and burgesses, and the Lords composed of the great magnates both lay and ecclesiastical (Waugh 1991). The new men of commerce, like the barons before them, were adamant that they would not pay taxes without some say in how those taxes were employed. This is clear from the tax rebellion of 1297. Hence, by the mid-fourteenth century, the king agreed that customs duties would not be imposed upon merchants without the agreement of a ‘full parliament’. With this the new men of commerce began to influence England’s dynamic strategy. From this discussion it has become clear that the rules of conduct— narrowly defined by the new institutionalists as ‘institutions’—concerning the politico-economic system of conquest England emerged in a pragmatic way in response to the strategic demands of the ruling elite. It is also clear that the rules of conduct were formalized through a process of trial and error as organizations were established to facilitate the strategic objectives of conquest. This is a refutation of the claim made by the new institutionalists that the prior establishment of rules of the game, in order to handle 315


information costs more efficiently, is the main influence in organizational and, hence, economic change. Both organizational and institutional changes are a response to changes in strategic demand. A commerce society The major focus of the commerce society is the city. Owing to the extraordinary profits earned by a commerce society through its monopoly access to resources, commodities, and markets, its metropolis is able to achieve a size undreamed of by neolithic agricultural societies. Population is attracted by the growth of real income and wealth to be earned in trade, finance, and manufacturing. We have seen this already in ancient Greece and in Venice, where the city-state became the vehicle for economic, political, and social change. In Western Europe, the commerce strategy led to the rapid development of the metropolis within the nation-state for those societies pursuing the commerce strategy: both London and Amsterdam became the dominating centres of economic activity not only in England and the Dutch Republic respectively, but also in the whole of Europe. Although the English conquest strategy had exhausted itself by the midfifteenth century, it took a further two generations before the alternative strategy of commerce was able to fill the vacuum. During this time economic stagnation continued (Figure 10.1). Only after the 1480s, with the weakening grip of pestilence, the revival of the wool trade, and the break-out of Western Europe into the rest of the world, did commerce become the dominant dynamic strategy of England. Only then did real GDP per capita resume its upward trajectory that had been interrupted two centuries before. A good index of the development of the commerce strategy is the remarkable growth of London between 1500 and 1700. Table 10.1 suggests that London grew moderately from 1200 to 1500, as a reflection of the expanding wool trade. But this population growth took place at a declining rate owing to the influence of pestilence during the fourteenth and fifteenth centuries. By contrast, after 1500 the size of London increased explosively until 1700. A similar rate of expansion, but starting from a lower base, was experienced by Amsterdam from 1500 to 1700 (15,000 to 200,000 people), Table 10.1 Population of London, 1000–1750

Sources: Bairoch et al. (1988:33); Snooks (1994b:77–8).

316


although stagnation set in thereafter (210,000 in 1750) as the Dutch lost their struggle with the English. London’s population growth between 1500 and 1700 also occurred much more rapidly than that of the entire country, with the proportion of England’s population living in the metropolis rising dramatically from 2.1 to 11.4 per cent. London’s remarkable expansion was due to the lead it took in the rapidly growing woollen textile trade, a development that generated major structural change in the agricultural sector. By 1550 woollen cloth, which was largely manufactured in rural areas under the ‘putting-out’ system, contributed threequarters of British exports, and of this London handled about 90 per cent (Seaman 1981:220). Owing to its premier position in the cloth export trade, which involved handling, financing, and shipping, London also took over the lion’s share of all other exports and imports. And because of this exportimport trade, London attracted a range of finishing trades including the clothing industries, boot-and-shoe making, and other leather industries making saddles, harnesses, buckets, and bookbinding (Clarkson 1971). Other industries producing food and drink were also established in the metropolis owing to the rapidly growing population (Coleman 1977). As a result of this new commercial and manufacturing activity, together with the rapid increase in residential population, there was a building boom of unprecedented proportions during the fifteenth and the first half of the sixteenth centuries. This boom involved the building of merchants’ houses, warehouses, workshops, together with the palatial city houses of the aristocracy, the smaller terrace houses of the middle classes, and the hovels of the workers. This is the reality behind the rapid growth in my estimates of real GDP per capita in Figure 10.1—in the vicinity of 0.6–0.7 per cent per annum between 1470 and 1700. And as this prosperity was based on wool, there was a massive building of great aristocratic houses and substantial farmhouses throughout the southern half of England, particularly between 1570 and 1640. Conversely, the numbers of castles in regular use declined markedly. In the remoter parts of England, castles were abandoned for more comfortable residences nearer London, while those in better locations were modernized and made indefensible. The replacement of the feudal castle in rural England with the great merchant house in London symbolizes the changing of the dynamic strategy from conquest to commerce. In view of this extensive evidence of rapidly growing mercantile wealth and income, which was clearly reverberating throughout the wider community—as seen in beginnings of consumerism at all levels of society from the early sixteenth century (Shammas 1990)—it is absolutely staggering that someone should recently claim so confidently and precisely (to the fourth decimal place) that the growth rate of real GDP per capita between 1470 and 1700 was as low as 0.0159 per cent per annum (a rate not significantly different from zero!), and that the level of real GDP per capita actually fell by a massive 22.4 per cent between 1470 and 1600, a period of commerce-led growth (Mayhew 1995:244, 252).3 317


The economic system The economic system that prevailed in England after 1500 has been described as mercantile capitalism. We have seen how it emerged from the feudal system of the late eleventh century (Figure 10.5) with the development of factor markets for land, labour, and capital. Hence the English economic system was transformed from one in which land, labour, and capital were distributed and controlled by a ruling elite (consisting of only 0.05 per cent of the population) through a process of personal commendation to one in which these factors were distributed and controlled by a process of impersonal buying and selling. But some of the old feudal elements remained during the sixteenth century, namely intervention by the monarchy in those markets in order to bestow economic privileges on favoured individuals and groups in return for financial considerations and in order to secure material advantages for sectional interests. Under pressure from the rapidly emerging middle classes, the monarchy was persuaded to abandon this type of intervention. Tudor, particularly Elizabethan, intervention in the economy was extensive. The Tudors were opposed to enclosures—a response by the entrepreneurial farmers to rising wool prices in the sixteenth century— owing to the social unrest they caused (such as Kett’s rebellion in 1549) and to pressure from the more conservative landowners. In fact, sixteenthcentury enclosures—involving the extinction of common rights over arable and pasture land, rearrangement of the fragmented strips into compact holdings, and the erection of fences and hedges—affected only about 3 to 4 per cent of all arable land in England, but up to 30 per cent of land in the Midlands (Seaman 1981:215–16; Allen 1992: pt. I). Elizabeth also attempted, through the Statute of Apprentices of 1563, to control labour markets by fixing wages, by regulating the conditions of apprenticeships, and by increasing the supervisory powers of guilds. But, as these regulations cut across the interests of the rapidly expanding commercial and manufacturing interests, they were merely side-stepped. The granting of monopoly rights in return for cash, however, was a different matter. This intervention was a response to the emerging demands of the new commerce interests for the protection required to reduce the risk to trading and manufacturing activities in order to make the necessary investment possible. As we have seen in the cases of Venice and ancient Greece, monopoly access to resources, commodities, and markets is the very essence of the emerging commerce strategy. But, as the strategy unfolds and a larger proportion of the population demand access to these commercial privileges, there is pressure on governments to extend it to all citizens based on merit rather than social position. Government regulation, therefore, moves from the granting of state favours to particular privileged individuals or groups in return for cash to the establishment of general rules, such as patent laws, in return for taxes that are given legal sanction. 318


This generalized description can be seen operating in the Tudor-Stuart period (Coleman 1977). Elizabeth I made fifty-five grants of monopoly privilege on the production of goods, many of which were to encourage foreign businessmen setting up new manufacturing processes in England, in return for cash. She also granted many trading monopolies that are the very foundation of the commerce strategy. These monopolies were first objected to by the Commons in 1597. Later under the Stuarts the Statute of Monopolies was passed in 1624 removing the right of the Crown to grant monopolies that discriminated against other English citizens. But, they were all in favour of monopoly arrangements that excluded the Dutch from the lucrative North Sea trade. Consequently the Commons passed the Navigation Acts of the 1650s and 1660s in order to protect England’s merchant marine and to break the dominance of the Dutch in fishing and shipping in the North Sea (Cameron 1989:157). Once again this institutional change was a response to strategic demand. The emerging commerce strategy had a major impact on the nature of markets and associated institutions of trade. Foreign trade in the early modern period was conducted by wealthy merchants who specialized in this type of commerce, leaving internal trade to a variety of middlemen. Specialization was necessary owing to the greater risk, capital, and knowledge (of foreign markets, shipping, insurance, and foreign customs and conditions) required for trade with Europe and the rest of the world. Yet, at the beginning of the sixteenth century, much of England’s overseas trade was in the hands of foreigners. Even by the 1540s foreign merchants, particularly those participating in the Hanseatic League, handled 45 per cent of the export of wool (Clarkson 1971:140). But as the commerce strategy unfolded during the sixteenth century, English merchants came to dominate the export trade. By 1600 the English Merchant Adventurers were responsible for three-quarters of the cloth-export trade conducted through London. As English commerce became increasingly important, not only to the nation but also within Europe, the institutional structure changed. Once again this was due to changes in strategic demand. The uncertainty and risks associated with foreign trade in the late fifteenth century led to the establishment of regulated companies that provided merchants with the necessary monopoly to be confident about returns on their investment and the Crown with much needed income. The most important, indeed dominating, trading company in England during the sixteenth century was the Company of Merchant Adventurers. It grew from groups of cloth merchants in various English ports during the fourteenth and fifteenth centuries. Those in London came to dominate and, in 1486, be formally recognized by the City authorities. By 1700 the Company’s membership had increased to about 3,500, of which about only 200 were active in trade and as few as 30 were responsible for half of its trading activities (ibid.: 141). 319


Despite the dominance of the Merchant Adventurers, the expansion of English commerce led to the formation of a number of other trading companies during the second half of the sixteenth century—the heyday of the trading company—including the Muscovy Company in 1555; the Eastland Company in 1579; the Turkey, Venice (which merged in 1592 to form the Levant Company), Barbary, and Africa Companies in the 1580s; and the East India Company in 1601. The later companies were joint-stock companies that traded with capital jointly funded by their members who shared the profits, rather than regulated companies, in which individual members traded with their own capital. During the seventeenth century, as the infrastructure of the English commerce strategy—particularly the network of colonies and trading bases throughout the world—was established, profitable opportunities for individuals increased. The colonies became not only important sources of raw materials, but also growing markets for English manufactures, to the tune of £1,000,000 per annum by 1686 (Zahedieh 1994:259). Accordingly, the established trading companies were increasingly challenged by interlopers who demanded an end to monopolistic practices in trade. As we have seen, this demand was voiced in Parliament, the political instrument of the commerce strategists. In these changing strategic circumstances, the regulated companies began to decline after the early seventeenth century and individual traders and partnerships began to dominate trade with Europe. Only in the more risky sphere of long-distance trade did the joint-stock companies—the East India Company, the Royal African Company, the Hudson’s Bay Company, and the Levant Company—continue to operate. Yet even here, by the late seventeenth and early eighteenth centuries, wealthy individuals played an increasingly important role. Within the strategic structure of empire, these merchants were able to arrange consignments, insurance, and services from overseas commission houses by meeting together in Lloyd’s coffee house. Individual merchants came into their own once the strategic infrastructure had been established. Then it was a relatively easy matter to devise new rules that would facilitate their access to highly profitable trading activities. As the commerce strategy unfolded in this way, institutions and organizations facilitating domestic trade also changed. These changes included the growth of market towns, country fairs, the role of middlemen, and even of retail shops. In the process, London became the centre of a growing national network of institutional arrangements. Public markets, which had grown rapidly between 1200 and 1350 to reach a peak of about 1,700, declined to about 600 in 1500 and only recovered slowly to about 800 by 1700 (Jones 1994:36; Epstein 1994). While historians continue to focus on the evolution of transaction costs (an institutional hypothesis that has difficulties explaining the above reversal), this pattern of development can be adequately accounted for by the shift from the conquest to the commerce strategy. 320


Before the 1480s, as we have seen, the development of the wool trade was subordinated to the conquest strategy which depended on the involvement of regional warlords. As the wool trade, which was under their supervision, was regionally based, the number of regional markets grew rapidly. In effect, control of the conquest strategy was diversified owing to its feudal nature. This expansion was brought to an end in the mid-fourteenth century by pestilence and war on the Continent. By the time these constricting influences were released and the wool industry began to expand in the late fifteenth century, England had adopted a new dynamic strategy. The new commerce strategy became centred on London not only because it was the main city-port on the Anglo-Dutch ‘lake’, but also because it was where Parliament—the headquarters of the new strategy—was located. Accordingly, the London market grew rapidly at the expense of public markets outside the metropolis. This was achieved by dealers—initially in wool and later in leather, wheat, and other rural products—who established themselves in London and sent out agents (‘factors’) into the country to purchase primary products in bulk at the annual country fairs and directly from farmers. Hence we can account for changing market institutions in strategic rather than the usual transaction-costs terms. Understanding the relationship between England’s dynamic strategies and its colonies can help to explain the rise and fall of the modern institution of African slavery. British colonial involvement in the New World arose from the activities of merchants and adventurers who, in the late sixteenth century, were exploring the possibilities of trade and natural resource exploitation. As Tudor and Stuart governments did not possess sufficient resources to establish official colonies, joint-stock companies were created to mobilize private funds for this purpose. In this way, as we shall see in the next chapter, the English formed eleven such companies in the first three decades of the seventeenth century in order to colonize the east coast of North America and, from the early eighteenth century, the islands of the West Indies. In the colonies of the New World there was an abundance of natural resources but a scarcity of labour and capital to exploit them. This set of factor endowments encouraged the use of slave labour in those regions where intensive agriculture—such as the cultivation of tobacco, cotton, and sugar—could be operated using the labour-gang system. As the English had become involved in the slave trade between Africa and the New World in the 1560s following the establishment of John Hawkins’ Africa Company, it was an easy and lucrative matter to direct this hijacked labour to the English colonies (Seaman 1981:221–2). Hence the English, indeed the European, commerce strategy (like that of ancient Greece) had slavery at its core. It is usually argued that, while slavery in the English commerce empire had economic origins, its abolition was the result of the anti-slave movement led by evangelicals such as William Wilberforce. In 1807 the slave trade, 321


although not the institution of slavery itself, was abolished; and in 1833 all slaves within the British Empire (largely in the West Indies) were emancipated and a total of £20 million compensation was paid to former slave-owners (Checkland 1964:331, 341). To the contrary, I will argue that the abolition of slavery, in the face of opposition from the West Indian lobby, was an outcome of the replacement of the commerce strategy with the technological strategy from the late eighteenth century. As colonies were not required for the successful pursuit of the technological strategy, the new strategists, who had been entering the Commons steadily since the late eighteenth century and in large numbers with the election of 1830, had little sympathy with the sectional interests of remnants of the old commerce strategy in the West Indies. And as the technological strategy continued to unfold, the death-knell of all coercive labour systems—whether slave, convict, or indenture—was sounded because it became possible to substitute capital, embodying technological change, for forced labour. This, however, did not finally eventuate until the twentieth century (Davis et al. 1972:379– 89). At the same time the unfolding technological strategy also drew the lower orders, including exslaves, into the modern process of power-sharing. Hence, a viable technological strategy is absolutely essential to the freedom and democracy enjoyed in the West today. Factor markets were transformed under the commerce strategy. The London capital market remained fairly primitive during this period, because commercial enterprises were able to meet their capital requirements initially from family, friends, and neighbours and, later, from ploughed-back profits (Kindleberger 1993:173–89). Most trading concerns were family businesses or small partnerships that grew wealthy in the lucrative wool trade and used their profits to invest in fixed capital such as warehouses, offices, docks, and shipping. Credit facilities were largely employed for arranging short-term working capital for the purchase of consignments of goods. Large amounts of capital were required only for overseas merchant ventures. In these instances successful merchants established a joint venture usually protected by government monopoly and provided the capital themselves. This is the origin of the trading companies discussed above. Initially these ventures were for a limited period after which the participating merchants split the profits or bore the losses. But as some were highly successful at generating extraordinary profits they were established as permanent joint-stock companies (ibid.: 190–2). The extent of these profits can be appreciated from the fact that in 1607 the East India Company recorded a profit of 500 per cent, and in 1611 and 1612 the Russia Company paid a dividend of 90 per cent (Hill 1961:38). But, of course, the risks were also high. The emergence of the financial market in London was a late development which closely paralleled that in Venice in earlier centuries and was a direct response to the unfolding of England’s commerce strategy. In the seventeenth 322


century London merchants were in the habit of depositing their surpluses with the gold merchants—who bought and sold bullion and foreign currency—in return for paper receipts. These private receipts, which were known as bank notes, were used in London for the payment of goods and services. The gold merchants employed these deposits to make loans to men of commerce and to governments at interest. Some of these goldsmiths together with some merchants, brokers, and tax farmers began acting as bankers in the second half of the seventeenth century owing to the demand for their services generated by the commerce strategy (Clarkson 1971:143– 52; Kindleberger 1993:53–5). It was on this unsophisticated institutional basis that financial innovations imported from The Netherlands after the Glorious Revolution led to a ‘revolution’ in the English financial system. These innovations, which included the bill of exchange (both foreign and inland), transferable shares in the permanent capital stock of corporations that could be traded, and perpetual annuities issued by the government, laid the foundation for expansion of the financial market until the 1850s. While this informal system suited the merchants it was inadequate for the credit requirements of the English government during the Anglo-Dutch war against France from 1689 to 1697. When, in 1694, the king turned to the London merchants for a loan of £1.2 million, they established, for an initial period of twelve years, the Bank of England, which issued bank notes to the contributors with a face value equal to the amount of capital they had provided. These notes, which increased in number as the monarch sought further loans to participate in the War of the Spanish Succession (1702– 1714), were used as paper money in London (Vilar 1991:211–16). By the end of the eighteenth century the Bank of England began, albeit reluctantly, to take responsibility for resolving financial difficulties, and after the bank crises of 1825, 1847, 1857, and 1866 it began acting as lender of last resort to ensure financial stability (Kindleberger 1993:92–4). As we have already noticed, the system of land distribution in the eleventh century known as subinfeudation had by 1300 largely been replaced by land sales both at the aristocratic and peasant levels. By the thirteenth century highly successful merchants were able to purchase landed estates as the old aristocracy waded irretrievably into debt, and by the fourteenth century successful customary tenants were able to purchase and lease land from each other and from the demesne (Harvey 1984:338–56). While large-scale purchases were limited before the sixteenth century both by the restricted supply of properties coming onto the market and the relatively few people who had the surplus funds to purchase large estates, the situation changed radically during the 1530s when Henry VIII confiscated property belonging to the monasteries and sold it to anyone with the available cash. And those with the cash at this time were the merchants who, for almost two generations, had grown rich on the trade in woollen cloth. On the other hand, more modest sales of land were made possible by the Tudor enclosures, particularly in the 323


Midland counties, but even more so by the more extensive enclosure movement of the eighteenth century (Allen 1992). By extinguishing common rights, converting copyhold to leasehold, and consolidating the scattered holdings, it became feasible to subdivide the larger estates and sell them to successful tenant farmers. But this was a controlled process, with the courts taking into consideration the rights of tenants as well as lords (Hoyle 1990). Labour markets also went through a radical transformation between the periods dominated by the conquest and commerce strategies. In the eleventh and twelfth centuries agriculture employed a dependent-labour system in which labour services were exchanged for the right to use land and capital for subsistence purposes. Only in the towns, which, according to M.M.Postan (1975:239), were ‘non-feudal islands in the feudal seas’, did anything approaching a labour market exist. And even here it was under the close supervision of the guilds. In fact most urban activities in the twelfth century were, as in the case of Venice, operated by owner-craftsmen employing family labour. By the fourteenth century rudimentary labour markets had emerged in rural areas, but they were still highly localized and dominated by the manorial courts. Even in the sixteenth century Tudor governments attempted, as we have seen, to control wage rates, to limit entry into skilled crafts, and to restrict the movement of labour. But, in a buoyant economy where demand for labour was high and at a time when market signals were operating effectively, such market intervention was largely ineffective, particularly in London Over the next century or so labour markets became increasingly responsive to demand and supply and lost their purely local nature (Monro 1994:165–78). The change in England’s economic system from feudalism to mercantile capitalism, therefore, was driven by the unfolding and transformation of dominant dynamic strategies. In turn, as shown in The Dynamic Society, these strategic changes are the result of economic agents responding to changing relative factor prices that depend on changing factor endowments of land, labour, and capital. While a particular dynamic strategy is pursued because of underlying factor endowments, so those factor endowments are changed with the unfolding of dynamic strategies in all neighbouring societies. The shift in England from a feudal to a mercantile capitalist system was a direct response to the shift from the old exhausted conquest strategy to the new emerging commerce strategy. The particular institutional forms that were appropriate to a conquest strategy—central control of resources by a military elite which, in the context of the Germanic takeover of Roman Europe, led to feudalism—were no longer appropriate to a commerce strategy which needed monopoly access to markets overseas but demanded freely operating markets within England. And as the commerce strategy unfolded so the economic system became more sophisticated. There was, however, nothing inevitable about this transition from 324


centralized feudalism to decentralized capitalism. As I have suggested earlier in another context, had the commerce strategy been succeeded not by the technological but by the conquest strategy, then the decentralized mercantile capitalist system would have been transformed into a centrally determined system run by a small military elite. Although in the changed circumstances of the eighteenth century this would not have led to a return to feudalism but to some sort of command economy presided over by a military dictator and a warrior elite. The precise form adopted would depend upon the relative cost of the available alternatives—upon what I call relative institutional prices. Whenever the direction of history reverses itself through a retrogressive change in dynamic strategy, new rather than old institutional forms are established even when they serve the old purpose. The background economic conditions that determine relative institutional costs are always changing in the Dynamic Society and can never be replicated. This is why historical events are always unique, even in the face of recurring patterns. What marks my argument off from that of the institutionalists such as Douglass North (North and Thomas 1973: Chapter 12; 1981: Chapter 11) and Friedrich Hayek (1988) is that economic systems do not evolve according to their own internal laws like Darwinian evolution, but are driven by the unfolding and substitution of dynamic strategies. The change in institutional forms cannot be explained in terms of the evolution of the ‘fittest’—that is, the most efficient—forms, but only in terms of the changes in strategic demand which consciously adopts those institutional forms that best facilitate the objectives of the dynamic strategists. Here the role of transaction costs is subordinated to changes in strategic demand. The driving force in the Ephemeral Civilization comes from the demand rather than the supply side. I also reject the institutionalist view that the changes in property rights required by the unfolding commerce society were essential to the occurrence of the Industrial Revolution (North 1981: Chapter 11). These property rights were required to facilitate the pursuit of the commerce strategy, rather than acting as a precondition for the totally unanticipated technological strategy. Not only was the Industrial Revolution the result of an entirely different set of forces—the exhaustion of the neolithic technological paradigm—but also there was more than one institutional path to this technological transformation. The Industrial Revolution could have been achieved in a number of alternative ways with different roles for the state, private organizations, such as banks and companies, individuals, and institutions including property rights. To claim otherwise, as the institutionalists do, is to raise the spectre of historical inevitability. The political system The nation-state—the major vehicle of the conquest strategy in Western Europe—was able to adapt to the requirements of the commerce strategy. 325


But it needed to be transformed. As we have discovered, the commerce strategy leads to the development of either the city-state, as in ancient Greece and in Venice, or to the large metropolis within the nation-state as in England and the Dutch Republic. And as the commerce strategy unfolds, the metropolis becomes the centre of an overseas empire. In ancient Greece the city-state survived intact because the overseas colonies were self-governing replicas of the mother city-state, and in the Venetian Republic their overseas possessions were never regarded as more than maritime bases and trading posts. By contrast the commerce empire of Britain had, by the early eighteenth century, begun to challenge the integrity of the nation-state. London became the great commercial and financial metropolis of a world empire. By 1800 London’s population of 950,000 people was almost double that of Paris, its nearest rival (Bairoch et al. 1988:283). Within this vehicle—or chariot—of change a great political struggle took place between 1500 and 1750 between the supporters of the competing dynamic strategies of conquest and commerce. The outcome of this struggle had implications for the nature of the political and economic system of England. Had the old feudal aristocracy won, then England, like France and Spain, would have turned again to the conquest strategy within the framework of the nation-state. But as we know, owing to the underlying economic forces, the rising gentry won this great battle and Britain subsequently pursued the commerce strategy within the framework of empire. We have seen how the struggle between the king and his nobles for control of the conquest strategy led, in the period 1200 to 1350, to the emergence of Parliament and the representation of a new group of men who profited from the growing and export of wool. Even when the growth of the wool trade was interrupted by plague and the intrigues of France and Spain, the Commons were able to exploit the English monarch’s desire for funds to pursue his conquest aims in France. Only when the conquest strategy was exhausted and the commerce strategy had yet to build up momentum in the second half of the fifteenth century was the monarch able to dispense with Parliament because he was able to live within his own means. While the Tudors (1485–1603) supported the new commercial interests because they needed their financial and political assistance, they failed to provide very positive leadership for the new commerce strategy. Only in comparison with the uncomprehending Stuarts, who continually frustrated the commercial aspirations of Parliament, do the Tudors appear to gain leadership credibility. The fundamental problem was that the hereditary absolute monarchy, which had emerged to lead the conquest strategy, was unable to provide appropriate leadership for the new commerce strategy. It was a problem that provoked the civil wars of the seventeenth century and which persisted until the emergence of limited monarchy between 1689 (Bill of Rights) and 1701 (Act of Settlement) and the acceptance in practice by 326


Victoria and Albert of constitutional monarchy in the 1840s. And it is a problem for any society attempting to make the transition from an exhausted conquest strategy to either the commerce or technological strategies. The interesting issue is that in England absolute monarchy was able to survive the exhaustion of the conquest strategy and the collapse of the old feudal aristocracy by persuading the new men of commerce that its leadership was relevant to their cause. But this compromise lasted only for two centuries because it was discovered the hard way that leaders of conquest do not make effective leaders of commerce. The first monarch to make the transition from leadership of a conquest to a commerce society was Henry VII. As a rank outsider Henry Tudor found it necessary to gain support from the gentry in his attack upon those aristocratic interests aligned against him. He not only governed with the assistance of the gentry in Parliament and as JPs in the counties, he also negotiated commercial treaties on their behalf (Elton 1955). Although Henry VIII (1509–1547) played to the aristocratic gallery in the early years of his reign with military posturing against the Scots and the French, he soon turned against the wealth and power of the ecclesiastical lords by dissolving the monasteries. To do so he needed the support of the Commons. This led to the summoning of the Reformation Parliament (1529–1536), which enthusiastically supported a king determined to break the wealth and power of the church not only because they stood to gain from a division of the spoils but also because it gave them the opportunity to promote the cause of commerce (Lehmberg 1970). While Henry’s objectives were entirely selfseeking and self-indulgent, he did make frequent use of the Commons because they represented a new class that could provide the funds he required. Elizabeth I continued the new tradition of governing through the gentry, rather than the aristocracy, in the counties as well as in London. The outcome of this policy was a doubling in the size of the Commons during the sixteenth century to 600 members and a reduction in the size of the Lords by one-third, from 60 to 40 members. Increasingly Parliament came to represent the views of the emerging middle classes. Of all the Tudor monarchs, Elizabeth made the greatest show of ruling with the consent of her ‘people’ through the Commons, largely because she desperately needed their financial support at a time of inflation, because of extensive alienation of crown lands, and because of the costly war with Spain (Elton 1955:285–6). The war against Spain was not a war of conquest but a war in defence of the commerce strategy both at sea and on land in Europe. It was a war in support of The Netherlands—that other European commerce society—against a powerful conquest nation. In defending the commerce strategy, which was largely supported by Protestant countries, against conquest societies, which were Catholic, Elizabeth was also seen as the defender of Protestantism. While both commerce and Protestantism were closely associated—because, as we shall see, a less hierarchical (or feudal) 327


religion appealed to the new men of commerce—it was for commerce rather than religion that England went to war. As this war of commerce cost much more to conduct than the substantial profits gained from plundering Spanish treasure ships, Elizabeth found it necessary to summon Parliament on thirteen occasions—about once every three years—for a total of 140 weeks which implies an average often weeks per sitting (Bindoff 1950:213–14). While Elizabeth received financial support in the Commons for her leadership of the commerce strategy, she came into conflict with them when, from 1597, they objected to her indiscriminate sale of monopolies to favoured individuals and groups. They objected because it discriminated unfairly against the rest of the middle class. For the first time, therefore, the Commons became the stage for the struggle to control the dominant dynamic strategy. In the past that stage had been either the king’s council or the battlefield. The stage of conflict had shifted because the dynamic strategy had changed. It was not so much a victory for the institution of parliament, but an early victory— for there would be many failures before the struggle would be resolved—for the supporters of the commerce strategy who had found their voice through Parliament. And it is for this reason, rather than the ‘elites’ responsiveness to popular grievances’ (Archer 1991:57–60), that Elizabethan London escaped ‘serious disorder’. A successful dynamic strategy, well led, generates the strategic confidence that holds society together. The victory and the stability were short-lived. The role played by Parliament still depended on the financial circumstances and the will of the monarch. And the Stuarts had no intention of working through the gentry as the Tudor dynasty had done. For those who believe in the fundamental irrationality of human behaviour, the seventeenth century will gladden their hearts. The Stuart dynasty failed to understand that England had been changed forever by the commercial expansion of the sixteenth century and that they were expected by the middle classes to act as leaders of the commerce strategy. To avoid being leaders of commerce the Stuarts refused to call the Commons by turning to other sources of funds. The main alternative to parliamentary approved taxes (or ‘subsidies’ as they were called) was customs duties, which were unpopular with merchants because they both interfered with trade and prevented the commercial interests having any say in how these funds should be used. Other sources of funds exploited by the Stuarts, particularly Charles I, included the selling of honours, the rights to collect taxes, and crown monopolies; feudal revenues; fines for breach of economic regulations; an income tax in 1626; and the extension of ‘ship money’ from ports to inland towns in 1635. And when these sources were not immediately available the Stuarts sought loans not from merchants or their associates, the goldsmiths, but from tax farmers who owed their wealth to the king’s pleasure (Kindleberger 1993:54). Using these methods James I (1603–1625) and Charles I (1625–1649) were able to rule for long periods without calling Parliament which refused to vote any 328


subsidies because the Stuarts failed to support the commerce strategy actively. The central issue over which the conflict between the Stuarts and the Commons raged was the Thirty Years War that broke out in 1618 (Hill 1967). While the Commons wanted England to defend the commerce strategy by attacking Spain at sea and on land as Elizabeth had done, James and Charles preferred to use feudal marriage diplomacy at first with Spain and, when this failed, with France. The outcome—the marriage between Charles and the French Catholic princess Henrietta Maria—was disastrous. In the eyes of the Commons (and some of the lords like the Earl of Essex) the marriage merely compounded the error of not vigorously defending commerce against conquest with the error of forming a feudal alliance with the enemies of commerce. Even a belated and half-hearted attempt to assist the Dutch against the Spanish and to attack Spanish ships ended in humiliation. To rub salt into old wounds Charles refused to provide English merchants either with protection against pirates in the seas around England or with protection against their rivals overseas. We are told that: ‘when English merchants sought naval protection for their trade in the Mediterranean, Charles told them not to sail there’ (Seaman 1981:254). Clearly Charles I had no idea of what was required of the leader of a commerce society attempting to attain world ascendancy. Little wonder the Commons regarded him as spendthrift and corrupt. This strategic struggle, between a monarchy short of money needed to pay for unsuccessful wars and a Commons determined to force the king to defend their commercial interests, led to a collapse of strategic confidence and to civil war. The catalyst for civil war was a conflict with Scotland which went badly for Charles, leading him to summon Parliament in 1640 to pick up the bill. Instead of responding patriotically to their monarch’s call as Charles had anticipated, the Short Parliament attacked his method of governing since Parliament’s last meeting in 1629. Charles promptly closed Parliament and resumed his war with Scotland. Further military failures led to the summoning in November 1640 of the Long Parliament which, technically speaking, was not disbanded for another twenty years. In 1641 the Long Parliament passed acts that: brought all taxation under parliamentary control and all citizens in England under the common law; prevented the dissolution of Parliament without its consent; laid down rules for regular parliamentary sittings. Even with the restoration of the Stuarts in 1660, little change was made to this legislation, which heralded a great victory for the new men of commerce over the monarchy in their strategic struggle. But to consolidate this victory in 1641, it was necessary to impose acceptance of these acts on a very reluctant king. The outcome was civil war, which began in August 1642 and ended in 1648 with a victory for Parliament and the execution of Charles I in the following year. The fascinating aspect of the civil war is that the parliamentary commercial 329


classes did not know how to go about it. From 1642 to 1645 they placed the conduct of the war unconditionally in the hands of the Earl of Essex, who assumed the role of Captain-General, because traditionally wars had been fought by aristocrats. Essex saw himself as protector of the commonwealth and the scourge of the king’s ‘evil papist advisors’. During this period, unsuccessful skirmishing took place between competing aristocrats (Adamson 1990:94–115). Only in 1645, when Essex was replaced by Northumberland, an able general under parliamentary control, and the New Model Army (a non-feudal army) was created, did the commercial classes regain control of the struggle against the king. Charles, however, had long since seen this struggle as an attempt to reduce him to the status of ‘a Doge of Venice’ (ibid.: 118)—a most appropriate comparison. The English civil war has been interpreted by Marxist historians as a conflict between a feudal aristocracy and the representatives of capitalism. Clearly this is not the case. As feudalism was a product of the conquest strategy, it declined and disappeared when that strategy was exhausted. Accordingly, the feudal aristocracy had lost its purpose with the ending of the Hundred Years War in the mid-fifteenth century, the monarchy had abandoned the hollow forms of the feudal aristocracy in the late fifteenth century, and by the early seventeenth century the majority of the so-called aristocracy had gained their titles and property with fortunes made in commerce. The reality is that the civil war—despite its confusion over military leadership—was a struggle between the new commercial interests and a monarchy set adrift from its conquest origins that, none the less, refused to lead the dynamic strategy of commerce—refused to be ‘a Doge of Venice’. This dynamic-strategy interpretation not only provides a better explanation of die rise and fall of various sectional interests, but can account for some of the apparently untidy loose ends left over after the Marxist interpretation. It is an interpretation that allows for some ‘aristocrats’ to be found on the parliamentary side and for some middle-class elements— lawyers, gentry and merchants—to be found on the royalist side. This was not a class struggle for control of the factors of production, but a struggle for control of the dynamic strategy between those who supported the king in his determination not to be an agent of commerce and those who supported Parliament’s determination that he should. Factions in this strategic struggle cut across class boundaries. In the chaos of revolution, those sectional interests responsible for starting it usually lose control to more radical forces. And to bring order out of chaos the revolution usually ends in dictatorship. The objective of the Commons was quite conservative: to achieve middle-class control of England’s dynamic strategy. But when they publicly attempted to justify and rationalize their actions, they spoke about the rights and liberties of the ‘people’. By ‘people’ they meant property owners, or what I have called dynamic strategists, not the great majority of the population who held no property. As 330


one parliamentarian of the time is reported to have said: When we mention the people, we do not mean the confused promiscuous body of the people’ (in Seaman 1981:266). A similar distinction was made at the time between ‘free men’ and ‘men who are not free’. The ‘free man’ was a man of property while the ‘man who is not free’ had no property A Member of Parliament was quoted in 1624 as saying: ‘He that hath no property in his goods is not free’ (in Hill 1961:45). Once again this is a distinction between the strategist and the nonstrategist. The civil wars of the 1640s, therefore, were initiated by conservative men who were pursuing their own sectional material interests. But inevitably the middle classes called on the lower classes for support in their wars. And among these were more radical men. In both the army and community were those calling themselves ‘Levellers’ who, after the civil wars had been concluded, demanded universal suffrage, redistribution of the land, and payment of income only to those prepared to work for a living. In the ensuing chaos Parliament was unable to assert its control. To bring order out of chaos and to provide leadership for the commerce strategy, Oliver Cromwell, who had command of the parliamentary army, imposed a military solution. He began by suppressing a number of army mutinies in 1649, by dissolving the ineffective ‘Rump’ and ‘Barebones’ Parliaments, and by suppressing rioting civilian Levellers in the streets of London; and he ended by installing himself, with the authority of the army, as Lord Protector of England in 1653—as protector not so much of the ‘people’ but of the commerce strategy over which the civil wars had been fought. With the death of Cromwell in 1658 and the resignation of his son Richard as Protector soon after, Parliament was summoned once more to Westminster. In May 1660 it voted to invite Charles Stuart to become King Charles II (1660–1685) of England. Apparently the prospect of further struggles with Stuart kings was regarded as preferable to the chaos of civil war and the oppression of military dictatorship. The ‘experiment’ with Cromwell was no more to the taste of the middle classes than that with Simon de Montfort had been to the feudal aristocracy four centuries earlier. While the middle classes had gained control of the dynamic strategy they seemed unable to devise a successful form of leadership for it. Clearly they were frightened that any attempt to elect one of their number as a type of ‘Doge of Venice’ would lead to the emergence of another Lord Protector. They returned to hereditary monarchy rather than continue the experiment with chaos. It is remarkable that the Stuart dynasty was so slow to learn the lessons of the civil war—the need for the monarchy to lead and defend the dynamic strategy of commerce. Despite the fact that the commercial classes in England and their representatives in Parliament associated Catholicism with the enemies of commerce, the Stuarts maintained contacts with Catholic France, surrounded themselves with Catholic officials, and dispensed with the Act of Parliament preventing Catholics from entering the public service. 331


After a generation of frustration, a Whig-led Parliament decided in 1688 to invite William of Orange (who had married James II’s eldest daughter, Mary), the effective ruler of the Dutch Republic and defender of the commerce strategy on the Continent, to force James II (1685–1688) from office. James, unable to convince his supporters to stand and fight, fled to France, and William sailed for London to claim the crown. This has been called the ‘Glorious Revolution’, not because of English euphoria for the new king, but because at long last the middle classes had found a true leader and defender of their commerce strategy. To prove it, William III (1689–1702) and Mary II (1689–1694) immediately involved England in the War of the League of Augsburg against France from 1689 to 1697, and the anti-French Wars of the Spanish Succession from 1702 to 1713; and Parliament readily agreed to the heavy land tax from which these expensive wars—far more expensive than those waged by the Stuarts—were financed. The childlessness of William and Mary placed the succession once more in the hands of Parliament. And they made good use of the opportunity—like the Council of Venice each time a new doge was elected—by passing a series of acts to establish a monarchy with limited powers defined by law. When George, Elector of Hanover, accepted the crown in 1714 after the death of Mary’s sister Anne (1702–1714), he did so under the terms established by Parliament. Parliament, which was in the hands of the Whigs, who represented the new commercial interests, had finally fashioned a head of state who would be leader and defender of the commerce strategy. Never again would an English monarch misunderstand what was expected of him or her. The Commons had finally created a monarch in their own image. Even the machinery of government was transformed during the emergence of the commerce strategy. Under the conquest strategy, as we have seen, the king’s laws were administered in the counties by the aristocracy working through the hundred and shire courts inherited from the Anglo-Saxons. Increasingly, from the thirteenth century, the emerging gentry became involved in local government and, by the mid-fourteenth century—when central government began to break down as the conquest strategy began to decline—they became quite powerful in the counties. This trend continued under the Tudors who, with the complete exhaustion of the conquest strategy, further undermined the role of the aristocracy. By Elizabeth’s time the Crown had no professional administrators outside London and, with the demise of the feudal aristocracy, the gentry controlled not only the Commons but also the counties. Hence, Elizabeth was only able to rule by providing what the gentry wanted—leadership and defence of commerce. As the Stuarts did not understand this simple fact—the prerequisite for their survival—they not only lost control of Parliament but also of government throughout the country. Out of this chaos a military dictator emerged and used the army to administer England. Only with the triumph of 332


the Commons after 1701 can it be said that there was a rapprochement between the central governing body and the machinery of local government. Only then did the representatives of commerce rule in both Westminster and the counties. Such an integration of governmental functions had not existed since the supremacy of the conquest strategy in the thirteenth century. The social system The second great wave of economic change in England brought with it considerable class mobility and social change. With the replacement of conquest by commerce, the wealth and status of the old feudal aristocracy declined and that of the new commercial classes rose. And as the commerce strategy unfolded during the sixteenth and seventeenth centuries a social transformation was achieved. Just as the strategic transfer did not replace the monarchy, only transformed it, so the aristocracy was not swept away, only changed compositionally. As the new men of commerce became increasingly wealthy in the sixteenth century they were quick to convert some of their windfall gains into secure assets that would generate a steady and reliable stream of income. This they had in common with the nouveaux riches of all societies examined in this book. Apart from providing a regular source of secure income, land ownership also provided the institutional means to control the sources of their wealth by directing the dynamic strategy through Parliament as MPs and through the county courts as JPs. And, of significant but lesser importance, it provided prestige traditionally associated with the aristocracy in England. The rising gentry was, as we have seen, able to purchase rural property because of the disposal of monastery lands and, later, crown lands by Henry VIII. Also, the old feudal aristocracy, which no longer had access to plunder now that the conquest strategy was exhausted, was forced to sell some of their property whenever the expenses from their extravagant lifestyles exceeded their incomes or whenever they lost money in business ventures. Those aristocrats who held on to their lands but were unable to take advantage of the wool boom were reduced in wealth to the level of, if not below, the more successful gentry crowding around them. Accordingly, the number of peers declined during Elizabeth’s reign from 62 to only 36, and even their revival to 126 in the early years of Charles I’s reign was due to the sale of peerages to the gentry, who were largely the successful sons of yeomen, merchants, lawyers, and public servants. By 1628 as many as 44 per cent of all peers were first-generation aristocrats, and by the mid-eighteenth century most noble families had recently risen from fortunes made in commerce. The lesser gentry had similar origins but lived lives of comfort in the country (Seaman 1981:223, 315). Hence the aristocracy was not swept away, just taken over by the new commercial interests. 333


The rise of the yeoman farmer in the sixteenth and seventeenth centuries, and his decline in the eighteenth century, have attracted renewed attention. Bob Allen (1992: Pt. I) explains it in institutional terms. The yeoman’s rise, Allen tells us, was the outcome of court judgements in the fifteenth and sixteenth centuries that enabled peasants in open-field villages to consolidate their property rights; and his decline was due to the invention of the modern mortgage system that enabled landlords to develop larger farms through the acquisition of freehold, copyhold, and beneficial leases. But this merely tells us about the instruments employed by the strategists to achieve their objectives. The real reason for the rise of the yeoman farmer was the unfolding of the commerce strategy that generated a demand not only for raw wool but also for food and other agricultural outputs required by the rapid growth of London and other regional urban centres engaged in the new strategy of commerce. In a similar way his decline in the eighteenth century was an outcome of the exhaustion of the commerce strategy, and the determination of the economically powerful landowners to continue to improve their living standards by greater efficiency from the larger holdings created by enclosure. This was largely achieved by reducing labour costs rather than increasing output in a temporarily static economy. As the process involved shedding labour, the burden of strategic exhaustion was shifted to the lower classes. At the end of the century, however, the enclosure movement was driven by the demands of the new technological strategy. Hence the rise and fall of the yeoman farmer were a complex response to changes in strategic demand. While the middle classes emerged and grew rich, the lower orders of society were little better off than in earlier centuries. It is just that the proportion of the population in this category declined significantly after 1500. Nevertheless, it has been estimated that, in the early sixteenth century, 20 per cent of the population were paupers, and that only the Elizabethan Poor Law Act of 1601, for all its shortcomings, stood between life and death for those unable to work (Seaman 1981:231). It was the first step along the long winding road to the welfare state in Britain. Others see England’s poor relief as playing a more positive role in economic development by underpinning a mobile labour force, encouraging the consolidation of farms and thereby ‘liberating’ smallholders, providing incentives for agricultural investment, and keeping population growth under control (Solar 1995). But whatever its precise role, this institution was the servant rather than the master of the middle classes. With the expansion of commerce in the sixteenth and seventeenth centuries came a demand for education by the sons of rising middle-class families (Charlton 1965). While the education of young children took place in the family home, a proliferation of grammar schools in the sixteenth century, established for the gentry by guilds, commercial organizations, and private 334


benefactors, competed for the attention of the older children. The subjects taught included Latin, English, literature, and arithmetic. The children of the ‘best’ families were taught by tutors at home. And those who intended to follow their fathers into the family business were provided with commercial experience after school. Following grammar school the sons of the gentry entered either Cambridge or Oxford, where classics was the main intellectual focus for the sons of gentlemen or, if they were serious about their studies, they attended the Inns of Court, which had operated as a secular university since the fourteenth century. But so great was the demand in the sixteenth century for places at the Inns of Court that the standards of teaching, by lawyers who also worked in the courts, declined. Law, of course, was a more appropriate training for intending businessmen than the classical studies of Oxbridge. On the other hand, the children of the lower orders, apart from those attending voluntary charity schools and Sunday schools, did not participate in systematic schooling until the technological strategy required skilled workers—until the lower orders had become active participants in England’s modern dynamic strategy. England’s religious institutions were also driven by the unfolding of its dynamic strategies. Christianity, which had been widely embraced as the Roman Empire stumbled into chaos, was under attack during the so-called ‘dark ages’. The Anglo-Saxons drove Christianity out of England along with the British. Their warrior-tribal society was sustained by a religious belief as hard and exacting as their short and violent lives. While they believed in a pantheon of gods, of which Woden was the head, they did not believe in an afterlife. The Anglo-Saxon attitude to life and death is beautifully expressed by the Venerable Bede in his Ecclesiastical History. He relates a story of King Edwin of Northumbria in 625 who asks Coifi, chief of the pagan priests, to tell them of the afterlife. The old wise man explains to his king: It is as if thou wert sitting at a feast with thy chief men and thy thanes in the winter-time; the fire burns and the hall is warmed, and outside it rains and snows and storms. Comes a sparrow and swiftly flies through the house; it comes through one door and goes out another. Lo, in the time in which he is within he is not touched by the winter storm, but that time is the flash of an eye and the least of times, and he soon passes from winter to winter again. So is the life of man revealed for a brief space, but what went before and what follows after we know not. (trans. by Williams 1946:67–8) For the Anglo-Saxon, immortality could be achieved only by great warriors whose heroic deeds would be told through stories around the campfires by all future generations. This heroic pagan religion provided rationalization for the chaos of life in the period of Germanic migrations. Yet while it suited a migrating tribal 335


society living (and dying) from battle to battle, it had less relevance to a more settled community of farmer-warriors in which an aristocratic elite was beginning to emerge. A more relevant religion would need to stress the new hierarchy and order of life. Christianity not only provided a more acceptable view of life for a settled society, it also presented the ruling elite with a rationale for the growing hierarchical nature of society and with an additional instrument for exploiting the lower orders. But most important of all it helped to enhance a growing strategic confidence which provides the binding agent in any society. Little wonder Christianity spread so quickly through the Anglo-Saxon kingdoms after it was reintroduced, not from Celtic sources, but from Rome by Augustine in AD 597. There is a postscript to our story about King Edwin and his chief priest. We are told by Bede that, when Coifi learnt that Christianity could tell of what goes before and what goes after the time spent by the sparrow in the lighted room, he mounted his horse, with spear in his hand, to destroy the unenlightening pagan altars. The need for such control over the populace is clear when it is realized that, according to Domesday Book, only 0.05 per cent of the population owned the entire wealth of England. While it was essential to the ruling elite that the barons hold a monopoly over military technology—the castle and the mounted knight—it was important that their brothers hold the keys to the next world—the cathedral and the priest. The castle and the cathedral, in such intimidating proximity still in Norman towns like old Durham, were the symbols of strategic control in early medieval England and Europe. On entering the Norman cathedral in Durham today one still experiences an impression of overwhelming power—an impression that every peasant was meant to experience. Contrast this with the uplifting beauty of York Cathedral built from the profits of commerce in an era when the rising middle classes were striving for greater freedom and individuality. Control can most effectively be exerted by a religious organization not only by demonstrating its power in the life to come, but also by rendering the oppressed peasantry dependent upon it for alms. This is why the medieval church was the main organization responsible for the relief of the poor. This dual control over the population of England—a partnership between lay and ecclesiastical brothers—was coordinated under strong Norman and Angevin rulers until 1172 when Henry II agreed to recognize, more in theory than in practice, the higher authority of Rome in ecclesiastical matters. It was not until his son John’s rule that the English monarchy capitulated to Rome, and the English church, like the church throughout Western Europe, became an instrument of papal authority and ambition which reached a peak in the thirteenth century (Brooke 1931). As the dynamic strategy changed from conquest to commerce at the end of the fifteenth century, the rising middle classes objected to the social control exercised by an aristocratic church at a time when the monarchy objected to papal control. With the growing wealth of the commercial classes and the 336


power of their monarch came a demand not only for influence over England’s dynamic strategy but also for some say in their relationship with God and religious observance. Hence, when Henry VIII moved against the feudal institutions of the papacy, the aristocratic church and the monasteries, he found enthusiastic support among the gentry for religious as well as economic reasons (Elton 1955:127–59). The reformed Church of England, under the leadership of the English monarchy (rather than the Italian papacy), with its prayer book in English (rather than a mass in Latin), and the dissenting chapels, was much more to the taste of the new men of commerce (Dickens 1964). They needed a religion that provided them with reassurances concerning the uncertainties and mysteries of life in a world threatened by larger conquest societies, and they wanted a religion that was thoroughly English and in step with their commercial interests and material achievements. They wanted a new spiritual—as well as a new secular—leadership for their dynamic strategy. And they wanted an ideology that would keep the lower classes in their place. But not just an ideology. The new commercial classes wanted to exercise control over the lower classes to protect the sources of their wealth by shifting the dependency of the masses from the old church to private foundations and, under Elizabeth, to the state over which the new strategists were gaining increasing control. Hence, it was the strategic transfer rather than the ‘rise of the nation state’ (Clegg and Reed 1994) that accounts both for the decline in church alms and the increase in secular social services from the early to mid-sixteenth century. It is a strategic rather than an institutional explanation. In any case, the nation-state in England has much earlier origins. The struggle between Parliament and the Stuart dynasty for control of England’s dynamic strategy unleashed chaotic forces not only in politics but also religion. In the mid-seventeenth century Puritanism burst forth in many guises, ranging from Presbyterianism to various radical sects, and it threatened to sweep the established hierarchical church away. This was prevented by Oliver Cromwell who, in 1653, dissolved the Barebones Parliament. With the Restoration in 1660, Parliament finally exerted supremacy over the established church and removed ultimate authority from the bishops. The bishops were also stripped of political power and the clergy were taxed along with the laity (Hill 1961:242–5). Hence the church was forced to contribute to the dynamic strategy of the men of commerce. While Parliament found it necessary for their own survival to grant freedom of religious expression to the dissenters (under the Toleration Act of 1689), they excluded them from political life, from attending English (but not Scottish) universities, and from professional organizations (ibid.: 246, 292–3). And through an alliance between squire and parson, the men of commerce exerted effective control over the rural population. As always, religion was used by the strategists to manipulate the nonstrategists: it changed in response to ‘capitalism’ rather than the other way round as some, like Max Weber (1930) and R.H.Tawney (1926), have argued. 337


The technological society The third great wave of economic change from the mid-eighteenth century was driven by the new dynamic strategy of technological change. It was this strategy that enabled Western Europe to break free from the eternal recurrence of war and conquest. It was this strategy that led to the technological paradigm shift we know as the Industrial Revolution. This argument about a technological paradigm shift—an economy-wide search for new ways of producing goods and services—gains support from the sudden and widespread nature of invention in England in the late eighteenth century: ‘in a brief period of time, across a large part of the English economy, the amount of invention dramatically increased’ (Sullivan 1990:361). The conquest→commerce→technological change sequence of dynamic strategies has been the cause of much misunderstanding. Most observers have looked at the institutional outcomes of this strategic sequence— feudalism, mercantile capitalism, industrial capitalism—and have assumed that it is a causal sequence and that it is unidirectional. This is the danger of drawing generalizations from only one phase of history in one part of the world, and of focusing on ephemeral institutions rather than on eternal dynamic processes. There is nothing unidirectional, irreversible, or inevitable about the feudal→mercantile→industrial institutional transformation or its underlying conquest→commerce→technological strategic sequence. It all depends on underlying changes in factor endowments and future capacity of the prevailing technological paradigm. No other society had ever experienced this sequence in the past. The city-states of ancient Greece went through a conquest→commerce→conquest strategic sequence; Venice experienced a commerce→conquest sequence; Rome managed only the single dynamic strategy of conquest before finally collapsing; and Tenochtitlan, which was cut down by the invading Spaniards in its prime, would have gone the same way as earlier Mesoamerican societies and as Rome. The great good fortune of England, and the rest of Western Europe, was to time its run for world dominance during the last millennium of the neolithic technological paradigm. Had England’s commerce strategy exhausted itself long before the neolithic technological paradigm itself approached exhaustion, it either would have been taken over by an existing conquest society (France or Spain), or it would have reverted to the conquest strategy itself, as ancient Greece did in the fifth and fourth centuries BC. So much modern thinking about the present and future is based on the assumption that there is something normal or inevitable about the feudal→ mercantile→industrial sequence. Marx, for example, regarded it as evidence that human society was on its way to a new and final form of human organization. Communism, he believed, would mark the end of history, the end, in my terms, of the Dynamic Society. Modern institutionalists also see 338


this institutional sequence as part of an irreversible evolutionary process. But this is not so. What superficially looks like the evolution of institutional forms is the outcome of a unique and fortuitous combination of underlying dynamic forces. These institutional outcomes are the response of a dynamic engine of change operating within a responsive economic/physical environment. As we saw in The Dynamic Society (1996: Chapter 12), the interaction between the dynamic engine and its environment leads to the emergence of opportunities for human agents to pursue different dynamic strategies in their quest for survival and prosperity. A few detailed examples will establish this point. The emergence of parliamentary government in England is typically seen as the outcome of an evolutionary institutional process. On the contrary, it was the outcome of the more fundamental strategic sequence of conquest→commerce→technological change, which was not at all evolutionary. Parliament emerged in response to the needs of a monarchy for funds to fight its wars and to die demands of the new men of commerce to have a say in how their taxes were being employed. But it continued to develop into the institution we know today only because the conquest strategy was succeeded by the commerce strategy from the late fifteenth century; because the commerce strategy continued to unfold, thereby placing considerable economic power in the hands of the middle classes, until it was exhausted by the mid-eighteenth century; because the commerce strategy was replaced by the technological strategy, thereby placing economic wealth in the hands of the new industrial middle classes who in turn struggled for control of government; and because the technological strategy has continued to unfold and to place greater wealth and political power in the hands of the working classes. In a different environment the exhaustion of the commerce strategy would have been followed by a return to the conquest strategy, under which the earlier economic, political, and social gains made by the middle classes would have been appropriated by a re-emergent military elite. Parliament would have been suspended or abolished and other political and social institutions would have become more hierarchical to exclude the involvement of the majority of the population. The same is true of the emergence of the market in Western Europe. If commerce had been followed by conquest rather than technological change in England during the nineteenth century, commodity and factor markets would not have continued to become more efficient. Efficiency is the goal of the technological but not the conquest strategy. What is essential in pursuing conquest is to have greater military power than other societies. In a nonindustrial world this is achieved through investment in military skills rather than in productive efficiency. Economic growth is generated in a successful conquest society by territorial acquisition and plunder rather than the production and exchange of commodities and services. Conquest societies are command economies, in which markets can be highly constrained and even abolished as in the USSR. Markets for capital, land, and labour would 339


be replaced by a system of central directives, and commodity markets would be subordinated to military directives. The emergence of markets, therefore, is not a unidirectional or an evolutionary process, as scholars such as North (1981) and Hayek (1988) believe, but depends on the nature and timing of various dynamic strategies, which can result in the reversal of earlier tendencies towards greater freedom and efficiency. The economic system The adoption of the technological strategy ushered in an economic system in which extraordinary profits could be generated through innovations in production—in the form of either new products or new processes—business organization, and distribution. Hence, while the objective is as old as human civilization, the method of achieving it is uniquely modern. The objective is to gain monopoly access to resources, commodities, or markets, and the method is innovation. Before the Industrial Revolution this same objective was achieved either through territorial acquisition, favoured location, negotiation, or intimidation. What we need to discuss here is how the modern economic system works. In the technological society, the incessant search is for any increase in either efficiency or novelty that provides a competitive advantage. This is what is new and distinctive about the technological strategy. Before the modern epoch, strategists sought to maximize their prospects of survival and prosperity not through novelty and efficiency, but through a physical advantage over their competitors. This is why in ancient societies technology changed only slowly if at all. And the only reason technological change occurred more rapidly in medieval Europe than in the ancient world is that, in their pressure-cooker environment, the conquest strategy was not as successful as it was for Rome. Hence a degree of technological change was necessary to generate the revenue necessary to pay for unsuccessful wars. Similarly, in Song China technological change was necessary to finance defence against neighbours who were not worth conquering. As the pursuit of efficiency is a modern quest, contemporary theories about its role in institutional change cannot be applied to the pre-modern era. Rondo Cameron (1989:155), for example, says of the European conquest societies of the seventeenth century: In Spain and France…the fiscal demands of the crown made it impossible for the government to pursue consistently a rational policy of economic development.’ Owing to a modern fixation with efficiency, Cameron does not recognize that the pursuit of the conquest strategy can, under appropriate conditions, be economically rational and that it can produce rapid economic development. He continually udges societies pursuing conquest as either absurd or unenlightened (ibid.: 139, 138), because they attempt to maximize their material advantage by means other than efficiency. Also, like Adam Smith, 340


Cameron is concerned with the inefficiency of Britain’s Navigation Acts in the mid-seventeenth century, when in fact they were instruments of the commerce and not the technological strategy (ibid.: 157–8). Commercial monopoly was what the British were after, not efficiency. Since Adam Smith most economists have shared this unfortunate preoccupation. Douglass North, as we have seen, is also unable to understand the apparent perversity of France and Spain in the early modern period. He tells us that ‘the benefits of improving the efficiency of markets were in France sacrificed to the fiscal needs of the state’ and that, in the case of France, ‘the structure of property rights that evolved in response to the fiscal policies of the government simply discouraged individuals from undertaking many productive activities’ (North 1981:150, 151–2). The simple reality is that France and Spain were pursuing conquest rather than efficiency. And while their faith in the conquest strategy was, with hindsight, ultimately misplaced, during the sixteenth and seventeenth centuries war generated extraordinary profits. Much is made by the new institutionalists about the institutional prerequisites for the Industrial Revolution. As I have already suggested, this approach implies that there was only one path to technological transformation. Clearly this is not the case, as the Industrial Revolution could have occurred within a number of different institutional settings. A contrasting example to the British case would be a society with a strong central government operating through a hierarchical organizational structure, possibly in response to war. Such a technological breakthrough would have occurred because of the powerful pressures and incentives generated by the exhaustion of the neolithic technological paradigm. The institutional change delivered by the commerce strategy in England merely ensured that, if the Industrial Revolution was to occur there, it would be the outcome of individuals working through the market. The institutions of England ensuring that die Industrial Revolution would be the outcome of individuals working through the market include a laissezfaire economy, a legal system that defended individual rights and private property, a political system that provided enterprising individuals with the opportunity to defend their sources of wealth, and an educational system that could provide the skills required by the unfolding dynamic strategy. I will deal with the laissez-faire economy here and the other institutions in later sections. Before I do, it needs to be emphasized again that these institutional matters were not preconditions for the Industrial Revolution, merely the institutional path it would take if it occurred first in Britain. The mechanism for the type of technological transformation experienced in Britain was the freely operating market that was responsive to individual decision-makers. If private individuals were to maximize returns on their investment in the new technological strategy it was necessary to introduce free trade and to reduce government intervention. The system that had facilitated the commerce strategy would not facilitate the technological 341


strategy, because the former was based on the principle of monopoly and the latter on efficiency. Hence it was necessary to clear away the Navigation Acts, the Combination Acts, the Usury Laws, the Statute of Apprentices and other Elizabethan labour statutes, the Corn Laws and other controls on imports, and other monopolies and special privileges (Checkland 1964:325– 44; Engerman 1994b:196–203). But it was also necessary, as Adam Smith (1776) warned, for the state to provide for the protection of society from internal and external violence, to prevent the strong taking undue advantage of the weak, and to provide beneficial public goods that are not in the private interest to supply. As successive British governments discovered for themselves, to maintain social order it was necessary to pass additional laws in the areas of public health, sanitation, education, industrial relations, welfare for the poor, and slavery. And to protect the property of the business class the government was able and willing to use force, at first through the armed forces and, from the 1830s, through the police forces of the major cities (O’Brien 1994:216–20). But public expenditure on law and order was minimal in the eighteenth and nineteenth centuries owing to the honorary role played by the gentry in the judicial system and to the improving condition of the working classes from 1820. The competitive drive to efficiency since the Industrial Revolution has led to continuous change in the nature of commodity and factor markets. Once again, this is not an evolutionary process but one determined by the unfolding of the technological strategy. And with this unfolding the technological strategy has reached into every facet of our lives, bringing together buyers and sellers of goods, services, and factors of production, both within and between nations. This has been effected by continuous change in the means of transport and communications. From the late eighteenth century there have been major changes: in roads and the vehicles travelling upon them; in canals, in two bursts from the 1760s to early 1770s and in the 1780s and 1790s; in steam-powered railways that connected towns across the face of England (from the 1830s to the 1850s), Europe, America, and elsewhere; in metal ships driven by steam (from 1820s) and diesel; and, during the twentieth century, in motor vehicles, trams and buses, aircraft, and super fast trains (Deane 1965). And in the field of communications we have travelled from the penny post (1840) and halfpenny postcard (1871) to the telegraph (1838), telephone (1879), radio (1920s), television (1936), satellite communications (1962), faxes (1970s), and to the Internet in the 1990s through an amazing expansion of personal computers. Through all these means, innovators have earned extraordinary profits and the followers have cashed in on their discoveries. Underlying these changes in transport and communications has been the emergence of a number of technological styles within the prevailing industrial technological paradigm. These technological styles, which have 342


emerged as the industrial technological paradigm has unfolded, include: the use of steam-powered iron machinery produced from coke (1780s to 1830s); the use of steel, synthetic chemicals, and more complex machinery (1840s to 1890s); the use of electricity and the internal combustion engine (1900s to 1950s); and the use of automated processes, microelectronics, lasers, new industrial and construction materials, and biotechnology (since 1950s). These technological styles were developed by decision-makers pursuing extraordinary profits in a competitive global environment (see Chapter 12). In the period before the 1840s, British entrepreneurs were the strategic pioneers, but increasingly thereafter that mantle was assumed by entrepreneurs in Europe, America, and Japan. Increasingly, British decisionmakers followed the strategic pioneers elsewhere. This is not to say, however, that the British ceased to be innovative, just that they lost their monopoly on innovation as the modern technological paradigm spread from the First Industrial Nation to the rest of the world. To facilitate these technological changes in markets and information systems, institutions have gone through equally rapid changes. After the eighteenth century, when Hanovarian governments resisted the new requirements of industry, there were changes in the legal system continually to redefine private property rights, the financial system, the labour market, the land market, and the commodity market—all too detailed to discuss here. Small, self-financing local enterprises that gave rise to the Industrial Revolution in England have been transformed into, or replaced by, large-scale and highly capitalized national and multinational corporations which embody a separ-ation between the ownership and management of resources (Kindleberger 1993:187; Jones 1996:23–59). This has necessitated further changes in commercial law. As always, the rules of the game have lagged behind the way the game is played (O’Brien 1994:229–41). Also, large extended families relying on the labour of female relatives or employed domestics have yielded to small highly capital-intensive households that rely less than before on female labour as the technological strategy continues to unfold (Snooks 1994a). All of this is the result of numerous individuals striving to maximize their material advantage through the modern quest for efficiency. These institutional changes can be illustrated by reference to the capital market. Before 1750 there were few banks outside London, perhaps no more than ten or twelve (Kindleberger 1993:81–2). The Bank of England did not operate outside London because the metropolis was the centre of England’s commerce strategy. Only with the emergence of technological change as a dominant strategy from the late eighteenth century were ‘country’ banks established. These arose from the needs of industrialists and associated businessmen for working capital and coin of small denomination to pay their workers. Country banks grew very rapidly from the mid-eighteenth century, so that by 1810 they numbered about 800 (Cameron 1989:169). But this early success foundered on the rocks of the 1825 bank crisis, which made 343


Parliament rethink its attitude to joint-stock organization for banks. As the Scottish joint-stock banks were better able to negotiate the crisis, Parliament passed an Act in 1826 that gave the Bank of England a monopoly over jointstock banking within sixty-five miles of London, and ensured competitive joint-stock banking everywhere else (although the limited liability enjoyed by the Scottish banks was not granted in England until 1856) (Kindleberger 1993:86). Other evidence also suggests that integration of regional markets into a national capital market did not occur until 1770 to 1820, the period of the Industrial Revolution (Buchinsky and Polak 1993). The growth in bank numbers, however, was reversed between 1870 and 1939 through amalgamations and takeovers (Capie and Wood 1994), as the unfolding technological strategy led to a drive for greater efficiency. Monetary regulation, which had been left to the Bank of England and to an adherence to the gold standard before the Second World War, increasingly became an instrument of government policy thereafter (Howson 1994), as Britain’s control of the global technological strategy became insignificant. The political system How has the vehicle of England’s dynamic strategy changed throughout the conquest→commerce→technological-change sequence? Conquest saw the rise of the nation-state; commerce the transformation of the nation-state into a maritime empire with London as its metropolis; while the unfolding of the technological strategy has led to the re-creation of the nation-state, the dismantlement of empire, and the move to economic and political union with its archrivals of the previous millennium. This trajectory traces out the changing fortunes of Albion. The dynamic process underlying this trajectory is of considerable importance. With the introduction of the technological strategy, which led to the Industrial Revolution, Britain was able to generate extraordinary profits from new products and processes within its own borders. Innovation, as we have seen, replaced monopoly access to resources and markets as the engine of growth. In this way England gained a competitive advantage over its neighbours and created a wealthy and powerful nation-state that no longer depended heavily on its overseas possessions. While the post-industrial empire—the new empire—assisted in the penetration of overseas markets, it was not essential to England’s new dynamic, as the successful dismantlement of the British Empire in the mid-twentieth century clearly demonstrates. As the technological strategy unfolded in the West, other nation-states, such as France, Germany, and the USA, applied the latest production and organizational techniques and participated in the extraordinary profits (economic rents) that Britain had enjoyed as the first industrial nation. And in the process, Britain’s extraordinary profits were eroded. In response, Britain attempted during the interwar years to protect its economic position 344


by turning to its Empire—with the slogan ‘men, money, and markets’—as a buffer against growing international competition (Hancock 1940). By the 1940s this temporary solution was shown to be untenable owing to the different economic interests between Britain and its Empire and to the growth of the mega-states of the USA and USSR. Since the Second World War the growing competition between the mega-states has forced old foes in Europe to abandon their empires, to bury their differences that stretched back more than one thousand years, and to begin the process of building a European mega-state that could compete with those in the rest of the world. Hence the unfolding of the technological strategy, which will extend into the future, has taken Britain from control of empire to active participation in a new mega-state. Within this transforming eco-political system a number of important institutional changes, which were driven by strategic demand, have taken place. They include the transition from a ‘limited’ to a ‘constitutional’ monarchy and the emergence of universal suffrage, and are concerned with control of the technological strategy. Although these institutional changes built upon the foundations laid down in the commerce phase, they did not evolve automatically from them. Had the underlying economic conditions been different, and had the commerce strategy been followed by conquest rather than technological change (as in ancient Greece and Venice), these institutions would have turned back upon themselves and government would have been hijacked by a new military elite. The unprecedented economic transformation that took place in England during the reigns of George III (1760–1820) and George IV (1820–1830), greatly increased the wealth and, hence, the political power of the industrial, commercial, and landowning classes represented in the Commons. And with the growth of this wealth and power, the authority of the Commons, relative to that of the Crown, increased significantly. These self-confident new men of wealth were more than a match for the Georges, father and son (Plumb 1966:92–180). From 1788 the father’s influence was weakened by a debilitating disease, while the son’s influence was limited by a debilitating character. The monarchy’s declining influence is reflected in the Georges’ ineffectualness (and that of the rest of the family) in determining the issues of Catholic rights and what party should dominate Parliament. While they both stood in the way of Catholic emancipation from civil and political inequalities, this was finally granted in 1829; and when the king (William IV, 1830–1837) attempted to replace a Whig with a Tory government, Parliament turned to the ‘people’ (that is, those who influenced the dynamic strategy) and a Whig government was returned. By the 1840s the supremacy of Parliament was finally accepted when Victoria and Albert acknowledged the principle of constitutional monarchy. From that time it was generally accepted that state sovereignty resides in the prime minister and cabinet who 345


are responsible not to the monarch but to Parliament which, in turn, is responsible to those—the ‘people’—who elect them. English parliaments, if not kings, have always held the view that they are responsible to the ‘people’. But over time the composition, if not the definition, of the ‘people’ has changed as the dynamic strategies have unfolded and been substituted one for the other. The ‘people’ are always those who influence and benefit from the successful pursuit of the dominant dynamic strategy. In the conquest phase the ‘people’ were the tiny proportion (about half of 1 per cent) of the population lucky enough to be the king’s tenants-in-chief; in the commerce phase they were the landowners, merchants, and financiers who invested in and profited from the wool and associated trades; and in the technological phase they were initially the new owners of industry and, later, also the working classes. With the growing wealth of the new owners of industry and their purchase of land in imitation of the commercial gentry came an increasing representation of their interests in Parliament. And as their representation increased, they struggled against the old gentrified commercial interests for control of the dynamic strategy in order to defend and increase their hold over the sources of their wealth. But this was a lengthy process owing to the entrenched positions of the gentrified commercial classes and to their alliance with the aristocratic landowners. And it was delayed by the ‘defection’ of some of the new men to the peerage: in 1735 some 13 per cent of members of the Commons were the sons of peers but, by 1826, this had increased to 25 per cent (Seaman 1981:366). An early victory for the pioneering industrialists can be seen in legislation passed during the second half of the eighteenth century designed to facilitate the long-term development of the cotton industry (O’Brien et al. 1991). What is of particular interest about the strategic struggle that took place when strategic exhaustion coincided with paradigmatic exhaustion—a time when society is particularly vulnerable to crisis—is that its intensity did not escalate as might have been expected. This was entirely fortuitous. The new technological strategy not only provided scope for the new industrial strategists to earn extraordinary profits, but it also made it possible for the more ambitious and flexible elements amongst the old commerce strategists to rebuild their fortunes. The reason is that the new technological strategy generated new products and new processes that enabled British merchants to make rapid inroads into overseas markets and to share in the new profitability of the First Industrial Revolution. And there was no attempt by the old strategists to manipulate the discontent of craftsmen and labourers (the nonstrategists) in the second half of the eighteenth century about the employment implications of the new industrial machinery (Ashton 1961:228– 31). The conflict between the old and the new strategists, therefore, merely led to struggles within Parliament rather than on the battlefield as had occurred in the seventeenth century in England and the late eighteenth century in France. 346


A central issue over which the old and new strategists battled in Parliament was the protection of agricultural production. The landowners, who were responsible for the Corn Law of 1815, wanted to keep wheat prices as high as possible—in order to maintain rents—by excluding wheat imports until starvation of the poor seemed highly probable, whereas the industrialists wanted to keep the prices of food and other raw materials as low as possible in order to pay minimum wages and to keep down their production costs. Industrialists were also keen to promote the import of primary products to increase the purchasing power of foreign buyers of their own manufactures (Checkland 1964:353–8). This struggle—which took place against a background of community agitation by the Anti-Corn-Law League representing the new middle-class interests, popular unrest, and the potato famine in Ireland—was not finally resolved until 1846 when the Corn Laws were repealed (Harley 1994:309–18). It was because the landowners knew they were making a last stand that this struggle was so prolonged. But in the end it was a victory for the supporters of the new dynamic strategy. The Corn Law issue, which can only be examined satisfactorily in a dynamic context, has long attracted the interest of economists who have employed comparative-static models, both partial and general, in an attempt to sort out whether the arguments used by both sides make any economic sense, and whether repeal of the Corn Laws made British society better off (Robbins 1935; Bliss 1996). There are a number of problems with this procedure. First, the entire approach is wrong-headed. What we need to understand is why decision-makers in the mid-nineteenth century did what they did, rather than whether or not their arguments conform with modern theoretical models. The latter has only academic interest. As we have seen, the middle class was struggling for control of the dynamic strategy and was prepared to employ not only any persuasive rhetoric available (including the theoretical arguments of the classical economist David Ricardo) but also the threat of social unrest. This is why they mobilized the working classes and argued that the repeal of the Corn Laws would improve their living standards. While the Anti-Corn-Law League may have believed their own rhetoric, the important issue is whether it was effective rather than whether it was true. The general equilibrium model used by Jeffrey Williamson (1990) suggests that the Corn Laws imposed a substantial tax (up to 22 per cent) on manufacturing activities, and that they reduced the living standards of workers. Second, it is irrelevant whether society as a whole was better off as a result of the repeal of the Corn Laws—an issue that stimulated economists to develop welfare economics (Hicks 1939; Kaldor 1939)—only whether the new dynamic strategists were better off, because only they had the wealth and power to succeed. Third, comparative-static models, either of distribution (as employed by Ricardo) or of welfare, do not capture the real benefits and costs that motivate the dynamic strategists. We need a dynamic model to do this, such as the dynamic-strategy model employed in this study. 347


The manufacturers were interested in achieving the expansion of industrialization and the growth of the economy. As it turned out, these dynamic objectives led to an improvement not only in their own living standards but in those of the rural workers and landlords, as well as the proletariat, owing to the greater efficiency induced in agriculture by greater international competition. The last stand of the conservative landed aristocracy in the Commons led to considerable unrest throughout the country between the 1770s and the 1840s (Ashton 1961:228–31). Food riots flared in 1795,1800–1801, and 1811– 1812, fuelled by craftsmen and their families (rather than labourers); and after the Napoleonic Wars hunger marches by working people wound their way through most large cities. This unrest culminated in the infamous incident in 1819 at St Peter’s Fields in Manchester, mockingly called ‘Peterloo’, in which eleven people died and hundreds were injured after troops charged into the crowd. The Tory government, sensing major social repercussions, overreacted by passing the oppressive Six Acts of 1819 against public assembly and free expression, and by charging and executing five of the Peterloo leaders in 1820 (White 1957:176–92). This excessive reaction so shocked public opinion that Peterloo became a turning point in the struggle between the landed interests and their opponents for control of the dynamic strategy. From this time the Canning faction in the Tory Party—namely Peel, Gladstone, and Palmerston—decided to proceed with a degree of social and economic reform (Blake 1970). The opposition of the more conservative Tories to any reform on the grounds, quite realistically as it turned out, that it would be the beginning of the end of their power and influence, led to a split in the party that allowed the Whigs to regain power under Lord Grey in 1830. Anxious about the prospect of the lower orders entering Parliament, Grey proposed an extension of the franchise to the property-owning lower middle classes—consisting of small businessmen, shopkeepers, innkeepers, and other dealers—as a way of reducing popular agitation and of uniting the middle and upper classes to deny the vote to the lower classes. The Lords, fearful of the growing unrest in the face of their initial opposition to these limited reforms, gave way. The outcome was the 1832 Reform Act which made a gesture towards more equal electorates, increased representation of industrial towns, and extended the vote in the counties to the more prosperous tenants (who were expected to vote with their landlords) and in the towns to £10 householders. This electoral reform was a victory for the middle classes who had participated in the introduction of the technological strategy. The lower orders, however, had to wait until the unfolding technological strategy demanded and rewarded investment by the workers in human capital required by the new industrial and service activities. Working-class political organization in Britain has a long history beginning with the medieval guilds (Postan 1975:241–5). Guilds, which were combinations of masters and journeymen, could be found in all the 348


major urban crafts. They were responsible for determining conditions of entry through long apprenticeships (usually lasting seven years), standards of workmanship, and price levels. But if they attempted to strike to enforce their objectives they could be punished under the common law of ‘conspiracy in restraint of trade’. During the seventeenth century, changes in the nature and structure of industry led to a growing gulf between the interests of the journeymen and their masters, who often became flourishing businessmen. To protect their separate interests the journeymen combined to form ‘friendly societies’ that provided insurance against sickness, old age, and premature death. They were later used to protest against the growing unemployment in their ranks as the Industrial Revolution introduced new machinery, particularly in the textile industry. To combat this industrial action, laws against combinations were passed in Parliament in 1799 and 1800. While combinations had always been illegal, these Acts introduced summary trials. Even when they were finally repealed in 1824 and 1825, working-class combination was restricted to issues of wages and hours of work (Pelling 1963:13–32). While the initial stages of the Industrial Revolution were de-skilling, the unfolding technological strategy generated a growing demand for increasing numbers of skilled and semi-skilled factory workers. This took place as the capital-intensive factory system spread throughout the urban areas and displaced the former artisans. As we shall see, working-class combination was usually only pursued, and certainly was only effective, as the various sections of the working class gained skills that were essential to their employers. The demand for skilled factory and building workers—particularly engineering tradesmen, boilermakers, carpenters, and joiners—grew rapidly from the early nineteenth century. This led to the first stirring of skilled union activity in the 1830s which resulted in employer recognition of the Amalgamated Society of Engineers by the 1850s and the Amalgamated Society of Carpenters and Joiners by the early 1860s. Building on this success, the working-class movement established the London Trades Council in 1860 and the Trades Union Congress (TUC) later in the decade. In 1871 trade unions, in recognition of their essential role in the new economic system, were finally given legal status by Parliament; and the TUC established a parliamentary committee to provide electoral support for, and to lobby, Liberal parliamentarians (ibid.: 33–58). Skilled workers by the 1870s, therefore, were preparing to take their cause into the strategic centre of British society. Beginning in the 1870s semi-skilled workers—who could now be numbered in hundreds of thousands—also began to organize their own unions. And by the 1880s they were joined by the so-called ‘unskilled’ workers who, like their more skilled colleagues, were investing in human capital through both general formal education and on-the-job training. They formed the basis of the more aggressive ‘new unionism’, which managed to survive the economic difficulties of the 1890s ‘because many of the so-called 349


unskilled labourers in fact had a real degree of skill which gave them scarcity value and so bargaining strength’ (ibid.: 102). In other words, even the least skilled workers had responded to the unfolding technological strategy by investing in the necessary general and specific human capital to become participants in, and beneficiaries of, its future development. Accordingly, they added their voices to those of their more skilled colleagues for a say in the direction of the dominant dynamic strategy. Because of the confusion introduced by Karl Marx and his followers, it is essential to emphasize that the workers and the middle class were not struggling against each other to achieve victory for different and competing dynamic strategies. They were not, in other words, in conflict regarding the overall direction of the Dynamic Society. Both groups had invested in, benefited from, and supported the technological strategy. On the one hand, the industrialists, financiers, and professionals invested in physical and human capital embodying new ideas, while the working class invested in human capital and experience. Both groups had a vested interest in the success of the technological strategy and had accumulated assets from the returns paid to their respective investments. Accordingly both groups had much to lose if the technological strategy failed. What they could not agree about was how the jointly determined income from this strategy should be distributed. Here there was room for negotiation through the tried and tested institution of Parliament. Hence the industrialists and the workers were, by the mid-nineteenth century, co-dynamic strategists, and their real opponents were the old gentrified commercial interests. Marx misjudged not only the fundamental dynamic of society but also the nature and the degree of disagreement between the ‘capitalists’ and the workers. The reason is that he saw both groups as owners of the means of production rather than as participants in the technology strategy. He failed to see that they were co-strategists—partners in the pursuit of the technological strategy. If one side of the partnership fails, then so will the other side. They rise and fall together. He failed to see that there was no alternative strategy to technological change except conquest, which would have plunged the working class back into the role of cannon fodder and back into abject poverty. He failed to see that there were well-defined limits to the range of income that was open to negotiation between these partners. And those who have followed him have failed to see that their destructive attacks upon capitalism are also attacks upon the class they claim to represent. As the technological strategy required the support of the working classes, it was only a matter of time before they obtained the economic clout required to enter Parliament and to influence economic policy. When Lord Derby introduced his Reform Act of 1867 to extend the vote to all male householders in the towns, it was received with general agreement by the Whigs and with only minor, if heated, opposition from the more conservative Tories. And the subsequent 1884 Act to extend household suffrage to the 350


counties was treated as a matter of course. Yet there was still resistance to the idea that men without property had any stake in the nation, and it was not until 1918 that universal male suffrage was granted, thereby ensuring that the Labour Party would become the alternative government. Women were not granted the vote until 1928, when at long last it was accepted—owing to their new economic role—that the ‘people’ who should be represented in Parliament included the entire adult population, both male and female. This was implicit recognition, for the first time in the history of Britain, that all the people had a stake in the dynamic strategy of the nation, that all the people had become strategists. By the early twentieth century, the party structure we know today was emerging. The essential characteristic of the British political system is that, while each party represents fairly well-defined sectional interests that get a little fuzzy around the edges, all parties support the dominant dynamic strategy of technological change. This is very different to those periods of transition from conquest to commerce and commerce to technological change, when different political groups supported different dynamic strategies. Such differences have led to civil war. Occasionally some groups outside Parliament—either rebel employer or employee organizations—act as if they have forgotten that the prosperity of all depends on the successful pursuit of the technology strategy. This can be seen in the destructive action of the TUC in the early 1970s when it defied both the Wilson (Labour) and Heath (Conservative) governments by refusing to accept legal limits to its power and by treating the elected representatives of the people as their enemies. Whatever the eventual outcome—in this case the final defeat of the TUC by the Thatcher government in the mid-1980s— such action is self-defeating. Ultimately the technological strategy must be defended by the state. The economic policies of both major parties in support of the technological strategy are very similar. Probably the main contentious issue has been the attitude to the extent of government ownership of major industries since the early 1920s (Millward and Singleton 1995). In the past the Labour Party has favoured the nationalization of large financial and industrial organizations but in the 1990s both major parties accept the argument that greater efficiency can be achieved through private enterprise. Efficiency is the objective today throughout the political spectrum (save one—the Green Party—which will be dealt with in Chapter 13). The only real difference, and this is fairly marginal, concerns the pattern of income distribution. Today there is agreement across the mainstream parties that, for the majority of citizens, markets should determine not only wage and salary differentials but also the returns on capital, land, and real property. But, while the market framework is generally accepted, special interests groups—such as farmers, other business concerns, and unionists—lobby the 351


respective parties, just as they have always done, for regulations that limit competition and redistribute income in their favour. The main debate, however, rages over the casualties of the modern technological society—over the welfare state. And even here the difference is not as great as the parties would have us believe. With both major parties gaining power in the postSecond World War years, government social expenditure has risen steadily (except during the Thatcher years) from one-tenth to over one-fifth of GDP (Johnson 1994:284). This is due not to the growing altruism of British taxpayers but to the growing strategic influence of the working classes. The modern Conservative Party had its origins in George Canning’s reakaway from the reactionary group of Tory MPs in the 1820s (Blake 1970). This party went on to attract support from the Whigs dissatisfied with the crusade to grant Irish home rule by the Liberal Party under Gladstone between 1868 and 1874. From this time the Conservatives, under Benjamin Disraeli, came to represent the interests of the industrial/ commercial/ landowning sections of British society; and the Liberals, apart from a brief period under David Lloyd George (1916–1922) when they represented industrial and working-class interests, increasingly came to represent the more esoteric and ideological interests. The political scene changed, modestly at first, when the Independent Labour Party was established in 1893, but it was not until the defection of a large number of Liberal Party members before and after the First World War that Labour acquired a substantial presence, not until 1918 that they had the numbers to act as an alternative government to the Conservative Party, and not until 1945 to 1951 that they were able to rule in their own right—they had formed minority governments in 1924 and from 1929 to 1931 with the support of the Liberal Party (Pelling 1963:169–71, 190–3). Finally, in the mid-twentieth century the representatives of the working classes were able to take control, albeit briefly, of the technological strategy and to deliver to their constituency a larger share of the spoils. The legal structure in England also changed as the technological strategy unfolded. As we have seen, common law in England had emerged as the monarch struggled with the aristocracy to gain full control of the conquest strategy. His eventual success led to the breakdown of feudal administration. During the ascendancy of the commerce strategy, common law was extended to include law concerning the activities of merchants that had been worked out in specialized commercial courts and arose from the determination of the new men of commerce to protect their livelihood. This legal system was conducive to the early development of a British industrialization that was based upon small-scale enterprise. Only when the unfolding of the technological strategy required more capital-intensive techniques and largerscale enterprises was it necessary in 1825 to repeal the 1720 Bubble Act, which prohibited the formation of joint-stock companies without special 352


parliamentary charters. But it was not until 1862 that limited liability was made generally available. Hence, when the need arose, it was possible to reshape the flexible system of common law to facilitate the changing nature of the new dynamic strategy. At all times strategic demand was the driving force in legal institutional change, while relative institutional prices merely determined the form that this change would take. But English common law was not the only legal system able to facilitate the technological strategy. Where history and relative institutional prices are different, owing to institutional responses to strategic demand in the past, the institutional systems will also be different. In France, the continued pursuit of the conquest strategy well into the eighteenth century meant that a more centralized administrative and legal structure, based on Roman sources, persisted beyond the Middle Ages into the modern world. And it was the difference in dynamic strategy rather than the difference in institutional arrangements, as argued by some scholars (O’Brien 1996), that was responsible for the slower adoption of the Industrial Revolution in France than in Britain. This institutional persistence exacerbated the struggle between the old order—the ancien régime—and the new men of commerce and industry for control of France’s dynamic strategy—a struggle that led to the French Revolution in 1789. Revolution is the outcome of strategic struggle rather than economic crisis as Marx argued. In the case of France, the absence of economic crisis has been demonstrated by L.M.Cullen (1993). At first a revolution by middle-class strategists, it predictably got out of control and was hijacked by the Jacobins, who were middle-class antistrategists. Just as in the English revolution of the 1640s, the desire to bring order out of chaos led to a military takeover, this time under the brilliant general Napoleon Bonaparte, who created a new administrative and legal structure conducive to modernization. Although Bonaparte used this new institutional structure to pursue a modern version of the conquest strategy until his defeat in 1814, it was able to facilitate the technological strategy adopted by the middle classes after Waterloo. Napoleon’s legal code—a synthesis of earlier Roman law and the revolutionary middle-class aspirations of economic and political freedom, equality before the law, and a secular and non-oppressive state—was drafted by middle-class lawyers to facilitate the interests of propertied men (Cameron 1989:209–12). It encompassed the Code civil and the Code de commerce. The Code civil of 1804 upheld private property rights and commercial contracts and authorized new methods of commercial transactions together with the right to charge interest on financial loans; and the Code de commerce of 1807 sanctioned various forms of business organization including limited liability. While French political and legal change was more delayed than in England owing to the pursuit of conquest into the age of commerce, and more abrupt when it came, it too was driven by the unfolding and substitution of dynamic strategies. 353


The social system The third great wave of economic change, like earlier waves, generated considerable class mobility and social change. And it was orchestrated by the unfolding technological strategy, which generated extraordinary returns for those investing in it and gave rise to a new group of wealthy industrialists. These new men replaced that class whose fortunes had foundered with the exhaustion of the commerce strategy in the early eighteenth century, and joined those who had managed successfully to convert their commerce fortunes into the security of rural land and to live within their incomes. During the early years of the Industrial Revolution, property was still the gateway to Parliament and to control over the sources of their income as well as a secure asset that generated a steady flow of income. The English aristocracy has been an enduring, if not an endearing, institution because of its ability to absorb new families thrown up by the latest dynamic strategy. The new families purchase the estates of the old aristocracy, who have missed the new opportunities, and gain access to the peerage, only to be replaced when the next wave of economic opportunists comes along. This occurred despite the attempt of the ‘landed classes’ to preserve the family property through ‘strict settlement’, by which each generation became life tenants, owing to the inevitable debts that became a charge on the land (Habakkuk 1994). Hence the continuing presence of aristocrats in Conservative governments well into the twentieth century. The English experience contrasts with the Venetian aristocracy which, after the exhaustion of the commerce strategy in Venice, refused to admit new families into its ranks. England’s flexibility is due merely to its good fortune in being able to replace each exhausted dynamic strategy with another. As Venice tried unsuccessfully to find a replacement for its commerce strategy, its class structure fossilized and its civilization was taken over by one more vibrant. But the days of the aristocracy were clearly numbered as the twentieth century progressed. Those who will survive into the twenty-first century will do so as highly efficient businessmen, not as privileged amateurs (Thompson 1993:22). The reasons for this transformation are, in terms of the dynamicstrategy model, threefold. First, with the growing sophistication of the financial market, land, for the first time in human history, was no longer the only secure asset that was capable of providing a secure and regular income. For the first time there is a range of financial assets, such as government securities and debentures, that are not only safe but more convenient and flexible as assets than land. Second, with the extension of the vote to all men in 1918 and all women in 1928, land was no longer the key for those wishing to influence the dynamic strategy. And third, by placing political power in the hands of the working classes, the unfolding technological strategy ensured that the privileged landowning classes would have to fight for their 354


economic survival. Today landed properties are purchased by those from all classes who are the beneficiaries of windfall gains—pop stars, football heroes, lottery winners—because they have a personal preference for secure assets that are real rather than paper (Thompson 1991:20). Social classes have little explanatory power if they are merely the result of an arbitrary division of a population on the basis of income into upper, middle, and lower—as is commonly done in the analysis of society. Classes are only meaningful if they have a functional purpose. For the Dynamic Society the only functional divisions arise from whether its members are dynamic strategists, in the sense of investing in and enjoying the rewards of the prevailing dynamic strategy; whether, in the transition between strategies, they are supporters of the old or the new strategy; and whether they invest predominantly in physical or human strategic capital. Hence our strategic groups include old and new strategists, strategists who invest in physical or human capital, and nonstrategists. These various groups, as we saw in Chapter 3, are involved in different levels of struggle for control of the dynamic strategy. The Marxist classes, based on ownership of physical factors of production, have no functional purpose. We have seen these strategic groups in England changing through the conquest→commerce→technological-change sequence of strategies. In the conquest phase the strategists involved only a tiny (0.05 per cent) minority of the population, including the king and his tenants-in-chief. The great majority of the population were dependent workers who were exploited by the military elite in order to raise a surplus sufficient to finance their conquest objectives. In the commerce phase the strategists included a larger proportion of families, who emulated the earlier ruling elite by purchasing rural property. The old strategists resisted the rise of the new men and struggled with them for the supremacy of their dynamic strategy. Eventually the new men won and took their place in society. The majority, if freer than before, were still dependent upon the strategists, who continued to exploit them. They were not yet part of the ‘people’. In the technological phase, the strategists are the new owners of industry together with those who finance these activities and who trade in the goods and services produced. They invest in physical capital embodying new ideas and they exploit the working classes. But as the unfolding technological strategy generates a demand for skilled workers, some of the lower orders invest in human capital and participate in the rewards that it brings. As such they become indispensable to the success of the technological strategy. And they are able to increase their share of the strategic returns by gaining entry to Parliament and exerting influence over, and later even controlling, the technological strategy. This is reflected inversely in the income and wealth shares of the top 10 per cent of English (including Welsh) households. The income share of the elite group increased from about 42 per cent in 1760 to about 50 per cent in 1867, thereafter it declined gradually to 40 per cent by the First World War, and 355


then more rapidly to about 25 per cent by the early 1970s; and its wealth share was maintained at about 85 per cent until the First World War, falling to 75 per cent in 1950 and 55 per cent by the early 1970s (Lindert 1994:381). In the modern world the nonstrategists—those who have opted out of the system or who consume inherited wealth—are a tiny part of the population, with the strategists, always struggling with each other over the spoils, constituting the vast majority. The social system has passed through 180 degrees with the transition from the conquest to the technological strategy. But it is essential to realize that this strategic transfer is neither inevitable nor irreversible. If the technological strategy is ever derailed we will slip back into the eternal recurrence of war and conquest and our social system will regress to earlier forms. We have seen that the unfolding technological strategy has, for the first time in the history of Britain, generated a widespread demand for human capital. This has been essential for the development of the technological strategy, and it has had major implications for the participation of the less wealthy in this process and for the nature of modern institutions. We need to survey the remarkable change in the role of education in English society. In its early stages the Industrial Revolution was de-skilling. New, more capital-intensive industries often displaced skilled workers, who were among the first to riot against the authorities. From 1811 industrial unrest raged throughout the Midlands and the north of England as skilled craftsmen protested against growing unemployment and low wages. This soon led to the ‘Luddite’ destruction of machinery by cotton weavers in south Lancashire, cloth workers in Yorkshire, and hosiery framework knitters in Nottinghamshire. And there was little effective demand in the late eighteenth or early nineteenth centuries for either general or technical education by industrial workers. The only argument in these years for mass education was as an instrument for creating an orderly and disciplined labour force, which could best be achieved through Sunday schools arranged by the church. It has been estimated that between 1818 and 1889 the proportion of children attending Sunday schools rose from 4 to 75 per cent (Seaman 1981:412). Only the children of paupers received state education, mainly in the form of industrial skills useful to the ruling classes, under the provisions of the 1834 Poor Law Amendment Act. But in the space of a generation the condition and prospects of pauper children had been transformed (Duke 1976:65–86). The demand for working-class education rose as the unfolding technological strategy led to more complex industrial processes and communications, and as workers, through their political representatives, became increasingly involved in directing this strategy. While in 1833 the state began subsidizing churches that provided schools for poor children, by 1870 only 40 per cent of working-class children received any formal education and, of these, three-quarters left school at 10 years of age with 356


many of the rest attending only on an irregular basis as schooling was not compulsory (Chadwick 1966:336–46). By 1870 this ad hoc system of education clearly was no longer adequate for a technological society, and an attempt was made by the state to introduce a more effective system (Barker 1972: Chapter 1). Local school boards, using local rates, were established to organize formal instruction in reading, writing, and arithmetic. But it was neither free nor compulsory. Compulsory education for children to the age of 10 years was introduced in 1876, and fees were gradually abolished from 1891 to 1918. By 1899 the compulsory age had been raised to 12 years and, except in rural areas, to 14 years by 1918. Not surprisingly, in the absence of central control, the local school boards provided varying standards of education. But by the 1890s some of them had extended the curriculum and were teaching languages (Latin and French), sciences (chemistry and ‘electricity’), mathematics, geography, and practical subjects such as book-keeping and shorthand writing. Technical education was given little emphasis until 1889, when the county schools were charged with this responsibility. But, as the technological strategy continued to unfold and to generate demands for more sophisticated education, the late Victorian standard was found to be inadequate. In 1902 a new state school system was established to take over from the earlier school boards. Councils at the county, borough, and urban district levels became responsible for elementary, secondary (a sixth form was added in 1918), and technical education. The curriculum was broadened and, from 1907, all secondary schools were required to reserve one-quarter of their places for scholarship children from elementary schools. And more generous scholarships were provided for the needy after 1918. Hence, by the 1920s it was possible for a few intelligent, hard-working children from working-class origins to gain entry to Oxbridge. This was one of the remarkable achievements of the technological strategy—after just 150 years it had enabled outstanding members of the working class to join the ranks of the ruling elite. Needless to say, not many made this journey before the Second World War (about 1 per 1,000 state school pupils), but many more did take the smaller but significant step from the working classes to the lower middle class (Seaman 1981:493). Under the first Labour government, the leaving age was raised to 15 years, and all grammar school fees were abolished. This was necessary if those from the working class were to participate fully in the direction and control of the dynamic strategy of the modern age. Between 1820 and the mid-1990s the average years of education per person employed increased seven-fold from 2 to 14.1—it doubled between 1820 and 1870, doubled again to 1913, and thereafter increased more slowly to the present (Maddison 1995:253). Middle- and upper-class children in the nineteenth century received education in grammar and public schools, and in their homes from private 357


tutors. They were educated in the classics, literature, sciences, mathematics, and games (a remnant of the anti-intellectual attitudes of an aristocracy that traced its values back to a, by now, extinct warrior nobility) in preparation for a higher education at Oxford and Cambridge largely in classics and history. As in Greece and Rome this was the education intended to produce the rulers of empire rather than the captains of industry. Only with the establishment of other universities—such as the University of London (previously University College) in 1836, and the University of Manchester in 1880—did the curriculum of higher education attempt to cater for those pursuing careers in business and finance. The late development of more practical courses in British universities is often seen as a major reason for Britain’s relative economic decline from the 1880s. In fact, it reflected the demands of the nation’s dynamic strategy which was based on a pragmatic rather than an ‘intellectual’ approach to industry and commerce, and to the additional need to run an empire in defence of this strategy. It will be recalled that in later Republican Rome, the education of senators—the ruling elite—shifted from military training to an education suitable for men needed to run an empire. If rhetoric, Latin, Greek, and history were good enough for the ruling elite in Rome, even though their dynamic strategy was conquest (which could be left to practical soldiers), then surely it was good enough for the British ruling elite, even though their dynamic strategy was technological change (which could be left to practical businessmen and technocrats). So might English educators have argued. It was an attitude to education that only changed—only needed to change—with the loss of empire from 1947. With no empire to run, the ruling elite had to turn to more practical subjects at university such as economics, commerce, technology, and applied science (Hannah 1993). In addition, the post-Second World War polytechnics (based on earlier technical schools) catered specifically for the growing technical complexity of the technological strategy. The move in the 1990s to integrate the polytechnics into the older university system is a reflection of how much the older universities have, in the second half of the twentieth century following the loss of empire, refocused their attention upon more pragmatic issues. Hence, rather than seeing education as a barrier to growth as in the conventional approach, it should be seen as an effective response to the changing demands of an unfolding dynamic strategy. This is recognized by Robert Milward (1994:166) who claims that ‘the pattern of educational development was as much a product as a cause of the distinctive features of British industry’. The relative ‘decline’ of Britain, which has attracted so much attention from historians and economists, is not as problematical as is often claimed, and it is due not to any special deficiencies of the British but to the different timing and nature of changes in the dynamic strategies of other

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countries. British strategists were responding in a rational and competitive way to their economic environment. The rise and fall of Christianity in England between the early seventh century and the late twentieth century also can be accounted for largely in terms of the changing nature of strategic demand. We have seen that the adoption and rise of Christianity amongst the English owed much to the needs of the populace for assurance in the face of the dangers and uncertainties of the ‘dark ages’, and to the desire of the small ruling elite to impose compliance with their conquest strategy on the populace. The castle and the cathedral became twin symbols of medieval oppression during the reign of the conquest strategy. With the growing wealth of England and its more equal distribution during the era of commerce from the sixteenth to the early eighteenth centuries, the role of Christianity began to change. While it was used to encourage conformity, religion was no longer a very effective instrument of oppression. The new strategists of commerce demanded a more benign established church and a greater degree of religious diversity. Essentially they wanted a Christianity that reflected their greater economic independence and material power. They did not wish to be dictated to by a feudal church. The new commercial classes embraced Christianity not only to receive psychological comfort and reassurance, but also to rationalize and justify their material achievements. They liked to see their success as a mark of divine favour (Hill 1961:92). In this respect Christianity embodied the dynamic spirit of the age of commerce. With the adoption of the technological strategy in the late eighteenth century, the demand for greater religious freedom increased. There was an obvious tension between the old idea of an established church and the growing economic and political independence of the middle classes. Accordingly, ‘throughout the mid-Victorian age the evangelical movement was the strongest religious force in British life’, permeating not only the dissenting churches (the Methodists, Presbyterians, Independents, Baptists, Quakers, and Latter-Day Saints) but also the Church of England (Chadwick 1966:5–6). The middle classes also used their religion in an attempt to create a compliant labour force. An important instrument of social control was the extension of Christianity to the working classes through Methodism. It has close parallels with the aristocratic use of the church during the reign of the conquest strategy. John Wesley, who was active among the working classes in the late eighteenth century, wanted to use Christianity to give meaning to the new lifestyle of urban workers and, thereby, to establish order in a world profoundly unsettled by the French Revolution. Methodism, which emphasized the dignity of discipline, sobriety, and hard work, made great progress among the industrial lower middle and working classes (Semmel 1973). It not only rationalized the way of the life of these classes, but 359


appealed to their anti-clericalism that was well-ingrained after a millennium of oppression. Methodism—which was the largest religious group outside the establishment—provided an apologia for the new dynamic strategy among those it needed to control. But it did not make much headway with those that the new dynamic strategy passed by—the poor. To those with little hope for material prospects, the message of sobriety and discipline held little attraction. They were the nonstrategists of their time. Only the Salvation Army, which entered into their world of pubs and doss-houses and offered food, shelter, and entertainment on street corners, had much of an impact on the down-and-outs. Just as England’s dynamic strategies led to the adoption and rise of Christianity, so they have led to its fall. As the technology strategy unfolded in the twentieth century, particularly after the Second World War, the need for religion, both by the populace and the state, declined. The new strategy brought with it new explanations and methods as well as a new prosperity. Permeating the entire society of Britain, the new prosperity provided a way of life that the medieval peasantry and the early Victorian proletariat would have regarded as a form of heaven. During the second millennium AD average life expectancies rose from about 28 to over 75 years (Snooks 1994b:25), and average living standards are now much higher than aristocratic standards were then. Materialist man has gone a long way towards achieving the objectives of survival and prosperity—objectives that have driven human society over the past 2 million years—and appears to have little emotional or psychological need for an uncertain life after death. At the same time, the technological strategy has generated an incomparable amount of knowledge about the physical and social world we inhabit. Science, both natural and social, can now provide many of the answers about life that, even in the recent past, could be dealt with only in metaphorical terms through religious stories. Only since the mid-nineteenth century have we discovered scientifically how the physical world has changed over eons of time (Lyell 1830–33), how the species of life have evolved (Darwin 1859), how large numbers of sophisticated civilizations have flourished in the past (Tylor 1871 and Morgan 1877); and only since the turn of the century have we discovered how the dynamics both of the universe (Hubble 1929) and of human society operate. All this and much more has removed the great intellectual uncertainties that have attracted many to Christianity in the past. Finally, and most important of all, the unfolding technological strategy, by including the entire populace in the process by which dynamic strategies are directed, has removed the need to control nonstrategists. As the entire population (except for criminal deviants) of Western democracies gain directly from the fluctuating fortunes of the technology strategy, we all have incentives to pursue this strategy and to support our representatives in government. As we all are dynamic strategists—all part of the ‘people’—there is no need as in 360


the past to persuade, frighten, or cajole others into complying with society’s strategic aims. We all benefit materially by doing so. Christianity, therefore, is no longer an instrument of strategic control as it was under all earlier dynamic strategies and even during the early phases of the technological strategy. And as it is no longer an instrument of strategic control, like the pagan religion of Rome after the exhaustion of the conquest strategy, it will decline into insignificance. The decline of Christianity in England has been accompanied, however, by the rise of secular faiths. Of these the most important are Marxism and environmentalism. The question is why, if the props of Christianity have been kicked away, other secular faiths have risen to partially take their place. It is quite clear that the new faiths do not fulfil a need for knowledge or material satisfaction, nor do they support the existing dynamic strategy— indeed, they act to undermine it. Rather, the new faiths appear to serve the emotional and psychological needs of those who are not comfortable with the materialist objectives of the human race—the objectives that drive the Dynamic Society. If they can bring the Dynamic Society to its knees and create stasis—the end of history—then they can prove that materialism is dead, and they will no longer need to face the enemy within. Even the nature of public entertainment has responded to the strategic sequence that occurred in England over the past millennium. Public entertainment mirrors the preoccupations of the age. For a variety of reasons—a curiosity about the famous individuals of one’s time, the need to rationalize one’s lifestyle, the desire to impose social compliance—we seek and find entertainment that draws upon the main characteristics of the dominant dynamic strategy. Like the secular games of Rome, public entertainment helps to rationalize and reinforce the dominant dynamic strategy and to reinforce strategic confidence. During the conquest phase down to the mid-fifteenth century, the aristocratic English enjoyed hunting, jousting, and tournaments; and they participated in public performances of heroic poems and songs, such as the Anglo-Saxon ‘The Wanderer’, ‘Beowulf and the The Battle of Maldon’, or the French ‘Song of Roland’ (said to have been chanted by the Conqueror’s men as they sailed for England). The other ranks in society looked on in awe and joined in where they could, particularly in wrestling and archery contests. This public entertainment, possibly more than Christianity, united the English in their respect for and obedience to the dynamic strategy of conquest. As the commerce strategy replaced the conquest strategy in the early modern period, more sophisticated forms of public entertainment were demanded by the merchants of the towns. They had no use for war-games and instead sought justification in the public theatres that were being built in Elizabethan England. While many of the plays that have come down to us focus on the epic, if tragic, deeds of warlike princes throughout 361


history—England was still ruled by a monarchy recently transplanted from its warrior origins—increasingly the subject matter celebrated the end of the conquest strategy (Richard III) and reflected the commercial realities of the sixteenth and seventeenth centuries (The Merchant of Venice). By the eighteenth century, plays, operas (Handel), poetry (the ‘metaphysical’ poets Milton, Marvell, Herbert, Donne), and novels (Jane Austen) focused upon the lives and preoccupations of the commercial classes and the gentry. Of course the most popular form of entertainment, precisely because it enabled participants to economize on that scarcest of resources—the intellect—was, and is, sport. With the replacement of the conquest strategy with the commerce strategy, the common people turned from archery and wrestling to bowls, football, and cockfighting after the sixteenth century; and upper-class youths indulged in real tennis, bowls, golf, and cricket (Seaman 1981:311–15; Blanchard 1994). In the modern age, which is driven by the technological strategy, the focus of public and, increasingly, private entertainment has shifted from rural to urban concerns and from the middle to the working classes. During the second half of the nineteenth century sports like soccer (1863), rugby (1871), and cricket (1871) became forms of paid mass entertainment, with 74,000 people attending the 1899 F.A. Cup Final (Seaman 1981:501; Vamplew 1988). This was the result of the technological strategy that not only generated shorter working weeks and higher real incomes, but provided the transport and communications necessary to organize national sporting fixtures. In turn, these sports were employed by the new strategists to instill into the young skills of leadership if they attended the wealthy public schools, and rules of discipline if they attended state schools. During the second half of the twentieth century these mass sporting activities were gradually transformed into spectacular gladiatorial contests—the technological equivalent of the secular games of Rome. The modern hero is the ordinary person placed in both banal (the so-called ‘soap operas’ that dominate television) and fantastic (urban thrillers) circumstances. Today we fantasize about our warrior past both through watching violent visual images and violent sports rather than through active participation. Entertainment during the twentieth century has increasingly become technologically oriented, increasingly drawing us into its processes, increasingly blurring the distinction between reality and fantasy (thereby providing a climate acceptable to unrealistic views such as postmodernism). Cinema, which emerged in the 1920s, became ever more technologically sophisticated; and it was joined relatively quickly by radio, television, the computer, the Internet, and ‘virtual reality’. In order not to be left behind, popular theatre has also become technologically complex with the ambitious productions of Andrew Lloyd Webber and the incredibly expensive extravaganzas of theatrical entrepreneurs staged in Las Vegas. Only the performing arts have retained their traditional labour-intensive forms; 362


although here too modern electronic technology has been utilized in an attempt to bring the performing arts to the masses. Just as medieval man was drawn into the conquest strategy through involvement in war-games, so modern man is drawn inexorably into the technological strategy through participation in electronic entertainment. This is both unplanned and contrived. In the Middle Ages it was important for the warrior-strategists to stage mock wars and war-games to encourage war skills and a war outlook; and today it is important for those who make extraordinary profits through the electronics industry, which is the leading edge of the technological strategy, to entice the young into a complete involvement in, and identification with, their products. At the same time these cultural activities unconsciously embody the vital principle of the modern age, which is isolated, interpreted, and distributed to the masses. We are all caught in the technological net that the strategists weave. We are one with both the fisher and his catch. CONCLUSIONS From this study a number of institutional themes have emerged. We have observed the transition of the British economic system from tribal to feudal to mercantile to industrial, as commodity and factor markets developed. We have observed the transformation of the system of strategic control from tribal chief and his kin, to regional and national kings and their baronial councils, to king and his parliament, to limited parliamentary monarchy, to constitutional monarchy with restricted and then universal suffrage. We have seen the rise and fall of different strategic classes—in terms of wealth, education, and influence—as the dynamic strategies have unfolded and been substituted one for the other: including a feudal landowning aristocracy, a commercial gentry, and an industrial middle class and proletariat. We have noticed the rise and fall of Christianity and, more recently, the emergence of the secular faiths of Marxism and environmentalism. And we have seen the rise of feudal law and its eventual replacement by a flexible common law that has progressively protected the property rights of the commerce and industrial strategists. If we stand back far enough and merely observe the superficial outlines of these institutional changes, we might convince ourselves, as many have done, that this is an evolutionary process. But if we examine these changes carefully and search for the underlying causal influences, as attempted in this chapter, we will notice that this institutional transition is not a relatively smooth process, but contains many discontinuities. And we shall discover that it was driven by the coincidental conjunction of three separate dynamic strategies to form a conquest→commerce→technological sequence. As this sequence is not inevitable—it is determined by fundamental economic forces that owe nothing to the institutional forms to which they give rise—the institutional transition is not an evolutionary process. 363


A different sequence would have generated an institutional transition similar to that in earlier civilizations. Such as the conquest→commerce →conquest sequence in ancient Greece, or the commerce→conquest sequence of Venice. Modern institutionalists have been misled by their observation position in historical time. There is no way that ancient Greek observers, from the vantage point of mid-fourth century BC (that is, just after the time of Alexander the Great), would have seen institutional change as evolutionary. They would have recognized that it was driven along a tortuous path that has many twists, turns, and reversals.

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11 THE UNITED STATES OF AMERICA Phoenix rising The blaze is kindled, the bale-fire wraps In roaring flames his wretched abode, And fiercely feeds on the Phoenix hoar, Ancient of years. His aged body Is prey to the flames: his fleeting spirit, Hastens to its doom, when the hot blast sunders Flesh from bone. Yet the breath of life In the fulness of time returneth again. (‘The Phoenix’ (early Anglo-Saxon poem) trans. J.D.Spaeth) Emerging in the Old World, the technological strategy was taken up and developed further by the New World. There is poetic justice here. The Old World had destroyed the dynamic society of the New World, but it was the New World with its amazing wealth of natural resources that carried the technological strategy to new heights. While Britain had emerged as the world’s first industrial nation-state, the United States of America became the world’s first industrial mega-state. And from this dynamic process came the resurgence of the New World. Phoenix rising. CREATION OF THE WORLD’S FIRST MEGA-STATE In the Old World the vehicle of technological change was the nation-state. But in the New World the dynamic strategists discovered they could compete effectively with Western Europe, and earn extraordinary profits, by creating a mega-state rather than emulating the Old World’s system of competing nation-states. This is the key point in understanding the development of US society. Had it been possible for the founding colonies of North America to generate extraordinary profits by employing the nation-state vehicle of technological change, the mega-state would not have been created. Instead North America would have been divided into a large number of nation-states in emulation of Western Europe. As we shall see, the Civil War of the early 1860s was fought on this issue. 365


The mega-state of the USA was formed through the adoption, unfolding, and substitution of a number of dynamic strategies from the seventeenth century. These strategies include the participation of the American colonies in the British commerce strategy until the 1760s—what I call the dependentcommerce strategy—the family-multiplication strategy that drove America’s westward expansion for the hundred years before 1890, and the technological strategy that emerged after 1820 and developed exponentially to become the dominant dynamic strategy from the 1890s. The pursuit of these strategies transformed a number of small settlements, precariously clinging to the east coast of North America at the beginning of the seventeenth century, into a mega-state occupying the entire continent between (approximately) the 30th and 45th parallels at the end of the nineteenth century This mega-state surpassed Britain in terms of living standards by the end of the First World War, and went on to lead the world in pushing back the global technological frontier in the generation after the Second World War. The USA’s strategic pathway is traced out by the timescape in Figure 11.1.

Figure 11.1 The expansion and growth of the USA, 1790–1992 Source: Drawn from data in Maddison (1995). Notes: GDP is in $US 100m; GDP per capita in $US; area in 10,000 sq. km.

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THE USA: PHOENIX RISING

The dependent-commerce strategy We need to investigate America’s dynamic strategies more closely. The first of these was an integral part of the British commerce strategy that was responsible for the initial and most successful colonies planted on the east coast of North America. Once these colonies had been established, the local entrepreneurs participated in the British strategy as junior players. While they derived benefits from British investment, markets, and security, they were constrained by overall objectives formulated in and administered from Britain. They had no say in British policy-making. British interest in the New World was stimulated by merchants and adventurers who, in the sixteenth century, began to explore the opportunities for trade and the exploitation of natural resources in North America (Robertson and Walton 1979:25). As colonization was beyond the scope of individual enterprise, and as the Tudor and Stuart dynasties were not willing to commit their own resources to such uncertain and risky ventures, the early colonies were founded by joint-stock companies that had been developed in the sixteenth century to conduct long-distance commercial enterprise (Brownlee 1974:13–14). Between 1606 and 1630 eleven British joint-stock companies were created to establish colonies in North America. The first was the Virginia Company which set up a base in Jamestown in 1607 to search for precious metals rather than to farm and trade; only when the company was reformed in 1609 did the colony pursue longrun settlement and commerce. Virginia, and the colonies that followed in rapid succession, survived by specializing according to their comparative advantage—determined by climate and natural resources—in order to produce staple commodities that could be traded within the British Empire. In this way Virginia and Maryland were able to take advantage of the soaring demand for tobacco in England; Georgia and South Carolina found it profitable to grow rice and indigo; North Carolina exported naval stores; the Middle Atlantic colonies supplied furs to England and foodstuffs to the West Indies; and the New England colonies focused upon shipbuilding and trading activities. The structure of comparative advantage enjoyed by the North American colonies within the framework of the British Empire had major implications for the future development of the USA as a mega-state. Within the British commerce strategy, the role of the colonies was to supply foodstuffs and raw materials that could not be produced in Europe. In order to illustrate this point we can, at the risk of some oversimplification, divide the initial colonies into three groups: the New England colonies, the Middle Atlantic colonies, and the Southern colonies. Each of these groups was endowed with quite different natural resources and climates, which effectively determined the role they played in the British commerce strategy. Only the Southern colonies fulfilled the classic colonial role. With their bountiful land and climate they were able to provide semi-tropical and 367


tropical commodities that were much in demand in Britain both before and after the First Industrial Revolution. In the colonial period, from the 1670s to the 1770s, the South accounted for about 80 per cent of the value of North American exports to and 50 per cent of imports from Britain. Tobacco was the dominant staple throughout, but rice and indigo were also important. None of these commodities could be grown successfully in England. The Middle Atlantic and New England colonists found themselves in less favourable circumstances and had to rely more on human than natural resources. While the Middle Atlantic colonies had the climate and land to produce wheat and flour, Britain had no need of imports of commodities they could successfully produce themselves. Fur pelts were the only sizeable staple, and this contributed to less than 10 per cent of North American exports to England, with imports almost seven times greater in the mid-eighteenth century. Even New England, with its harsh climate and limited land resources, was able to export more to Britain (more than 10 per cent of the North American total) than the Middle Atlantic, largely through the development of shipbuilding, naval stores (pitch, tar, resin, turpentine, hemp, masts, yards, and bowsprits), and dried fish. Nevertheless, throughout the eighteenth century its imports exceeded its exports by a factor of three. Only by deviating from the letter of the law of British mercantilism were these Northern colonies able to support such a strong demand for British imports. They balanced their trade with Britain by exporting a variety of foodstuffs and livestock to the West Indies, together with wheat and flour to southern Europe, in return for specie and bills of exchange (Henretta et al. 1987:84–6). When it came to making an even greater profit, therefore, the British were prepared to bend their mercantilist principles. Paradoxically, it was a deficiency in natural resources that gave the Northern colonies a comparative advantage in manufacturing. What began as a disadvantage in the seventeenth century became a great asset during the nineteenth and twentieth centuries—an asset that enabled them to win the Civil War and to turn the tide in both the First and Second World Wars in Europe and the Pacific. New England was able to compete with Britain in shipbuilding because of its relatively low raw-material costs that more than offset its relatively high labour and delivery costs. By the eighteenth century Britain had long felt the effects of its dwindling organic resources such as timber and forest products. The rising relative price of organic resources was, as we saw in Chapter 10, one of the forcing grounds of the Industrial Revolution. Shipbuilding, however, was the only major American manufacturing activity able to penetrate export markets. Other industries, such as textiles, clothing, iron, glass, bricks, paper, and flour, existed only to serve the local market protected by the barrier of distance from Europe. But such activity was more attractive in the North where, without the good fortune of climate and land, there was a greater reliance on human capital and enterprise. 368


The structural distinction between the Northern and Southern colonies was to have a major impact upon the emergence of a mega-state in North America. While the South grew rich through participation in the commerce, and, later, the technological strategies of Britain, the North could grow rich only through the exploitation of an expanding domestic market in North America. The North looked westward over the continent, while the South looked eastward over the sea. Prosperity in the North was to depend on the expansion of the western frontier in North America rather than the technological frontier in Europe. And when this difference of orientation became a matter of conflict between the North and the South, the very survival of the future mega-state hung on the outcome. The family-multiplication strategy America’s dependent-commerce strategy came to an end in the last quarter of the eighteenth century when the colonists successfully rebelled against the mother country. This does not mean that the production and export of staples became any less important in the late eighteenth and early nineteenth centuries. Indeed, the export of raw cotton from the South and, later, grain and flour from the West to Europe were important sources of economic growth before 1860 (North 1961:66–74, 135–55). Despite this, the Revolution was an outcome of the clash between two competing dynamic strategies. We have seen that the American colonies were established as part of the commerce strategy of Britain, and that their survival and expansion in the seventeenth and first half of the eighteenth centuries depended on their ability to participate in that strategy. But by the mid-eighteenth century an alternative strategy, this one American-born, began to emerge. This new dynamic was the family-multiplication strategy, and it involved the settlement of new land through the process of new family formation, initially through high rates of fertility and, after 1812, through immigration. It was this dynamic that powered the great westward movement of the American frontier. The family-multiplication strategy was widely employed by palaeolithic societies during the ‘great dispersion’ of mankind throughout the habitable world and by neolithic societies as they converted hunting lands into agricultural lands. It led to a dynamic process that elsewhere I have called environmental dynamic change or EDC (Snooks 1994a:126–34; 1996:221– 2), whereby land underutilized at the prevailing level of technology is brought into the process of production. And this dynamic came to life again following the great European break-out from 1492 when Europeans imposed their more sophisticated technology on the hunting and/or simple agricultural societies that occupied the Americas, Australasia, and Africa, decimating and displacing the former inhabitants. The modern familymultiplication strategy was driven by the lure of extraordinary profits that 369


could be gained from cheaply available land and, particularly, from the monopoly acquisition of such land. Initially this new dynamic was held in check by the French who built and defended a line of forts and trading posts stretching along the St Lawrence and Mississippi Rivers from Quebec in the north to New Orleans in the south. And the French were determined to contain British settlement to the narrow belt east of the Appalachians. Such an attitude, like all attempts to stand in the way of the Dynamic Society, was bound to lead to violent confrontation. Owing to the dynamic nature of the British colonies, it was only a matter of time before the colonialists attempted to settle west of the Appalachians. The first to do so was a group of prominent Virginian aristocrats who, in 1747, formed the Ohio Company to make a grab for land in territory regarded by the French as their own. By 1754 the colony of Virginia was at war with the French—a war joined by Britain in the following year and which continued until 1763. The final outcome—a victory for the British and the colonialists—was never in doubt as the population of the British colonies was about 1.5 million while that of New France was only 100,000. And the British had a more powerful navy. With the removal of the French fortifications, the American colonialists looked forward to unlimited gains both by exploiting this new source of land, and by providing the goods and services to enable others to do so. But the British had other ideas. Representing the interests of the commercial and landowning groups in the home country, the British Parliament was less interested in the possibility of westward expansion than were the colonialists. They had little to gain and much to lose by allowing the colonialists to expand westward. As the British Empire was based on naval rather than army power, the Westminster government felt less confident about the pursuit of a continental empire. They knew that any significant westward and southern expansion would alienate the native inhabitants and eventually bring the colonialists into conflict with the Spanish who had long held Florida and who had recently expanded into the vacuum left by the collapse of New France. The inevitable outcome for the British would be further land wars and increased costs of providing security. Not surprisingly the British government responded to this new colonial strategy by issuing a proclamation in 1763 forbidding any immediate land sales west of the Appalachians and claiming all unoccupied territory as crown land. This move, which threatened to prevent the colonialists pursuing their home-grown dynamic strategy of westward expansion, brought the British and the colonialists into open confrontation. And to add insult to injury, the British government, which had just embarked on an ambitious attempt to reform its imperial system (Henretta et al. 1987:154– 5), imposed a stamp tax on colonial newspapers and legal documents to raise one-third of the cost of maintaining an army of 10,000 soldiers in North America. They also attempted to tighten up the system of customs duties on 370


imports and of illegal trade with Canada and the West Indies. This led not only to an angry reaction from American speculators and merchants who feared their profitable activities would be curtailed, but also raised the inevitable response from all colonialists that there should be no taxes without representation. It was as if the Parliament in Westminster had forgotten its own origins and history. From the 1760s, therefore, an intense struggle began between the British government and the colonialists for control of the American dynamic strategy. There were two dimensions to this struggle. While many of the colonialists, particularly those in the South, wanted to continue as participants in the British commerce strategy because their material interests were closely associated with it, they were keen to replace their junior-player role with something approaching a full partnership. This could be achieved only if they had some influence on the way their taxes were being used and would require either the formation of an imperial parliament in which they were represented or the replacement of the existing imposts from a foreign parliament with a grant made to the British Crown (who was responsible for establishing the colonial companies) under specified conditions. The second dimension of this strategic struggle was the determination of most colonialists, but particularly those from the North, to prevent the British from blocking westward expansion. Although the British redrew the Proclamation Line in 1768 under pressure from the emerging land companies, they became more restrictive again in 1774 when the boundary of Quebec was extended south to the Ohio River. The colonialists, therefore, were unable to dissuade Britain from its path of restrictive interventionism. It was an example of the classic clash between dynamic strategies. And, as elsewhere, it led to war. Those observers who have attempted to measure the benefits and costs of British imperialism in North America have failed to recognize the critical economic significance of this strategic struggle. The reason is that deductive economists focus on static benefits and costs and completely overlook the dynamic dimension. Applied economists have estimated that the annual costs of ‘distortions of trade routes’ resulting from the Navigation Acts imposed between 1763 and 1775, which have traditionally been regarded as the main burden of empire, amounted to no more than 3 per cent of gross colonial product and that this would have been at least partially offset by benefits from being part of the British Empire including subsidies, bounties, and military protection (Thomas 1965; McClelland 1969—for a dissenting view, see Sawers 1992). Others have argued that the costs of taxes and customs imposed after the war with France, and the restrictions resulting from the 1763 Proclamation Line, were not terribly onerous. This has encouraged one scholar to argue that ‘any strictly economic interpretation of the origins of the Revolution is inadequate’ and that political considerations were more important (Brownlee 1974:72). 371


We need to ask why the colonialists—or, indeed, the British who, according to these applied economists, do not appear to have gained much from their North American colonies—were prepared to risk so much for so little. There were some very dark moments for the colonialists during the long and costly War of Independence (1775–1783), particularly in 1776 and 1777; and victory was only guaranteed after the French commitment of 6,000 troops together with its navy. Clearly the colonialists must have thought that the potential material benefits of victory were considerable if they were prepared to undertake such an expensive and risky enterprise. The only way to understand this issue is by abandoning the static approach of neoclassical economics in favour of a more realistic dynamic approach—an approach that places us in the shoes of the participants. It is true that the static net cost to the colonialists of the British Empire in the 1760s and 1770s was very small, just as was the static net benefit to the British. But these static benefits and costs are not why the British built their American empire nor why the colonialists wanted to secede from it. Rather, the American colonies were an important part of the British dynamic strategy of commerce, but, after a point in its development, their strategy clashed with the emerging family-multiplication strategy of the colonialists. If colonial decision-makers in both the North and the South were to achieve future extraordinary profits, they had to throw off the British restrictionists and expand westwards. But such a move threatened the basis of the British commerce strategy. These dynamic benefits were considerable—as we can see in the subsequent rapid growth of the USA which took it from a dependent commerce society to the world’s greatest industrial power in little over a century—and they were well worth fighting over. With the restraints of British commercial imperialism cast off, the American colonies were free to pursue their own strategy of family multiplication. Although the great westward movement began as a trickle in the 1780s, it soon reached a flood that grew exponentially. In 1800 there were 400,000 people west of the Appalachians—a considerable achievement in only a generation for a society with a population of just over 2 million at the time of the Revolution—and ten years later this had more than doubled to about one million. So rapid was this westward flow that the proportion of the total population settled in the new western states rose from 3 per cent in 1790 to 15 per cent in 1810, to 37 per cent in 1840, and to 50 per cent in 1860 (Bruchey 1975:48). This westward movement was fed both by high fertility rates that declined from 55.0 births per thousand in 1800 to 41.4 per thousand in 1860, and large flows of net migration rising from 250,000 between 1783 and 1819, to 700,000 between 1820 and 1840, and to as many as 4,200,000 from 1840 to 1860 (ibid.: 39). This, then, was the essence of the family-multiplication strategy. To accommodate the westward expansion the US government—which, 372


unlike the British government, took a leading role in the new strategy— extended its borders by purchasing Louisiana from Napoleon Bonaparte (who had taken it from the Spanish) in 1803, by acquiring Florida from the Spanish in 1819, by taking Texas and the South-West from Mexico in 1845 and 1848 respectively, by acquiring Oregon Territory in 1846, and by purchasing southern Arizona from Mexico in 1853. But while the territorial basis for the world’s first mega-state had been created by the early 1850s, it took a further forty years for the frontier to be closed and for the familymultiplication strategy to exhaust itself. Ironically, the accelerating momentum of the westward expansion during the nineteenth century was facilitated by events occurring in Great Britain. What the British had denied through the institution of empire they provided through a market transfer of technology and capital as they moved from a commerce to a technological strategy. The technology generated by the British Industrial Revolution was required not to transport families, but to transport the goods that made the westward movement of families profitable. Only by investing in a network of transport and communication was it possible to transform a series of isolated and fragmented regional markets into an integrated mega-market. The westward expansion was initially (before 1790) facilitated by ocean and river transport, as it was cheaper to transport agricultural produce 3,000 miles by water down the Ohio and Mississippi Rivers to New Orleans and via the Atlantic Ocean to New York than to take it 300 miles overland across the Appalachians. But, of course, in the absence of steamboats at this time there was no upstream traffic and, hence, no return trade. Imported goods had to be able to bear the high costs of travel by wagons over unmade roads (see Figure 11.2). While road building after 1790 created an overland system linking the eastern ports with the Ohio valley, they provided an economic basis only for intra-regional trade. It was not until die use of steamboats on the Mississippi River system after 1812, together with the canal boom in the 1820s and 1830s (three-quarters of which was financed by governments) by which the lakes and rivers were linked into an extensive water transport system, that an integrated market was developed in the North-West. As can be seen in Figure 11.2, this investment in a new transport technology dramatically reduced inland freight rates in the 1820s and 1830s. But it was not until the 1850s and beyond that a railroad system was established (three-quarters financed by private interests) that formed the basis of a new mega-market from the Atlantic to the Pacific (see Figure 11.3). While in 1852 canals carried twice the tonnage of railroads, in 1859 railroads carried 25 per cent more tonnage than canals (Fishlow 1965). While this new transportation infrastructure was a response to strategic demand—to the unfolding of America’s dynamic strategy—it was an essential part of the process of building the mega-state that the USA was to become. As one scholar tells us: 373


Figure 11.2 USA inland freight rates, 1784–1900 Source: Drawn from data in Henretta etal. (1987).

The [railroad] construction of the late 1840s and early 1850s, in particular, responded to the demands of farmers for access to eastern markets and, in turn, supported the voluminous flow of land seekers ahead of the domain of the iron horse. (Brownlee 1974:138–9) The attempts, inspired by neoclassical theory, to measure the static benefits and costs of investment in transport technology as usual overlook the dynamic dimension. Robert Fogel (1964) has estimated the ‘social saving’ from investment in railroads to have been only about 4 per cent of GNP in 1890 and concludes, therefore, that railroads played only a limited role in American economic development. According to the applied economist, therefore, railroads were not essential to growth. What this approach—also used by Fishlow (1965) to suggest a higher contribution of 10 per cent—overlooks is that railroad investment played a central role by creating, in response to strategic demand, an integrated mega-market in the second half of the nineteenth century that was to facilitate the unfolding of 374


(a) Before 1861

Figure 11.3 The expansion of American railroads to 1890 Source: Drawn from data in Henretta et al. (1987).

the American technological strategy—an unfolding that made it possible to achieve world dominance in the twentieth century. As no system of canals and roads could have linked the east and the west across the Rocky Mountains into an integrated mega-market, the American technological strategy would have stalled in the absence of the railroad. In all probability this would have guaranteed the division of the continent into a number of

375

(b) Before 1890

Figure 11.3 (cont’d)


nation-states rather than a single mega-state. These are the real benefits— dynamic benefits—of the railroad system. Westward expansion beyond the Appalachians after 1790 split into three main streams, each of which led to a different use of the land during the ante-bellum period. In the North, settlers from New England and the Middle Atlantic states carried their wheat-farming systems into the Great Lakes basin of northern Ohio, northern Illinois, and southern Wisconsin. In the South there were two main streams, with settlers from Virginia and North Carolina taking corn production into the Ohio valley, and settlers from South Carolina and Georgia extending cotton growing into Alabama and Mississippi (Brownlee 1974:116). It is the expansion of cotton growing that has particular interest here because it formed the basis of opposition to the concept of the megamarket (of course, not by that name) that led to a struggle between alternative dynamic strategies, which could only be resolved ultimately through civil war. The expansion of cotton growing in the South-East was a direct response to the British technological strategy, just as tobacco growing had been an earlier response to the British commerce strategy. From the very beginning, this favoured region possessed the climate and resources that enabled it to grow rich through participation in Britain’s dynamic strategies. The same was true of Australia, which provided that other essential raw material for British textile mills—raw wool. A major focus of the British Industrial Revolution was the production of cotton textiles. The introduction of a new technology in this field so reduced the price of cotton textiles that their market expanded rapidly in England, Europe, and overseas. British exports of cotton goods, in quantity terms, increased by a factor of four between the 1760s and the 1780s, by a factor of ten between the 1780s and the 1800s, and by a further factor of three between the 1800s and 1815 (Deane 1965:89). Accordingly the British demand for raw cotton increased in a similar exponential fashion. While traditional suppliers in India and Brazil responded quickly to this new market, it was the American South that became Britain’s main source of raw cotton once the cotton gin had been invented by Eli Whitney in 1793. This simple innovation extended the geographical range and reduced the price of US raw cotton. Hereafter, cotton growing spread from a narrow strip along the coasts of South Carolina and Georgia to the inland areas of these states, then north into North Carolina and Virginia, west into Tennessee and, after 1812, into Alabama, Mississippi, Louisiana, Arkansas, and Texas. As a result of this rapid geographical expansion, the contribution of the USA to world production increased from 0.05 per cent in 1791 to 62.6 per cent in 1840 (Bruchey 1975:24). Hence, by the mid-nineteenth century, the prosperity of the South—the average income of freemen in 1860 was higher in the South than in the North (Engerman 1967)—was tied to the fortunes of Britain’s technological strategy. 377


At the same time, westward expansion had important implications for industrialization in the USA which was located mainly in the North-East. Expansion of the domestic market generated a demand for intermediate and consumer goods that was exploited by local manufacturers owing to distance from European suppliers and to protective tariffs (Harley 1992). Because of the different economic structure of the North and the South, tariffs were always a hotly debated subject in Congress. In the period 1816 to 1832 they were raised to quite high levels (up to 60 per cent), effectively prohibiting the import of all cheap cottons and woollens but allowing in finer textiles from England. Between 1832 and 1857 import duties were reduced to the point (about 20 per cent) where it appeared that America might join Britain as a freetrade country. But in March 1861 the Morril Tariff Act set the USA back on a course of protectionism that it followed into the 1930s. Overall, tariffs increased the rate of manufacturing growth but probably did not have much influence on its direction (Robertson and Walton 1979:205–7). Ante-bellum industrialization, therefore, depended largely on the expansion of domestic demand for basic manufactured commodities. This is reflected in the unsophisticated nature of manufacturing activity in 1860—the five main activities were the production of cotton goods, lumber, boots and shoes, flour, and men’s clothing (ibid.: 204). The impact of market expansion on the structure of the economy can be seen reflected in the declining proportion of the total workforce engaged in agriculture from 83.7 per cent in 1810 to 63.1 per cent in 1840, and 52.9 per cent in 1860, while the proportion engaged in manufacturing increased from 3.2 per cent to 8.8 per cent, 14.6 per cent, and 13.8 per cent for the same years (Davis et al. 1972:187). At the same time the proportion of the population living in cities increased from 5.1 per cent in 1790 to 10.8 per cent in 1840 and 19.8 per cent in 1860 (ibid.: 601). Yet the location of industry and urban populations in North America was not evenly distributed. The greatest concentration of industrialization was to be found in the North-East. Of the total number of factory employees, both male and female, 71.5 per cent were located in New England and the Middle Atlantic, 16.0 per cent in the Midwest, 8.4 per cent in the South, and 3.8 per cent in the Far West (Robertson and Walton 1979:205). This contrast between the industrialization of the North and the South was a reflection of their different dynamic strategies and was to play a major part in the conduct and outcome of their strategic struggle during the Civil War—a topic that is of particular interest in this study. Westward expansion provided ample opportunities for individuals and groups in both the North and South to reap extraordinary profits by extending their economic systems into new territories. One interesting study has shown that an ‘analysis of wealth holding in early Chicago [immediately before the Civil War] suggests that the urban frontier may have been a place 378


of exceptional economic opportunities for settlers’ (Galenson 1991:600). With unlimited land there was no problem between these competing strategists that could not be resolved through political means. The struggle for control of America’s dynamic strategy in Congress was unlikely to develop into serious conflict while the addition of a ‘free soil’ state to the Union could be balanced by the addition of a further slave state, because a change in the constitution required a two-thirds majority of states. To ensure the status quo, Congress adopted the ‘Missouri Compromise’ in 1820, by which it was agreed that the 36° 30' parallel would be the dividing line between free-soil and slave states. It is important to realize that the distinction between free-soil and slave states was a distinction not only between two different economic systems but also between two competing dynamic strategies. As we have seen, the freesoil states of the North had, for about two generations, pursued a technological strategy linked to the expansion of the domestic market. They were more highly urbanized and industrialized, paid higher wages, and wanted to impose high tariffs to exclude British imports. On the other hand, the slave states of the South were locked into a dependent-commerce strategy by which they supplied raw cotton to feed British industrialization. They were basically rural societies with little urbanization, used slave labour, and did not want protective tariffs that increased the cost of imports from Britain or from the North. Because of their competing strategies, the North and the South had fundamentally different attitudes to the future political structure of North America. The North was committed to the concept of the Union, but only because their dynamic strategy required the development of a large and highly integrated domestic market. As any fragmentation of that market would threaten their extraordinary profit-making, they were concerned to preserve the Union at all costs. Translating this into the concepts employed here, the North was committed to the idea of the mega-state. The South, however, did not share this commitment. While they were keen to participate in westward expansion because of the extraordinary profits they could earn by exploiting the new land directly or by breeding and selling slaves to the new planters, the longrun material success of Southern strategists depended more on their economic relationship with Britain than with the rest of America. The South could quite happily pursue its dependent-commerce strategy as a separate country if the costs of remaining in the Union rose to unacceptable levels. They were, in other words, more comfortable with the concept of the nation-state than with the mega-state. The real source of conflict between the North and the South, therefore, was not the moral issue of slavery as most have argued (for example, Ransom 1989:16; Fogel 1989:411–17), but the fundamentally different dynamic strategies to which they were irretrievably committed. Slavery was merely the most obvious characteristic of this more fundamental difference. 379


While the North was able to rationalize its materialistic pursuit of extraordinary profits by raising the moral issue of the freedom and dignity of all humans—and there was a minority who believed this passionately—they would not, and did not, go to war over a moral issue. Similarly, the South did not go to war to evangelize their system based on slavery. Further, the existence of slavery was not challenged in the lead-up to the Civil War. War arose out of the determination by the North to prevent the fragmentation of the mega-market and, despite the enormous cost in lives and superstructure, was continued by both sides in order to protect and enhance their incompatible dynamic strategies. When the balance between the westward expansion of the North and South was disturbed, their strategic struggle came into the open. This happened from the mid-1840s when the USA became involved in a conflict with Mexico and began acquiring territory in Texas and California. Both the North and the South wanted to profit from these new acquisitions. To resolve their differences over the type of economic system to be permitted in these new territories, the 1850 ‘compromise’ was reached, by which California was to be admitted to the Union as a ‘free’ state, and New Mexico and Utah were to be organized as ‘territories’ without any restriction over the issue of slavery. To be ‘free’ or ‘slave’ was merely to be one system or the other, or a combination of both. The question of strategic control arose again in 1854, over the settlement of Kansas and Nebraska. Once again both the North and the South wanted to extend their influence into these areas. The struggle became intense. To break the deadlock in Congress a Northern Senator, Stephen Douglas from Illinois, introduced a bill to discard the Missouri Compromise and to allow those territories above the 36° 30' parallel to determine whether they would permit slavery. While Douglas believed that the Southern economic system would not thrive so far north, he misjudged the reaction of the Northern economic interests, who were furious, expressing their anger by preventing slave-owners from retrieving runaway slaves. As it became clear in the 1850s that westward expansion was no longer unlimited, the struggle for control of the remaining territory intensified. This struggle was reflected in the opposition between the Republican Party that drew its support from the North and the Democratic Party that largely, although not entirely, represented the South. In 1860 this struggle came to a head when Abraham Lincoln, the Republican nominee for president, defeated a divided Democratic Party. This Northern victory, I wish to propose, was seen by the South not as an immediate threat to slavery but as a significant reversal of fortunes in the struggle for control of the Union’s dynamic strategy and, hence, their ability to defend and extend the sources of their material prosperity. Slavery was not under immediate threat as it could only be abolished in the South by a constitutional amendment requiring a two-thirds majority of states, which was unlikely for some time. 380


Further, emancipation was not a declared objective of the North until a year or so after the beginning of the Civil War and, even with the war won, Lincoln intended to phase out slavery slowly through the payment of compensation to slave-owners. In fact, the emancipation proclamation of 1862– which recommended itself to Lincoln only once large numbers of slaves greeted the invading Union soldiers as liberators—was probably both an attempt to drain off the South’s labour supply and a propaganda instrument to maximize internal support and to persuade Britain and France not to join the conflict on the side of the Confederacy. Had the South been allowed to secede there would have been no Civil War, but slavery would have continued in the South for another few generations until the technological strategy brought it to an end. The reason the North went to war against the South was not to free the slaves, but to prevent the fragmentation of the North American market by the creation of a new nation, the Confederacy, in the South. By breaking away from the Union, the South might provide an example, together with financial and military support, for the central territories and for the Far West to do the same. Like the South these new nations could have pursued a dependent strategy by developing staples, such as wool, wheat, meat, and minerals, that could be exported to Europe. If the USA was transformed into a multitude of nation-states as in Europe, the technological strategy of the North would collapse. To prevent this the North was prepared to pay whatever it might cost. And the cost was high. In four years of bitter warfare much infrastructure together with the lives of more than 600,000 men were destroyed (Engerman 1966). This amounted to the staggering proportion of about one-quarter of young men eligible for military service. Had the war been fought over any issue other than control of the dynamic strategy of North America these high costs would have quickly led to a negotiated peace. Following its expensive victory, the North imposed its dynamic strategy on the South—with the dramatic consequences feared by the seceding states—and attained its vision of a mega-state in North America. No one would ever challenge the technological strategists again. And, just as the Northern strategists had hoped, there were immense riches to be garnered. This can be seen reflected in die great mansions they built in New York over the following generation (Hughes 1997). The Civil War had achieved its objectives. While the American Civil War can be explained by my dynamic-strategy model, it provides a stumbling block for other mega-theories. It is, therefore, a litmus test for dynamic models of human society. How, one might ask, would Marx explain it? It is quite clear that the Civil War was not a struggle between classes—both societies were dominated by prosperous elites who invested in ‘capitalist’ enterprises—but, rather, a struggle between supporters of different dynamic strategies. Nor was it a struggle between the 381


forces of good and evil as implied by those, like Robert Fogel, who argue that it was a conflict over the moral issue of slavery. Robert Fogel (1989), joint Nobel Laureate with Douglass North, is the best-known exponent of the popular argument that the Civil War was fought over the ‘moral’ issue of slavery. His recent discussion of this issue is surprising because, in contrast to his earlier work (Fogel and Engerman 1974), he employs an ethical rather than an economic argument. This approach, which in my opinion leads him into error, is the outcome of not employing a dynamic framework for his static neoclassical approach to slavery. Moral arguments are employed to fill the void left by deficiencies in the neoclassical approach to history. Fogel (1989:411–17) argues that the South was determined to secede because it was fully aware of the disastrous impact of emancipation on the personal fortunes of West Indian planters, and it realized that the future of the Union ‘promised nothing but increasingly galling economic exploitation by the dominant section and the rapid reduction of the South to political impotence’ (Stampp 1970:136, quoted by Fogel). Further, he argues that the North was determined to prevent the secession of the South because it felt it was necessary to destroy such an immoral system. This, he argues, was made more urgent owing to the precarious state of the lower classes throughout the West and the anti-slavery movement throughout the world. Fogel (1989:413–14) claims: Peaceful secession, I believe, would not only have indefinitely delayed the freeing of U.S. slaves but would have thwarted the antislavery movement everywhere else in the world. It would also very likely have slowed the struggle to extend suffrage and other democratic rights to the lower classes in Europe, and it might have eroded whatever rights had already been granted to them in both Europe and North America. Since the forces of reaction everywhere would have been greatly encouraged, and those of democracy and reform demoralized, it is likely that the momentum for liberal reform would have been replaced by a drive for aristocratic privilege under the flags of paternalism and the preservation of order. In other words, the Union’s moral stand not only defeated slavery in America, but prevented a world-wide lapse into less democratic forms of government. Fogel (ibid.: 414) also suggests that, had the North not declared war in 1861, the ‘Confederacy would probably have used its wealth and military power to establish itself as the dominant nation in Latin America’ by exploiting its monopoly position as a cotton producer. With a large army based on the monopoly profits of a slave-based cotton industry, the Confederacy could have posed a threat to the North at some future date. He concludes that the destruction of such a profitable system could be achieved only by a moral and political stand: Its death was an act of “econocide,” a 382


political execution of an immoral system at its peak of economic success, incited by men ablaze with moral fervor’ (ibid.: 410). While this is a fascinating argument, it is not supported by the evidence. Of course slavery is an immoral system, but that is not why the North declared war on the Confederacy. We have already discussed the exceptionally high costs of the Civil War and the real reasons (emerging from taking a broader dynamic approach) that the North wanted to prevent the secession of the South. Here I will briefly outline the major problems with Fogel’s argument. First, while I agree that the viable slave economy of the South saw no future in the Union, the real issue in their eyes was not the future prospect of emancipation as such, but rather the prospect of losing influence over the Union’s dynamic strategy (as suggested in his quote from Stampp). Second, if we take a wider dynamic view of American history, it is clear that, in going to war against the Confederacy, the North was pursuing its dynamic strategy of technological change by preventing the fragmentation of the American mega-market. It was not a matter of ‘econocide’ but the elimination of a regional pre-technological strategy by an economically more powerful technological strategy. The North’s objectives were strategic rather than moral or political. Moral and political ideologies are merely instruments of strategic control. This is not meant to imply that moral views are not strongly held and fought for, just that this is restricted to a minority of the population. And, of course, the interaction between strategic and ideological issues is complex, as Fogel (1989:201–320) shows, but the process is driven by the dynamic strategy. The strategists found it expedient to adopt and use the moral debate about slavery, and the ideologues found it necessary to collude with the strategists (particularly by arguing, incorrectly, that abolition would lead to greater prosperity in the South). It is convenient for both sides when moral issues coincide with strategic issues. While strategic issues will generally prevail, moral issues will do so only if they can ride on the back of the prevailing dynamic strategy. The third problem with Fogel’s moral argument is the suggestion that the Union may have played a wider role in preventing the return of more oppressive forms of government throughout the world. The evidence suggests that it is not true, as Fogel (1989:414) claims, that in ‘the 1850s and 1860s democracy as we know it, and lower-class rights generally, hung in the balance throughout the Western world’. As demonstrated in this, and the last, chapter, the global unfolding of the technological strategy was steadily involving the working classes in the North-East of the USA and in Europe in power-sharing. This process depended not on the example of the New World but on the requirements of the technological strategy. Fogel appears to have some sort of Marxist model of class conflict in mind. Fourth, any attempt by the South to exploit its monopoly position as a cotton supplier would have encouraged the British to establish cotton production in its other colonies (India and, possibly, northern Australia) or to purchase it from former 383


sources of supply such as Brazil. This would have enabled Britain to boycott the Confederacy and bring it to its knees—as was done in the case of South Africa in the late twentieth century—thereby freeing the slaves. We can conclude, therefore, that, in the absence of a dynamic framework, it is dangerous to employ an ethical model to shore up the deficiencies of the static neoclassical approach to history. The technological strategy With the victory of the supporters of the new technological strategy, the industrialization of America could proceed apace. Before 1860 rapid industrial development had occurred but it had been restricted by the size of the domestic market and had largely followed the path laid down by the European Industrial Revolution. It was not until after the Civil War that industrialists in the North-East were able fully to exploit the American mega-market and, in the process, to make their own contribution to the modern technological strategy. To exploit the potential mega-market in the USA, railroads stretched out from the east to the Pacific coast and criss-crossed the territory in between. Figure 11.3 shows the contrast between the extent of the railway system in 1861 on the eve of the Civil War and a generation later once the mega-market in North America had been created. While the private sector played the major role in this railroad expansion, we are told that the Federal government ‘subsidized construction ahead of demand, designed to bind the Pacific states to the East’ (Davis et al 1972:501). The dynamic strategists, through their political representatives in Congress, therefore, were eager to complete what they had begun with the Civil War. In 1860 the USA had 30,000 miles of railroad, which amounted to half the world’s total. But over the next three decades, before the closing of the frontier, this total increased by a factor of 5.7 to 170,000 miles, and by the First World War it increased by a further factor of 1.5 to reach 250,000 miles (ibid.: 500). The traffic carried by this vast railroad network increased even faster—by a factor of 30.8 between 1860 and 1890, and by a further factor of 3.0 between 1890 and 1910—because freight rates fell dramatically over these years (see Figure 11.2). The sudden reduction in the rate of expansion of the transportation network after 1890 reflects the exhaustion of the westward dynamic. Finally, the expansion of the telegraph from the 1870s, which enabled orders to be relayed instantly around the country, also helped to build this integrated mega-market. Indeed, it has been suggested, quite persuasively, that the contribution of the magnetic telegraph to GDP per dollar of investment, owing to the better management of capital, must have been much more considerable than its share of total capital formation would suggest at first sight (Field 1992). By exploiting the growing mega-market, the technological strategists generated a major structural change in American society. This 384


transformation involved a shift from rural to urban working and living. Between 1860 and 1910 the proportion of the total workforce in agriculture declined from 52.9 to 31.4 per cent and that in manufacturing increased from 13.8 to 22.2 per cent. And, owing to a much higher labour productivity in urban activities, manufacturing contributed twice as much to value-added as agriculture by the early twentieth century. At the same time the proportion of the population dwelling in urban areas more than doubled from 19.8 to 45.7 per cent (Davis et al. 1972:187,601). This structural change was an outcome of the attempt by manufacturers to meet the demands of the mega-market through the provision of massproduced and mass-distributed commodities of a standardized nature to American businesses and families at internationally competitive prices. While America did not possess an advantage in basic technology over its European competitors, it was able to exploit economies of scale in both production and distribution of manufactured commodities by gaining favourable access to the giant US market. To do so, mega-corporations emerged to exploit the mega-market. Accordingly, by the 1890s manufacturing output per man-hour was higher in the USA than in Britain, enabling the USA to begin exporting machinery and engineered commodities in substantial volumes to Britain and Europe by the turn of the century. But their main market was the domestic market. The success of the initial technological substrategy is reflected in the economic growth achieved during the second half of the nineteenth century. Between 1870 and 1900, real GDP per capita increased at the rapid rate of 2.1 per cent per annum, compared with 1.5 per cent per annum for the two decades before the Civil War (Bruchey 1975:75). While part of this higher growth was probably the result of making good the damage and delay caused by war, the important point is that high rates of growth were achieved even though westward expansion slowed and was finally exhausted during this period. High rates of growth were even maintained right through to the First World War, when the level of real GDP per capita was double that at the beginning of the Civil War (Robertson and Walton 1979:384). It is clear that the strategy of the South could not have done as much. Hence, by the early twentieth century, the cost of defending the technology strategy by waging war on the South had paid handsome dividends. Following the First World War, America’s technological strategy was put to the test as not only had the frontier closed, but the major staples of cotton and wheat had also stagnated (Davis et al. 1972:375). Despite the occurrence of the Great Depression in the 1930s the USA was able to generate growth rates of 1.6 per cent per annum between 1913 and 1950 and of 2.4 per cent per annum between 1950 and 1973 (Maddison 1995:62). This continued growth was an outcome of the more intensive use of existing natural resources that comes from the successful pursuit of the technology strategy. Efficiency rather than resource abundance was the key to the 385


American dynamic as it broke out into the international economy. While greater efficiency accounted for only 50 per cent of the increase in real GDP per capita in the nineteenth century, its contribution rose to at least 80 per cent between 1900 and 1973 (Bruchey 1975:116). This was America’s second technological substrategy. This improvement in efficiency was an outcome not only of more advanced machinery but also of new assembly-line techniques for production on a large scale, of improved management and organization, of better factory design, and of more effective marketing. Henry Ford, for example, who introduced the mass-produced standardized motor car by pioneering assembly-line techniques, was able to reduce the price of the Model T Ford dramatically and hence to increase annual sales from 12,000 in 1909 to 600,000 in 1916, and to more than 2,000,000 after the First World War (Hounshell 1984:224). By 1930, therefore, as much as 60 per cent of American households owned at least one car. This new approach to production and distribution was so successful that it was quickly imitated by the manufacturers of other consumer durables (radios, phonographs) and ‘household producer’ durables (refrigerators, washing machines, vacuum cleaners, telephones). A major source of ideas for improvements in efficiency since the First World War has been the systematic approach to the practical applications of science. While the use of science in industry can be traced back to the midnineteenth century, significant investment in applied scientific research by governments and corporations only emerged in the twentieth century. Expenditures on research and development (R&D) rose rapidly from negligible levels after the First World War to reach 0.06 per cent of GDP in 1940, most of which was undertaken by private interests. Between 1940 and 1970 R&D expenditure rose by a factor of five to more than 3 per cent of GDP, of which two-thirds was financed by the federal government, mainly in the fields of defence, space, and nuclear energy (Bruchey 1975:126). Most private R&D was undertaken by mega-corporations like AT&T, Westinghouse, and IBM. Those areas of manufacturing activity to benefit most from R&D expenditures include the chemical, electrical, electronic, nuclear, and biological fields (Davis et al. 1972:260). Since the mid-1970s R&D expenditure has not grown as rapidly as GDP owing to the reduction of federal investment in space and defence research. Post-Second World War prosperity was experienced only after a decade of economic difficulties that emerged as the limits of the domestic market were reached in the second half of the 1920s. While the geographical limits of the mega-market were achieved in the 1890s, the technological limits were not reached for another generation. On each occasion—the 1890s and the 1930s—the growth of the economy was interrupted and economic depression emerged. In particular, by 1925 the capacity of the domestic market to purchase the consumer goods produced had been fully explored 386


through the techniques of mass production, advertising, and consumer credit. Further rapid growth required either a breakthrough in technology (not achieved until the 1960s and then by America’s competitors) or a more effective utilization of overseas markets that had been growing in the 1920s as the domestic market became increasingly saturated. As America perfected its large-scale assembly-line techniques and as the technological limits of the domestic market were approached, its share of world trade in manufactures increased from 13.0 per cent in 1913 to 20.4 per cent in 1929 (Davis et al. 1972:576). To further penetrate overseas markets using this technology required a new orientation—a shift of emphasis from the domestic to the world market. This reorientation away from the mega-market was not achieved easily, as reflected in the high unemployment and the stagnation of America’s share of world trade in manufactures during the 1930s. It was not until the end of the decade that America was able to achieve a break-out into the world economy, which also had considerable political implications. Accordingly, America’s share of world exports of manufactures increased from 19.2 per cent in 1937 to 26.6 per cent in 1950, a level maintained until the end of the decade, after which it declined steadily. This break-out was achieved by developing a new range of investment and marketing arrangements and institutions. In other words, I am arguing that the economic downturn of the early 1930s was an outcome of America’s arrival at the technological limits of its mega-market, and that the duration of the Depression was a result of the time taken to reorient its strategy towards the world market. The 1930s fell between the exhaustion of the second technological substrategy and the emergence of the third. An important lead in the strategic reorientation was given by the massive increase in demand for manufactured war supplies after 1939. While there is insufficient space to document this argument in detail, the main steps will be outlined as it constitutes a new interpretation—a dynamic-strategy interpretation—of the Great Depression that emerged in America as the first phase of its technological strategy exhausted itself and was subsequently transmitted to a fundamentally unstable world economy. The instability of the world economy was an outcome of two sets of forces: an imbalance in the Atlantic economy, particularly in trade and capital flows, created by the First World War (Arndt 1944; Lewis 1949); and an incomplete baton change in world financial responsibility between the First Industrial Nation and the First Industrial Mega-State (Kindleberger 1973). While these were the main causes of world instability, the situation was also aggravated by overproduction in some branches of world agriculture (particularly wheat) owing to the application of a new technology to the low-rainfall plains of Australasia and North America, and by the reduction in international specialization as the desire to industrialize spread round the Western world (Schedvin 1970: Chapter 2). But none of this would have mattered had it not coincided with the ending of the first phase—the 387


internalization phase—of the American technological strategy, which was a necessary and sufficient condition for a depression in America and, at least, an extended recession in the rest of the world. Hence my interpretation of the 1930s’ Depression in America is that it was a result of the reduction of strategic demand rather than aggregate demand, which is merely an outcome in my dynamic model. The exhaustion of the second phase of the American technological strategy is reflected in the values of actual future dividends paid, which fell from the mid-1920s. This, it has been persuasively argued, was the driving force behind the declining real prices on the stock exchange in the second half of the 1920s and, ultimately, their collapse in 1929 (Barsky and De Long 1990:270–1). In other words, the stock market responded to the unfolding of America’s technological strategy, gradually at first, then precipitously when it became clear that this was the end of (strategic) history as they had known it. The internally generated depression in America was transmitted to the rest of the world through three major agencies. First, there was a sudden reduction in USA demand for raw materials from the rest of the world, which led to severe balance of payments problems and reductions in the GDP of primary producing nations. Second, the USA dumped the large stocks of primary products that it had built up during the 1920s on world markets. This had a dramatic effect on the prices of commodities such as wheat and wool. Third, America withdrew capital from Europe thereby causing the delicate international payments system to collapse. The combined effect of falling prices, particularly for primary products and intermediate goods, and the cessation of international capital flows transmitted the depression throughout the world. And as individual nations faced falling export incomes and declining foreign investment they devalued their currencies, raised interest rates, and reduced government expenditure. This reflex action, aimed at isolating each nation from world depression, merely added to its severity both within and without (Eichengreen 1988). The world depression was brought to an effective end—while there had been widespread recovery in the mid-1930s, by 1937 there were signs of relapse—only once America had redirected its technological strategy from the mega-market to the global market from 1939. And with this recovery of strategic demand the stock market began to expand rapidly again. Only once America had redirected its dynamic strategy did it begin to take responsibility for the stability of international institutions. And the only reason it did so was to protect its new global interests. America’s transition from its traditional policy of isolationism to world power, therefore, can be explained by the redirection of its dynamic strategy from the internal megamarket to the world market. This marked the beginning of the third technological substrategy. But the American boom was not to last. From 1973 to 1992 real GDP per capita increased at a much more modest rate of 1.4 per cent per annum 388


(Maddison 1995:62). This slow-down, which was also reflected in the stock market, is the outcome of growing difficulties experienced in the late 1960s and early 1970s in employing the standardization tactic in the world market. While there are some parallels with the fortunes of this tactic in the domestic market for the decade or so after the mid-1920s, there are also a number of contrasts. In the first place, although old markets are saturated, some new markets in Asia are expanding very rapidly; and in the second place, the Japanese and West Europeans have already shown how new tactics within the technological strategy can be developed using electronic technology to penetrate old markets further. There appears to be considerable mileage left in the current technological strategy. While the American growth rate since 1973 is similar to that achieved from 1840 to 1860 and 1860 to 1900 (1.5 per cent per annum), and not much less than that for 1913 to 1950 (1.6 per cent per annum), it has come as a bolt from the blue for the generation of Americans that grew up in the ‘golden age’ of the 1950s and 1960s when the growth rate was an abnormally high 2.4 per cent per annum. To make matters worse, other nations—such as Western Europe (1.8 per cent per annum), Japan (3.0 per cent per annum), China (5.2 per cent per annum), India (2.4 per cent per annum), and even Asia as a whole (3.5 per cent per annum)—have been growing more rapidly than America since 1973. For the first time in more than a century the USA is no longer the front-runner in global economic growth. This has led to much breast-beating and to predictions of gloom and doom (Bernstein and Adler 1994; Madrick 1995). For the first time since the 1790s Americans have realized that their prosperity cannot be taken for granted. Of course their lagging behind the growth performance of the Asian tigers is to be expected because these less developed societies have a great deal of technological catching-up to do. More serious is the lagging behind Western Europe and Japan, who have developed substrategies within the existing global technological strategy to make inroads into international markets generally and into the US mega-market in particular. These substrategies involve the use of the new electronic technology, together with the associated new organizational techniques, to cater more selectively to consumer preferences in motor vehicles, consumer durables, household producer goods, gourmet foods, individual clothing, and personalized service. In this way these new strategists have tempted many consumers away from the standardized, mass-produced, and mass-distributed goods and services long supplied by American manufacturers (Harrison 1994). This, of course, is not the end of the American technological strategy, but it is probably the end of the standardization approach that has accounted for their success in the domestic and international markets during the last century. If Americans wish to survive and prosper in the twenty-first century, they will need to take up the new challenge presented by the Japanese, 389


Europeans, and now the Asian tigers. This is not the first critical challenge they have faced. We need only recall those occasions in the past when the American dynamic strategy was either blocked or exhausted, such as during the French land blockade of the 1750s, the British containment of the 1760s, the threatened fragmentation of the mega-state in the 1860s, the exhaustion of westward expansion in the 1890s, and the attainment of the technological limits of the domestic market in the mid-1920s. On each occasion American strategists rose to the challenge. It would indeed be surprising if they did not strike back against their current competitors. Phoenix is still rising. THE INSTITUTIONAL RESPONSE The creation and development of the organizational and institutional structure of American society were a direct response to the emergence, unfolding, exhaustion, and replacement of its various dynamic strategies. We have seen that three main dynamic strategies have been pursued in America since the early seventeenth century, namely the dependent-commerce strategy during the period of British imperialism, the family-multiplication strategy during the westward expansion, and the technological strategy since the mid-nineteenth century. This strategic sequence had, as we shall see, a characteristic impact on America’s institutional development, which must not be seen as the out-come of some sort of evolutionary process. In no sense was it unidirectional or inevitable. Had the strategic sequence been different, then the institutional outcome would have differed correspondingly. And the strategic sequence could have been different. We have seen how the transition between each of these strategies was marked by an intense strategic struggle that broke out into extended warfare—a revolutionary war in the eighteenth century and a civil war in the nineteenth. For the moment let us assume that the outcomes of these wars were different—that the revolutionary war was won by Britain and the Civil War was won by the Confederacy. We need not be concerned about how realistic these assumptions are—although not to admit them as possibilities is to subscribe to the concept of historical inevitability—because they will be employed to show how the institutional outcomes could have been different. In the case of the revolutionary war, had Britain devoted more resources to repressing the rebels, and had the French not taken up the rebel cause, then the colonialists may have been defeated, North America would have remained in the British Empire, and the dependent-commerce strategy would have been perpetuated. Similarly, had Britain come quickly to the aid of the Confederacy, as many in the South thought it would or—owing to their close involvement in the British technological strategy—at least should, then the South might have retained its independence as a separate nation even if it could not have overwhelmed the North. The South merely had to maintain its own borders. Such an outcome would have fragmented the North 390


American market, prevented the development of a mega-state, and could have stultified the process of industrialization in the North. Had these counterfactual scenarios actually taken place, the strategic sequence facing America would certainly have been different. In the first place the dependent-commerce strategy would have been extended beyond the 1770s and would have been transformed (as it actually was in a sense for the South) into a dependent-technological strategy as Britain went through its Industrial Revolution. This may have led all regions of North America, including the North-East, to specialize in primary and secondary commodities required by Britain—raw cotton in the South, wheat in the Lakes area, wool and livestock products in the Midwest, minerals in the Far West, and manufactured intermediate goods in the North-East. In turn this regional specialization in staples for export may have led to a local demand for separate nation-states, just as in the cotton-growing South. Such an outcome would have prevented the emergence of a new form of industrialization based on mass production and mass distribution of standardized commodities that in fact enabled the USA eventually to compete effectively with Europe in domestic and world markets. In this case, industrialization may have been delayed—as it was in Australia, which continued as part of the British Empire—until the twentieth century. Had this scenario occurred, institutional development in North America would have been very different. Let us turn to the second scenario. Had the Confederacy, with the assistance of Britain, won the Civil War, the North American market would have been fragmented. It would have seen the end of the mega-market, particularly if other regions pursuing their own comparative advantage followed the South’s lead. This fragmentation may not have prevented continued industrialization in the North-East, but it would have channelled it in different and less profitable directions. It is highly unlikely that the North-East could have challenged the supremacy of Western Europe because it could not have achieved the economies of scale and scope that were only possible within an integrated mega-market. Certainly much of North America would have been committed to a dependent-technological strategy rather than their own independent strategy of technological change. Hence the institutional response to these counterfactual strategies would have been quite different to that which actually occurred. While it is not possible or necessary to speculate about the details of institutional differences between these two counterfactual scenarios and their real-world counterparts, a few bold impressions would not be out of order. At the political level the differences are obvious. Political institutions would have developed around a number of nation-states rather than a single mega-state. Like Australia and Canada, these institutions would have resembled the Westminster rather than the presidential system. The Constitution would have been implicit rather than explicit, and there would have been no Bill of Rights. 391


Similar differences would have existed in the judicial system. And the parliament of these nation-states would have hosted the struggle of different major interests for the control of different dynamic strategies. From these different struggles would have emerged different organizations and different regulations for the conduct of different policy objectives. At the economic level a series of fragmented national markets, protected by different sets of regulations, rather than an integrated mega-market with all its attendant institutions would have emerged. This in turn would have led to an urban and corporate structure in the North-East closer to that in the European nation-states and in other frontier societies (such as Australia) than the mega-cities and mega-corporations of the future USA. And the social structures of these counterfactual scenarios would have been different, reflecting the different pressure groups associated with different dynamic strategies in the various nation-states of North America. It is possible that some sort of economic association between these nation-states eventually would have arisen, but it would have been long in the making as there would have been no mega-state in their vicinity to spur them on to union. It is even possible that rivalry between them, based on opposing dynamic strategies, would have led to regular wars as it has in Europe. The economic structure The outstanding institutional development in the American economy was, as we have seen, the emergence of the mega-market—the world’s first highly integrated mass market. And the focal point of the mega-market is the megacity or megalopolis—a city liberated from its earlier constraints by the technological strategy—and the main actor in the mega-city is the megacorporation. While this vast market has attracted much attention, it is usually treated as an inevitable fact of economic life or as an institution that has evolved according to its own internal laws. Neither interpretation is true. It is, as we have seen, the outcome of a particular strategic sequence that has occurred over the past three centuries as decision-makers responded to changing factor endowments. The mega-market has emerged only because of the way in which particular dynamic strategies have been adopted, have unfolded, become exhausted, and been successfully replaced by other strategies. Had either of the two counterfactual scenarios come to pass then the mega-market would not have emerged. In the colonial period, which was dominated by the dependent-commerce strategy, the main market was driven by an external demand for export staples. This demand was generated mainly within Britain and its Empire but, as we have seen, southern Europe also played a role as the British were never able to make the Empire self-sufficient. And in return the American colonies purchased industrial goods from Britain and primary goods from other parts of the Empire. This set of trading relationships based upon 392

Source: Drawn from data in Henretta et al. (1987).

Figure 11.4 The American ‘lake’ in the early eighteenth cintuey


comparative advantage created the Atlantic economy centred on the American ‘lake’ (see Figure 11.4). As in the other pre-industrial societies, location on the fringes of a ‘lake’ enabled communities to participate in more widespread commercial activities than would have been possible over land. Those societies that found themselves in such favoured locations often went on to build great civilizations, usually, but not always, based on the commerce strategy. Water-borne commerce enabled many societies to build up expertise and economic power that enabled them to break out of their original environment. We have seen this with the Aztec ‘lake’ in the Mexican basin, the Greek ‘lake’ in the Aegean, the Venetian ‘lake’ at the head of the Adriatic, the Anglo-Dutch ‘lake’ in the North Sea, and now with the American ‘lake’—the largest of them all—in the Atlantic. The American colonies played an increasingly important part in the Atlantic economy not only in the demand for and supply of commodities, but also in the provision of lower-cost shipping owing to its vast supplies of forest products. They imported manufactured goods from Britain (in return for tobacco, indigo, flour, timber, and shipping), slaves from Africa (in return for rum), molasses, sugar, and bills of exchange from the West Indies (in return for flour, timber, fish, and manufactured goods), and wine, salt, and bills of exchange from southern Europe (in return for fish and rice). While this pattern of trade was simple and direct for the South, it was more complicated and indirect for the North which was unable to develop a major staple strongly demanded by Britain. Nevertheless, in this period the North was able to develop a more balanced economy that was responsible for the emergence of the technological strategy through the exploitation of the domestic market. In the colonial period, the American domestic market was small and fragmented by distance and the high cost of overland transport. Domestic demand for intermediate and consumer goods was met largely by a relatively high level of imports, facilitated by low costs of sea transport, which placed considerable pressure on the balance of payments. Nevertheless, each colony found it expedient to manufacture those commodities that derived some protection from distance and from an abundance of natural resources. Much of this, particularly in the South and West, was carried out in rural rather than urban areas. Restrictions on the development of the domestic market would have continued throughout the tenure of British rule. As we have seen, the British wanted to restrict settlement to the seaboard for strategic and security reasons. To do so would tie the colonies permanently into the mother country’s dynamic strategies. But, following the Revolution, the colonies were free to pursue their own strategy which, as discussed, involved westward expansion that was made possible by the continuing operation of the Atlantic economy. The growth of market possibilities inherent in this 394


overland expansion, however, depended on investment by the new strategists in the construction of canals (after 1817), and in the application of the new technology provided by the British Industrial Revolution in the form of steamboats (after 1815), and steam locomotives (after 1835). And in its turn this infrastructure investment accelerated the pace at which new land was taken up and at which families multiplied both through natural increase and net immigration. The limits of the mega-market were not reached in geographical terms until the 1890s and in technological terms until the mid1920s. Thereafter the strategists turned increasingly to world markets. The response of entrepreneurs to the expanding internal market, which developed as the American dynamic strategy unfolded, led to a change in the nature of industrial trading, financial, and transport organi2ations and institutions. And these changes expanded the market even further. It was the attempt to exploit the potential market by lowering costs of production and distribution that led to changes in the nature of business organizations and in the legal rules and conventions governing them. In the colonial period, when domestic markets were small and fragmented, much of manufacturing activity was conducted by rural households. And even where urban workshops were employed, the businesses were financed and run by families or small partnerships, often from the profits of commerce. Business corporations were established only for the supply of public utilities such as water. After the Revolution, corporations were drafted into the service of the new dynamic strategy. Up to 1801 a further 300 business corporations were created by state legislatures to raise capital to provide infrastructure for inland navigation, turnpike roads, and toll bridges (Bruchey 1975:95). These were joint-stock companies that were granted privileges—such as tax exemption, monopoly rights of way, and rights of banking and lotteries—to attract capital for the provision of public goods or goods that were desirable but could not be provided at a profit. Until the 1840s incorporation in all states, with the exception of New York from 1811 and Connecticut from 1817, required a special act of the state legislature. As yet, strategic demand did not require general laws of incorporation. This changed after the 1840s with the passage of general laws for the establishment of corporations. But even so, it was not until the mid-1870s that this method was widely used, because until then individual proprietorships and partnerships were able to provide capital on a scale required by strategic demand. Before this the main incorporation was undertaken by railroad and telegraph interests—the first modern business enterprises—which preferred special charters for the privileges they bestowed (Chandler 1977: Chapters 3–5). Hence the provision of an institutional framework ahead of strategic demand will not necessarily lead to economic development. 395


After the mid-1870s the incorporation of manufacturing businesses proceeded at a very rapid rate, particularly in the fields of iron and steel, other metals, chemicals, textiles, and alcoholic beverages. By the end of the century about two-thirds of America’s industrial output was produced by large corporations, which grew rapidly in size through vertical and horizontal integration (ibid.: Chapters 9–11). And from the 1880s these large corporations began to transform their organizational structure. They divided their activities—such as materials acquisitions, manufacturing, marketing, and finance—into separate departments run by specialist experts who reported to an executive committee that made decisions on the basis not of personal observation but of statistical indicators of output, costs, purchases, sales, and profits (ibid.: Chapters 12–14). In other words, American corporations applied the principle of specialization and division of labour, formerly followed in production, to the way production was organized. And, in turn, the departmental managers applied the techniques of scientific management, pioneered by Fredrick Taylor, to the pursuit of greater intra-corporation efficiency. All this amounted to what Alfred Chandler has called the ‘managerial revolution’ (ibid.: 484–500); and what I regard as the building blocks of the mega-corporation that responded and contributed to America’s mega-market. We have seen in the chapters above that the city-state and the metropolis within the nation-state have provided the vehicle for the commerce strategy in the ancient and the early-modern world respectively. In the modern era the megalopolis within the mega-state has become an important instrument of the technological strategy. The technological city has achieved a size that even dwellers in the earlier commerce and conquest cities could not have envisaged. Some modern cities in the mega-state are larger than entire commerce societies of earlier eras. In the USA the number of cities (with a population of 2,500 or more people) has grown from 24 in 1790 to thousands in the 1990s and the proportion of the population living in these cities has increased from 5.1 to 75.2 per cent (US Bureau of the Census 1995). It is an interesting feature of urban growth in America that the initial distribution of city sizes, from very small to very large, has been maintained over the past two centuries— American cities have grown larger together (Davis et al. 1972:601–2). In other words, the emergence of the megalopolis has not eliminated diversity in city size. For city size there has been no convergence. While urban growth has been continuous since 1790, it was marginally faster in the nineteenth than the twentieth century. The watershed was around 1890, the point at which the westward expansion of the American frontier came to an end (see Figure 11.5). Thereafter urbanization depended solely on the technological strategy. By the 1960s the urbanization process had been largely completed, to the extent that nearly all American workers lived within daily commuting distance of the centre of a metropolitan area. 396

Source: Drawn from data in Henretta et al. (1987).

Figure 11.5 The groth of the american mega-city to 1900


During the mid-1990s, in this vast American sea of urbanization, ten cities stand out by having populations in excess of 2.9 million. They include, in order of declining size, Los Angeles (9.2 million), New York (8.6 million), Chicago (7.7 million), Philadelphia (5.0 million), Washington (4.5 million), Detroit (4.3 million), Houston (3.7 million), Boston (3.3 million), Atlanta (3.3 million), and Dallas (2.9 million). While these mega-cities are the outcome of the technological strategy they have, in turn, contributed to further innovations through the generation of external economies. The technological process at the core of the megalopolis is self-sustaining. Traditionally the architecture of cities is examined within a cultural context. But, as I maintain that architecture is an integral part of the dynamic strategy, it is discussed here as a component of economic structure. The mega-city, as we have seen, emerged in response to strategic demand, and within the mega-city grew the mega-building. While the mega-building was pioneered in Chicago during the 1880s—employing the new technology of a steel framework in conjunction with mass-produced durable plate glass to build office blocks up to ten storeys high—New York took the lead after the mid-1890s owing to its greater population pressure (Condit 1968). In 1913 New York could boast the 55-storey Woolworth Building which was referred to as the ‘Cathedral of Commerce’. Towering office blocks were a response to changing factor endowments (with land becoming relatively very scarce in crowded metropolitan centres), the changing requirements of the mega-corporations, and the changing supply of new building materials and technology. These technological issues were also the main determinants of the architectural form of the megabuilding because they allowed only narrow limits within which the unfettered architectural imagination could operate: as between, for example, the art-deco featurism of the Chrysler Building and the Empire State Building or the extreme functionalism of the United Nations Building. In all cases these mega-buildings thrust skyward in long thin columns that allow only superficial variation. But, within these limits, design innovations are imitated and explored until they are exhausted or until they are replaced by innovations providing greater possibility for development. This is a type of architectural dynamic strategy. As the technological strategy unfolded in the USA, the demand for funds and, hence, the response of financial institutions changed. Before the Civil War, funds for industry and commerce had been provided from informal sources, including family, friends, neighbours, business associates, and ploughed-back profits. While formal institutions did exist—in the form of banks, insurance companies, joint-stock companies, and stock exchanges—it was not until after the Civil War that they were developed in form and function to take on a substantial proportion of total financial activity. This rapid change in financial institutions was a direct response to the great leap 398


in demand for finance to invest in the technological strategy. And as the centre of this process of rapid industrialization was located in the NorthEast, this is where the main development of financial institutions took place. But the process of industrialization spread out from this centre so that by the First World War a national network of capital institutions had been created to facilitate the effective operation of the vast, integrated mega-market. The main financial institutions included the commercial and savings banks, insurance companies, stock exchanges, and investment banks. Commercial banks, which did not exist in the colonial period, developed rapidly in the nineteenth century, especially in the second half. While in 1789 the USA had only three commercial banks, they had increased in number to 700 by 1835, 1,500 by 1860, more than 3,000 by 1880, and over 12,000 by 1900 (Bruchey 1975:89). This rapid institutional change in both the East and West was a direct response to strategic demand and was facilitated by the passing of both free-banking legislation—making state charters easier to obtain—in most northern and western states between 1830 and 1880, and the National Banking Act of 1863 which made it possible to obtain charters even in those states with restrictive banking regulations (Davis et al. 1972:320). These commercial banks accepted deposits, made loans to the business community, and issued bank notes (previously issued by colonial governments and British exporters). The deposits were made directly by commercial interests and also indirectly through the new savings banks that also grew rapidly during the nineteenth century. Savings banks mobilized the savings of participating individuals who increased in number from 9,000 in 1820 to 694,000 in 1860, over 2 million in 1880, and more than 6 million in 1900. There was a similar increase in the funds mobilized and invested in industry and railroads by life insurance companies from less than $5 million in 1840 to more than $170 million in 1860 and about $7,500 million in 1900 (Bruchey 1975:92–3). Despite their limited numbers, investment bankers played a disproportionately important role in the growth and organizational development of railroad and industrial activity. These bankers had their origins in eighteenth-century merchant banking (which had facilitated an earlier dynamic strategy) and emerged to act as intermediaries between those seeking higher returns on their surpluses and the relatively unknown and risky railroad and manufacturing corporations requiring large amounts of financial capital for rapid expansion. The best-known investment banker was J.P. Morgan who, before the Civil War, was a New York agent of the Anglo-American merchant banker George Peabody (Hughes 1973:399–454; Brownlee 1974:194). An important aspect of their role was the mobilization of British funds for investment in American corporations about which next to nothing was known. The usual explanation by the new institutionalists is that investment bankers were able to overcome the considerable uncertainty that 399


existed about those American corporations by providing potential investors with information concerning their background and performance (Davis 1996). My interpretation, as outlined in Chapter 2, is that British investors were persuaded to invest by information not about corporation performance, which for new corporations did not exist, but about successful people who were also prepared to invest in those corporations. And as the reputation of those banking investors grew, foreign and American investors alike were prepared to invest in unknown corporations merely on the advice of men like J.P.Morgan. Hence novice investors, through the process of strategic imitation, were willing to follow the advice and example of investment bankers with established reputations. These investment bankers also played a central role in reorganizing, along more efficient lines, some of America’s largest railroad corporations after the crisis of 1873, and industrial corporations after the depression of the 1890s. And they were responsible for the growing influence of the stock exchanges of New York and Boston, which in the last few decades of the nineteenth century began to depart from earlier practices of dealing only with government, transport, and public utility securities. Since the First World War the scale of US investment required to exploit the American mega-market and to break out into the world economy has been responsible for the development of a more extensive and sophisticated national capital market. The stock exchange played a central role in this process, particularly during the 1920s, by mobilizing capital to finance a growing number and proportion of domestic and foreign industrial activities. While the crash on Wall Street in October 1929 drove away many potential investors, the Securities and Exchange Commission helped to rebuild confidence so that by the 1940s the stock exchange had resumed its earlier role. But more important in this process than a change in regulations was the strategic demand for funds that was generated as America threw off the constricting bonds of the interwar years and broke out into the world economy. While the stock exchange continued to expand between 1950 and the early 1970s, it did so at a slower rate than in the period before 1929. The reason for this is intriguing. As financial intermediaries grew in response to strategic demand, they found it increasingly profitable to bypass formal markets and to deal directly with corporations requiring capital (Davis et al. 1972:337). This has been facilitated by the recent introduction of electronic technology in the financial sector. In other words, trends in the relative roles of formal and informal institutions between 1880 and 1929 began to reverse themselves after 1950 in response to the unfolding technological strategy. There is no simple evolutionary process here. We need briefly to consider the development of government regulations that were thought necessary to facilitate and stabilize the technological strategy. This involved a growing network of economic rules that, in contrast to the claims of the new institutionalists, were a response to organizational difficulties rather than the impetus for organizational change (North 400


1981:194). These regulations, which began in the states and the colonies before them, were taken up by federal government in the last quarter of the nineteenth century and concerned issues such as interstate commerce, food quality (1906 Pure Food and Drug Act), unfair competition and price discrimination (the Sherman Act of 1890 and the Clayton Act of 1914), the currency (a series of acts following the crises of 1873, 1893, and 1929), and banking practice (the Federal Reserve Act of 1914) (Brownlee 1974:192– 210). Much of the rule-making powers, owing to their extremely tedious nature, passed in the early twentieth century from the legislative to the executive branch of government where changes were made to facilitate the operation of the organizational structure and to placate powerful sectional interest groups (North 1981:194–6). Rule-making also devolved upon the judicial system. Decisions about economic, social, and political activities that in the eighteenth century had been the monopoly of the legislature were increasingly made by common law judges after 1820. This role continued to develop throughout the nineteenth century as the judicial system became increasingly confident of making rather than just discovering legal rules that had wider economic implications (Horwitz 1977:1–30). It is important to realize, however, that these rule-making powers that altered property rights did not evolve, but rather responded to changing strategic demand. The political structure The central feature of America’s changing political structure over the past three centuries is the emergence of the mega-state. Once again it is necessary to stress that the mega-state did not evolve in a unidirectional and inevitable manner, but rather was the outcome of a series of strategic struggles. During the century before the American Revolution, colonial government became increasingly influenced by local attitudes to commerce, despite the attempt of English officials before 1715 to retain direct administrative control. But, after the final victory of the British Parliament (under Whig control) over the monarchy in 1688 and the substitution of limited for absolute monarchy, earlier restrictions on American commerical expansion were increasingly ignored. In the colonies the authority of the representative assemblies increased relative to that of the appointed councils and British governors. These representative assemblies were dominated by the leading commercial and landowning families—from the top 10 per cent of wealth holders in the Southern colonies and top 30 per cent of those in Northern colonies—who possessed Whig sympathies. But despite their privileged status, members of these assemblies increasingly regarded their authority as deriving from the populace of the towns and counties they represented. The political struggle between the colonialists and the British agents took place over the issues of greater colonial autonomy within the imperial commerce strategy and of greater colonial control over taxation. By the 1750s the 401


colonialists appeared to have the upper hand in this struggle (Henretta et al. 1987: Chapter 3). Over the next generation this modest contest turned into a desperate struggle for control of the American dynamic strategy. As we have seen, this contest was between colonial pressure groups striving for extraordinary gains from opening up the vast land resources of the West and the British government attempting to maintain the imposition of its commerce strategy on the colonies and to resist the creation of a new territorial empire. The outcome was a revolutionary war and the independence of the former American colonies. It was one thing to throw off British rule, but quite another to develop a new system of government. The political systems that emerged in the newly formed states depended on the balance between economic interests, which in turn resulted from the dynamic strategies of the various regions. In the Northern states the small manufacturers and middling farmers formed lower-house majorities, while in the Southern states the majorities were composed of wealthy planters and merchants (ibid.: 195–9). And the struggle for control of the dynamic strategy in each state was not between different classes, but between those supporting different strategies among the propertied sections of the community. We are told, for example: As James Madison pointed out, these political struggles were not between ‘the Class with, and the Class without, property.’ Those who lacked property—slaves, indentured servants, laborers, and tenant farmers—played only a minor role. Wealthy mercantile leaders and landed property owners battled with a larger coalition of less affluent farmers, traders, and artisans for control of the state governments. (ibid.: 200) What we are not told is that these were the representatives of different strategies—of commerce, family multiplication, and even technological change. The inevitable flicker of desire within men of little or no property to take part in the strategic struggle (such as Shay’s Rebellion in 1786–87) was quickly snuffed out by the middle and upper classes in the state legislatures. These men were not yet participants in the American dynamic strategy— they were nonstrategists. The political systems at the state level worked quite effectively, owing to their emergence during the colonial period, but the newly established central government did not. In fact the original Articles of Confederation did not confer powers to regulate commerce, to influence the financial affairs of the states, to regulate economic activity, nor to raise its own finances. Two groups wanted an extension of central government powers for two very different reasons: prosperous farmers, who advocated national policies on the larger issues of western settlement, tariffs, and tax revenue; and merchants and creditors, who wanted to counteract the inflationary fiscal 402


policies of state governments and to encourage foreign commerce (Henretta et al. 1987:201–2). Those who opposed an extension of central government powers were the small non-commercial farmers from the back country of the rural areas. It was the former groups that prevailed in ratifying (1787–90) the modern system of republican government drawn up at the 1787 Constitutional Convention. While the 1787 Constitution was drawn up to achieve a balance between competing economic interests, there is little doubt that it favoured prosperous farmers who wanted to encourage westward expansion. To preempt the move by any other faction to gain control of the political apparatus and to either impose a new dynamic strategy or to redistribute property rights, the founding fathers developed a system of checks and balances to increase the costs of doing so (North 1981:188–9). This involved a tripartite system of government involving separate legislative, executive, and judicial organs; a legislature consisting of two houses; and the operation of government at the federal, state, and local levels. While these checks and balances were prudent and moderated the most blatant abuse of power by minority factions, no constitution could prevent the emergence of new strategists or their ultimate control of the political apparatus to pursue their dynamic strategy; nor could it prevent the emergence of new participants within the existing technological strategy—such as the working classes after the extension of suffrage to all white adult males in the early nineteenth century—from shifting the distribution of GDP in their own favour. The long list of constitutional amendments attest to this truth. Institutions do not determine dynamic strategies, dynamic strategies determine institutions. Initially there was considerable disagreement over the strategic direction to be taken by the new republic. The Republican Party (no relation to the modern party of that name established in 1854) led by Thomas Jefferson and James Madison was in favour of westward expansion to create a prosperous agricultural society of yeomen farmers and independent artisans that would continue to play a role in the Atlantic economy. On the other hand, the Federalist Party led by Alexander Hamilton wanted to maintain the earlier policy of containment to develop a self-sufficient society dominated by wealthy merchants and manufacturers. The dominance of Republican presidents between 1800 and 1824 provided encouragement for the westward (and even northern) expansion already underway. It was this policy that brought the USA into conflict with the Spanish in Florida and Mexico, the Indian nations in the West, the British in Canada, and ultimately the British government. The outcome of these conflicts was the Louisiana Purchase (for about $15 million) of 1803 from Napoleon Bonaparte, the unfortunate 1812–14 war during which the USA unsuccessfully invaded Canada, and the acquisition of Florida from Spain in 1819. Predictably, the Federalist Party, which resisted the westward expansion on the grounds that it would undermine the power base of the wealthy 403


merchants and manufacturers, lost political support during the formative phase of the new American dynamic of westward expansion. As Federalist ideas were not supported by the economic reality of the early nineteenth century they were simply swept away. Ironically, by harnessing this geographical expansion through a network of transport facilities, the Northern manufacturing and commercial interests were able to create a new and more enduring dynamic strategy—technological change—that was able to carry American society forward after the westward expansion had exhausted itself. Through their new political apparatus—the Whig Party that was established in the mid-1830s—those Northern interests were able to synthesize the economic nationalism of the old Federalists with the expansionism of the Republicans to create something entirely new. By then most politicians—even former Federalists like John Quincy Adams— supported expansionism, even if for different reasons—reasons that would, in the next generation, come into open conflict. The dynamic strategy that led to the great westward expansion was also the driving force behind the granting of white male suffrage. Under Thomas Jefferson, the Republican Party had taken a more liberal approach to white male suffrage. Jefferson realized that his vision of a prosperous expansionary agricultural society would need the political involvement of prosperous yeomen farmers and independent artisans. This turned out to be the case. Westward expansion actually led to the creation of a large population of small farmers and craftsmen who demanded and received political representation whenever the newly settled western territories joined the Union and became states. And in the 1820s most eastern states removed property qualifications to the right to vote, largely in an effort to persuade their people not to migrate west. By 1830 the major exceptions were Rhode Island, Virginia, Florida, and Louisiana. As they invested the lives and savings of their families in transforming the wilderness into a great market for manufactured products, ordinary men became participants in America’s dominant dynamic strategy. And, as dynamic strategists, these men demanded and received political representation in return for the payment of taxes. This occurred at least two generations before the technology strategy in Britain was to involve the working classes of that country in the struggle for political control. The growing markets for manufactured goods resulting from westward expansion led to rapid industrialization in the North-East during the 1820s and 1830s. This was to form the basis for the new technological strategy that was responsible for transforming the political structure of America. In particular it led to the growing difference between the economic interests of the North, which looked westward to an enlarged domestic economy, and the South, which looked eastward to the Atlantic economy. This difference was reflected in the struggle for control of America’s future between the Democratic Party (established by Andrew Jackson in 1828), which became 404


increasingly associated with the interests of the Southern planters, and the Whig Party (established in the mid-1830s), which became increasingly associated with the business interests of the North-East. This difference, however, was blurred around the edges as both parties had supporters in other parts of the country: the Whigs gained some support in the South from small farmers in the back country and a small group of wealthy planters who had invested in industrial activities in the North; and the Democrats gained some support in the North from those opposed to, or alienated by (such as immigrants), industrialization. But as these parties increasingly came into conflict over their incompatible strategies during the 1840s and 1850s there was a realignment of their support base along more clear-cut North—South lines. And in the process the Whig Party disintegrated and was replaced in 1854 by the new Republican Party, which embarked on a collision course with the Democrats that could be resolved only by civil war. With the complete destruction of the South’s economic, political, and social system, together with the elimination of its competing dynamic strategy, the Republican Party was free to pursue its vision of a new mega-state. This required not only a resumption of westward expansion but also a reconstruction of the South. Between 1868 and 1871 all the Southern states rejoined the Union and were governed for up to a decade in some cases by ‘reconstruction governments’ under Republican control. But the enforced change in the economic system of the South led, in the period 1860 to 1880, to a decline in output per capita by 23 per cent at a time when it grew by 35 per cent in the rest of the USA (Engerman 1966:181). The fall in Southern living standards can be explained by the reduction in agricultural productivity owing to the collapse of the plantation system (Irwin 1994). With the resulting determined resistance and intimidation by the old families, the North found it economically expedient to leave the South to its own devices. This meant the resumption of planter control over its now, technically speaking, free black labour force. In this way the Southern elite turned from the commerce strategy to rent-seeking—a tactic always employed by the economically powerful in a society with an unsuccessful dynamic strategy. Between the end of reconstruction and the turn of the century, the political structure of American society reflected the unchallenged pursuit of the twin strategies of westward expansion and industrialization. This led to a balance between the two major political parties. The Democrats, adopting an agricultural emphasis, represented the Southern and Western agricultural states; and the Republicans, with their industrial emphasis, represented the business and middle classes mainly in the North. During this generation the differences between the parties were expressed on issues such as how high the tariff rate should be, what to do about the currency, and how unemployment should be resolved. With the elimination of conflicting strategies, therefore, the differences between the parties were reduced to matters of emphasis and detail. 405


Once the westward expansion had exhausted itself by 1890, the technological strategy reigned supreme. Accordingly the Republican Party, which championed industrialization, began to gain ascendancy. In the 1896 federal election, the Republicans under William McKinley emerged as the dominant party, even making gains in urban districts that had traditionally supported the Democrats. This dominance they held—except during the period (1913 to 1921) of internal leadership wrangles—until 1933. Under Republican leadership, America’s industrial power was employed to extend its territorial influence, following the Spanish-American War, in the West Indies (1898 to 1917), the Panama Zone (1903), the Hawaiian and other Pacific islands (1898), and the Philippines (1898). It was the emergence of a single dynamic strategy that accounted for the common political objectives and for the growing attention that could be devoted to abuses in the way the technological strategy was pursued. The earlier struggle between dynamic strategies was replaced after the 1890s with a struggle over how the bountiful returns of the technological strategy should be distributed. This new struggle focused on the economic power of the mega-corporation, leading to greater regulation of big business, and on the welfare of the casualties of industrialization, leading to a greater degree of social security. And as the technological strategy unfolded, a closer relationship was forged between government, big business, and the community in general—a relationship that grew stronger during crises such as world wars and depressions—as in the case of Franklin Roosevelt’s ‘New Deal’. In an era when the dominant strategy embraced the entire community, the federal government, whether Democrat or Republican, became the main instrument not only of its pursuit but also of the stability and sustainability of its outcomes. This was not the ‘ideological transformation’ claimed by some (Anderson and Hill 1980; North 1981:198), but rather the strategic induction arising from the participation of all American citizens in the technological strategy. Since the Second World War the pursuit of the technological strategy has been equated in the political, business, and popular mind with the pursuit of economic growth. And economic growth has been maximized by breaking out into the world economy. Earlier isolationism arising from a traditional preoccupation with the dynamics of their own mega-market gave way to international expansionism. This transition has long puzzled interested observers. Why did the USA cling so determinedly to its isolation during the first forty years of the twentieth century when it was already the world’s largest and most powerful industrial nation? And why did it suddenly become so involved in international affairs—in international organizations such as the International Monetary Fund (1944), the International Bank for Reconstruction and Development (1944), the General Agreement on Tariffs and Trade (1947), and the United Nations; in involvement in the internal affairs of other countries; and in various military engagements—from the 406


1940s? The contrast between the difficulties Franklin Roosevelt had in attempting to get America involved in the war against Hitler in the early 1940s and the ease with which the country was able to place troops in Korea in the early 1950s, in Vietnam in the mid-1960s, and in the Gulf region of the Middle East in the 1990s is astounding. It becomes explicable only in terms of the redirection of America’s technology strategy from the megamarket to the world market, and the need to support and defend that strategy beyond its borders. This strategic redirection brought the USA into direct confrontation with the world’s second mega-state, the USSR. Competition between any two mega-states will be intense as these giants struggle for world supremacy, but when organized on two very different and competing principles—the regulated free market society versus the centrally determined society—the confrontation between them will be heightened. At least in ideological terms. So it was with the USA and the USSR between 1945 and 1989. The obvious ideological differences were exploited by vested interests in both societies in order to rally their people behind the pursuit of their respective economic programmes. As the Soviet-style system spread rapidly to underdeveloped societies, accompanied by lavish gifts of capital, the competition between the mega-states led to a number of ‘small’ but dangerous wars in Korea and Vietnam during the 1950s and 1960s to the 1970s. The old struggle for control of the technological strategy in America became a struggle for its control on the international stage. This was a global struggle between the strategists and the antistrategists. And anti-communist measures of the McCarthy era of the late 1940s and early 1950s became the instruments of this great materialistic struggle. Ideology was cynically used, as it always is, to further the interests of the military-industrial complex that relied for part of its success on production for war and cold-war competition (including space travel and the Star Wars programme). The two decades after the Second World War were dominated by the Democratic Party, which gained its support from the working classes, urban dwellers, Afro-Americans, ethnic groups, women’s groups, and sections of the middle classes. To fashion this diverse set of interests into a solid support base, the Democratic Party needed to pursue policies of welfare and civil rights. But these policies were only effective as the unfolding technological strategy drew individuals from these less affluent groups into full strategic participation. And as fully participating strategists they asserted their rights. The mechanism of strategic participation in the second half of the twentieth century requires further explanation. At its core are fundamental changes in technology that have responded to changing relative factor prices. The introduction of automated and, later, computer-operated processes in manufacturing and in services generated a demand for both unskilled and ‘light’ labour in a wide range of economic activities (Snooks 1994a:81–8, 142–8). Those sections of the community that had a comparative advantage 407


in this type of labour were unskilled married women and Afro-Americans. The more complete participation of these social groups in the mainstream of the technological strategy has led to their receipt of higher incomes, their investment in better skills, and their payment of higher taxes. like all other social groups before them they have demanded greater influence over the system that employs their taxes and greater status in society. Not surprisingly the distribution of a higher proportion of income to these new strategists led, from the late 1960s, to a counter-attack by the old strategists. In turn, this resulted in the renewed influence of the Republican Party, which attempted to reverse the new trend in income distribution—just as has happened in the rest of the Western world. The social structure The changing social structure of America over the past three centuries has, as in all other societies examined here, depended upon the changing nature of strategic demand. Once again the pattern of social change is an outcome not of some sort of evolutionary process but of a historically determined strategical sequence of dependent-commerce→family-multiplication→ technological change. By the middle of the eighteenth century American society, under the influence of British imperialism on a continent with different regional climates and natural resource endowments, had developed a strong North— South contrast. While there was a transitional zone occupied by the Middle Atlantic states, this is not a serious omission in the following discussion. In the New England colonies, the dominant social group consisted of small freehold farmers. Of course there were a number of artisans, merchants, and professionals in the towns, but they did not have a major influence in this ‘freehold society’. Something like 70 per cent of the alienated land in this region was worked by owner-occupiers; the reverse of the situation in ‘old’ England. Typically these farming communities were composed of large households operating the family farm. In 1700 the average family farm was run by a husband and wife together with seven children, whereas by 1800 the number of children had declined to about six (Henretta et al. 1987:92,292). The large number of children in the average household was required to help run the family farm in a society where land was relatively abundant and cheap and labour was scarce and expensive, to provide for the parents in old age at a time when there was no welfare, and to meet the high infant mortality rates under pioneering conditions. Because the holding could support only one family, either the younger sons were encouraged to migrate further west, or the whole family would sell up and move to where land was cheaper so that all the children could be provided for without breaking up the extended family. Economic opportunities in frontier urban towns were 408


also greater than those in the east, as can be seen from a comparison of wealth and its distribution between Chicago and Boston (Galenson 1991; Herscovici 1993). This was the underlying mechanism of the familymultiplication strategy that provided the dynamic for westward expansion from the mid-eighteenth to the late nineteenth centuries. As we have seen, fertility rates were as high as 55 births per thousand in 1800 but as low as 41.4 per thousand in 1860. This change reflected the relative decline in the family-multiplication strategy as the technological strategy, centred in the North-East where less land was available for settlement, grew in relative importance. Over this period the proportion of population living in urban areas increased by a factor of three, from 6.1 to 19.8 per cent; and the proportion of the labour force engaged in manufacturing increased by a factor of six, from 3.2 to 19.1 per cent (Davis et al. 1972:601, 187). There has been an interesting debate between Y.Yasuba (1962), supported by C.Forster and G.S.L.Tucker (1972), and J.Potter (1965) about these declining birth rates. Yasuba and Forster/Tucker argue that declining American birth rates were due largely to the declining availability of ‘easily accessible land’, whereas Potter claims that they were due largely to urbanization and industrialization. The point is that both are equally correct and equally wrong, as the change in birth rates was the outcome of a transition between two different dynamic strategies. It is a bit like arguing over whether prices are determined by demand or supply—they are determined by both. In the South, namely the Chesapeake colonies, an entirely different social structure developed. Between 1680 and 1720 tens of thousands of African slaves had been acquired by wealthy settlers or planters, and put to work on large estates producing tobacco or rice. While there were also many yeomen farmers, they took their lead both politically and socially from the elite planters. Their bond was a need to keep the overwhelming number of African slaves in their place. In the South, the planter elite built brick mansions; imported English furnishings, clothes, and eating habits; imbibed English culture; and had their sons educated in London at the Inns of Court. They thought of themselves as transplanted English aristocrats. And why not, they grew rich by participating closely—more closely than the North— in the British commerce strategy. The yeomen farmers in Southern society imitated the planters to the full extent of their much more modest budgets. In contrast the African slaves lived hard and often brutal lives with few material pleasures and little spare time to enjoy even these. But with the passing generations these dispossessed peoples developed a distinctive Afro-American culture that not only borrowed from European society but also contributed to it, mainly in the form of music. Owing to the need to keep a large dependent population in its subservient role, it is not surprising that the legally established church in the South was the Church of England—which preached conformity and 409


acceptance of one’s place in society—rather than the non-conformist religions in the less hierarchical and more flexible society of the North. As we have seen, the established church in England had always played this oppressive role. The different social structures of the North and the South reflected the different strategies these regions pursued rather than the different property rights (ownership of the means of production) they adopted. Property rights merely reflected the requirements of different dynamic strategies. And ‘class’ in any functional sense (rather than in a purely descriptive sense) involved being either a strategist or a nonstrategist. What binds different families together in the pursuit of a common objective is not some Marxist concept of class but whether they are participants in, and beneficiaries of, a particular dynamic strategy. In the North during the mid-eighteenth century the great majority of families were strategists, whereas in the South the great majority (Afro-American slaves) were nonstrategists. Differences in the educational systems also reflected the different dynamic strategies of the North and South. While the ability to read and write in 1790 was widespread in the North, including 90 per cent of adult males and more than 50 per cent of adult females, it was much more restricted in the South, including only two-thirds of white males, a small minority of white females, and virtually none of the blacks. More superficial distinctions in terms of dress and other customs, which did not conflict with strategic requirements, had more diverse cultural origins, particularly in the North, owing to more varied national (German, Scottish, Irish, and Dutch as well as English) and religious (Quaker and other non-conformist as well as Church of England) origins. These social differences, both fundamental (strategic) and superficial (nonstrategic), were carried west after 1790 by migrants from the North and the South. The adoption of the technological strategy by economic interests in the North from the early nineteenth century led to the emergence of the American business ‘class’. Members of this strategic group included a small elite of wealthy manufacturers, merchants, and bankers, together with a larger number of small businessmen (formerly self-employed artisans), engineers, and professional people of more modest wealth. As the manufacturers were able to reap higher profits owing to the introduction of new technologies, their wealth increased more rapidly than that of the merchants, and they came to dominate this strategic group. As in Europe, this strategic group made a virtue of the qualities required to generate business profits—discipline, hard work, frugality, and temperance. And in order to maximize their profits, they attempted to impose these values on their employees. Ideology, therefore, was used by the business ‘class’ to manipulate the nonstrategists in its pursuit of material advantage. While unskilled and semi-skilled labourers became increasingly dependent on the 410


business ‘class’, they also became increasingly separated from it in terms of wealth and values. At this early stage of industrialization, the labourers were exploited by, rather than being participants in, the technological strategy: the daily wage in Massachusetts of unskilled labour as a proportion of that for a skilled machinist fell between 1826 and 1840 from two-thirds to less than one-half (Henretta et al. 1987:332). An important instrument by which the technological strategists attempted to regulate the behaviour of the nonstrategists was religion. The business elite used the church and various charitable institutions in this endeavour. In particular, the evangelical movement, which embraced the values of hard work and temperance, was employed in an attempt to manipulate the ‘lower orders’. While this had an influence on those who aspired to join the middle classes, as in England, it had only a limited impact upon the poor who held out no hope for social mobility. The disaffected—mainly artisans threatened by the new technology—turned to the trade unions, but the influence of these institutions declined with the elimination of many pre-industrial crafts and with the improvements in working-class living standards after 1840. While the family continued to be an important instrument of expansion along the western frontier, in the more settled regions it took on a new role owing to rising living standards and falling access to land. As the family ceased to be the central dynamic in the settled regions—the technological strategy had replaced the family-multiplication strategy—its size and nature were transformed. The average number of children per family fell from about seven in 1700 to six in 1800 and four by 1850 (ibid.: 92, 292). At the same time the family changed from being the main source of economic expansion and growth to being the control centre of the community by planning, investing, monitoring, and benefiting from the pursuit of the dynamic strategy that had been contracted out to the market sector. This is discussed in detail elsewhere (Snooks 1994a: Chapter 6). In this way the household became less like a place of business and more like a place of leisure and recreation. As the household environment became less regimented the status of women improved and the economic pressure on children was relaxed. The cut and thrust of competitive life was transferred from the household to the market. And the release from the burden of constant childbirth made it possible in the 1850s for women from the wealthier social groups to agitate for civil rights, initially for the abolition of slavery and later for the rights of women. In 1860 the state of New York granted women the legal right to collect their own wages, to bring suit in court, and to control their own property if widowed (Goldin 1990). As the North industrialized, the South grew prosperous by growing cotton for the textile mills of Britain. By the 1850s cotton had displaced the other export staples of tobacco, rice, and sugar in importance and accounted in 1860 for two-thirds of the value of US exports. At the same time the cotton industry was expanding rapidly westward, generating a growing 411


demand for more slaves. As the slave trade had been terminated in 1808, this western demand for slaves was met by eastern planters investing in slave production. Hence the combined profits from investing in the growing of cotton and of slaves were high in the 1840s and 1850s. It was on this dependent strategy that the structure of Southern society was based. The planters, who grew even more rich and powerful than those in the eighteenth century, made up a very small proportion of Southern whites. In 1860 no more than half of 1 per cent of the white population owned twenty or more slaves, and only one-sixth of this group owned fifty or more (Henretta et al. 1987:413). It was an inequality perpetuated by the optimistic ambition of the poorer whites to join the ranks of the planters, which was given credibility by rapid westward expansion and by the reluctance of immigrants to enter the slave zone. The elite planter ‘class’ cultivated a lifestyle of wealthy elegance, attempting to compensate for the murky origins of their wealth by promoting themselves as hospitable, generous, courageous, chivalrous, and loyal. While the Afro-American slaves working on these plantations had no legal rights, they were better fed, clothed, and housed than the poorest whites in both the South and the North. Also their medical care and life expectancy were ‘well within the range experienced by free men during the nineteenth century’ (Fogel and Engerman 1974:109–26), but only because they were a valuable investment both as a plantation workforce and as a source of new slaves for sale. The working conditions of slaves varied widely and depended on the rationality and humanity of individual owners, and on whether they worked on the more civilized plantations in the east or on those in the more oppressive climate and with rougher facilities in Alabama, Mississippi, Louisiana, Arkansas, and Texas (where one-third of slaves lived in 1860). The Afro-American communities had close nuclear families and elaborate kinship networks (Genovese 1974:450–8). This was encouraged and exploited by the planters because they used the slave family as a unit of administration, as an instrument of labour discipline, and as the source of slave procreation (Fogel and Engerman 1974:126–44). Yet this family structure was disrupted from time to time by the sale of family members ‘down the river’ for incorrigibly disruptive behaviour or as part of the programme of raising slaves for sale: in the mid-1860s something like onequarter of men over 40 had been separated from their first wives, and many women complained about having children taken from them. In these circumstances Christianity was a major source of consolation for the slave communities, providing an identification with the children of Israel who eventually found deliverance from bondage in Egypt and entered the promised land. But the promised land was far off and some preferred escape or rebellion, neither of which was usually successful in a society held together by force and the threat of terror (Genovese 1974:587–657). There are strong historical parallels here with Anglo-Norman England and the 412


conquest societies of the ancient world. Indeed, the entire Southern system was an anachronism in the age of the technological strategy—but, for the time being, a profitable one. The victory of the North in the struggle for control of America’s dynamic strategy during the Civil War brought the old Southern society to an end. The slaves were freed under the Thirteenth Amendment, and the former plantation system broke down. But the old planter families and the new entrepreneurs who emerged to exploit reconstruction opportunities in industry and commerce were determined to regain control of the economic and political system. To do so they demanded, and received, the complete cooperation of all whites in this new strategic struggle. With the discrediting of the Republican Party in Southern eyes, the Democratic Party—the ‘Redeemers’—dominated politics in the South, ruthlessly attacking any challenges from black Republicans and populist movements (initially including poor whites as well as blacks) from the poorer agricultural areas. The failure of the populist movement led to the frustration of the poor whites, whose anger was skilfully directed against the blacks, particularly during the depression of the 1890s. Hence, the old political and social forces re-emerged from reconstruction by intimidation and an appeal to white racial solidarity and white supremacy. Here was a frightening but effective use of ideology by a minority in its struggle for strategic control. And it was a method that continued to be employed until the mid-twentieth century. In the face of a failed strategy, therefore, the old planter families decided upon the usual tactic in these circumstances of rent-seeking. This involved conspiring together to pay as little as possible to the freed slave for a given amount of work. At first (1865) written contracts concerning specified work for wages were responsible for eliminating the despised gang system, and later (from 1866) a shortage of cash led to the emergence of a sharecropping system similar to that existing in parts of southern Europe. Owing to the greater independence conferred by this system, it was initially popular with the ex-slaves, and spread quickly and widely (Ransom and Sutch 1977:89– 99). The landlords supplied the land, seed, capital, and fertilizer, and in return claimed between half and two-thirds of the crop. In this way both parties shared the incentives, risks, and financial outcomes. By saving some of their income, some ex-slaves managed to rent and even to buy land, but the land they bought was land that the whites did not want and could be obtained only at relatively high prices. Even as late as 1910, Afro-Americans owned less than one-third of the land they worked. And many of these eventually fell into the hands of the rent-seekers—the merchants who forced them into overproduction and the country retailers who charged high rates of interest on working capital (ibid.: 149–70). The Afro-American ‘promised land’ did not turn out as many thought it would at the end of the Civil War. Black tenant farmers neither owned their 413


land nor managed their businesses. They were caught between the landlord and the merchant and were really only free to do the hard work of farming. And Afro-Americans were forced from many skilled jobs that they had held immediately after the Civil War once the military presence of the North was withdrawn. From the late 1880s a policy of racial segregation was adopted which was to last until the mid-twentieth century. But this was all quite predictable. Racial equality cannot be imposed by institutional changes such as the Fourteenth Amendment of 1868. It could, and would, occur only when the Afro-Americans were absorbed into the dominant dynamic strategy of the USA. Even the National Association for the Advancement of Colored People (NAACP), established in 1909, was successful in its institutional approach only after this had occurred—a century after the Civil War. This crucial point was realized by the amazing black leader Booker T. Washington (1856–1915) who summed up his approach with the words ‘there is little race prejudice in the American dollar’, and who wanted to make his community essential to the success of American enterprise (Harlan 1972). This could happen only through the emergence of a strategic demand for labour in which the majority of Afro-Americans had a comparative advantage. Accordingly, it was delayed until after the Second World War, when there was widespread adoption of automation and computer-controlled processes. In contradistinction to a recent historical evaluation (Henretta et al. 1987:606–7), Washington rather than the NAACP was correct in the analysis of the nature of their race. While the South struggled to recover in the generation or so before the First World War, the North continued its eager pursuit of the technological strategy. As we have seen, this led to the emergence of the industrial and services city—the mega-city—as the vehicle of America’s industrial transformation. By 1900 some 20 per cent of the population lived in substantial cities of at least 100,000 people—cities that contained the megacorporations that served the needs of the mega-state. In order to play this new role, these large cities had to undergo a technological transformation of their own, including the construction of steel-framed skyscrapers, rapid transport systems, electric lighting and power, and telephonic communications. The vehicle was transformed along with the strategy. Within the mega-city the numerous inhabitants became increasingly drawn into the technological strategy and the working classes gradually made the transition from nonstrategists to strategists. Even so the contribution to, and rewards from, the economic system created external distinctions within urban areas. The poorest groups lived in the least attractive parts of the city centre, while the middle-income groups made their way to the surrounding suburbs that were encroaching upon broad acres, and the rich occupied mansions either in the city centre or on the rural fringe. Certainly the distribution of wealth was, and still is, highly skewed: with the top 1 per cent of the population in the late nineteenth century owning onequarter of the wealth, the top 5 per cent about one-half, and the top 35 per 414


cent owning the great majority of the nation’s wealth (Davis et al. 1972:29– 32; Henretta et al. 1987:560). With their newly won wealth, the business elite began moving out of the city centres as early as the 1840s. And as the industrialization process continued, the rapidly growing middle classes began to join this exodus from the mid-1870s—in imitated pursuit of the ‘rural ideal’—to create the suburbs that have dominated urban living ever since. The main focus of this movement was the new salaried middle class—the managers, accountants, clerks, advertising people, sales people, engineers, chemists, and designers— which grew by a factor of seven between 1870 and 1910, three times more rapidly than members of the old middle class consisting of small businessmen and professionals. And in reflection of their different levels of success they lived in clearly delineated suburbs. Even parts of the working classes were absorbed into the technological strategy by 1910. Like the elite and the middle-income groups, they shared, albeit more modestly, in the benefits of industrialization. The real earnings of workers increased by 50 per cent, both between 1840 and 1870 and again between 1870 and 1910. This was the outcome of their investment in the skills and experience required by the process of industrialization, which led to an increase in labour productivity. Labour became as committed to the technological strategy as all other social groups, and like all the rest they had to struggle for their share of the returns, particularly in the 1890s when unemployment was pervasive (Hatton and Williamson 1991). This meant involvement in union activity, such as the 1877 strikes in protest against wage cuts, the 1886 strikes in support of the eight-hour day—hours had already been reduced from 66 in 1860 to 60 by 1880 (Atack and Bateman 1992)—and the 1892 strike over wage cuts once again. But having gained these concessions, which they felt reflected their contribution to economic progress, they gave the American technological strategy their total support, much to the frustration of unrealistic radicals who were deluded by Marxist confusions and caught up in their own political ambitions. The workers had finally joined the dynamic strategists. By the 1920s the unfolding technological strategy had, as we have seen, generated an economic system based on a mega-market. A major outcome of this successful economic system was the world’s first mass culture. By integrating all regions of the nation through a network of efficient transport and communications, and by creating a system of production and distribution that could meet the growing demands of this mega-market for low-cost standardized products, all sections of the American community were drawn into a national mass culture. This mass culture, which displaced earlier regional cultures, was created by the products of the technological strategy: movies, the weekly audience for which grew from 40 million in 1922 to 115 million in 1930; radio, which began in 1920 and by 1929 had captured 40 per 415


cent of American households; together with a wide and growing range of magazines and newspapers, which had circulations running into the millions. These were the new organs of strategic imitation which replaced the older media of the public lecture and the pulpit. With their national circulation, radio, newspapers, magazines, and movies provided information on how influential people lived their ‘desirable’ lives, and how everyone else could imitate their success at more modest levels. Before the 1940s, this process of imitation did not extend far beyond the middle classes who, with the assistance of consumer credit, could afford more fashionable houses, cars, consumer durables, household producer durables, and holidays. But the potential existed for a vast extension of the market for these new commodities once workingclass incomes increased and costs of production and distribution declined. The Great Depression, as we have seen, demonstrated the limitations of a system that had long been geared to pulling itself up by its own bootstraps. By the mid-1920s it is clear that, as the domestic market had been fully exploited given the level of technology and the level of real GDP per capita, the first phase of the American technological strategy had exhausted itself. Even with aggressive consumer marketing in the USA using seductive advertising and liberal consumer credit, consumer spending declined after 1925 (and house construction after 1927), inventories began to rise threateningly, and producers began to reduce output and to sack workers. The decline into a deep and extended depression was now inevitable and would continue until the technological strategy was refocused from the internal market that had served it so well for the past century, to the international market that could provide it with a new lease of life. In the meantime the unemployed, who made up at least 25 per cent of the normal workforce in 1933, had to struggle to survive. The Great Depression exposed the precarious economic and social position of disadvantaged groups—particularly native Americans, blacks, women, the aged, and the least skilled labourers—that had not as yet become full participants in the technological strategy. It was these groups that were addressed by the New Deal policy of Franklin Roosevelt from his inauguration in 1933 by putting the unemployed to work on public works that included reforestation, road and bridge construction, the construction of public buildings, and regional development programmes; by passing the Social Security Act of 1935, which established a federal-state pension fund from contributions by both employers and employees and an unemployment compensation fund; by passing the National Labor Relations Act of 1935, which upheld the right of workers to join unions; and by passing legislation that gave minorities a greater role in determining their own future (Henretta et al. 1987:746–63). The break-out of the USA into the international market from the late 1930s marked the beginning of the second phase of its technological strategy. It involved not only a redirection of US strategy but, in the process, the 416


generation of higher incomes and lower costs of production and distribution that enabled local industry to exploit the large working-class market. This was assisted by a large-scale expansion of consumer credit from $8.4 billion in 1946 to $45 billion in 1958, and an increase in advertising expenditure from $6.5 billion in 1951 to $10 billion in 1960 (Henretta et al. 1987:853). The American economy began again in 1946 where it had left off in 1927, but this time with a more international vision. After the Second World War, the renewed and rapid increase in living standards generally and salaries and wages in particular led to a renewal of the suburbanization process that had ground to a halt at the end of the 1920s. This time the working classes joined the middle classes, although in different suburbs. Hence, while the population of the suburbs increased, that of the city centres actually fell. New York in the 1950s, for example, lost 2 per cent of its population in the city centre—despite the large inflow of Puerto Ricans—while gaining 58 per cent in its suburbs. Suburbanization was fuelled by the widespread adoption of the motor car by all classes of society, by the low cost of petrol, and by the construction of an elaborate network of freeways. This new system of private transport changed not only the way people shopped, went to work, and spent their leisure time, but also the very nature of their communities, which increasingly submerged their local identity in a wider regional and national identity. Innovations in mass travel and communications, which included jet aircraft, television, and the computer Internet, provided the basis for an even more closely integrated national, and international, mass market and for an even more rapid and widespread imitation of popular values and consumption. As this second phase of the technological strategy unfolded, a major structural change in employment occurred. It involved three major components: first, a major shift from rural to urban activities; second, a large shift from the production of goods to the production of services; and third, an unprecedented shift of married women from the household to the market. As agricultural productivity increased rapidly after the Second World War, relative employment in this sector declined massively from 13.2 per cent of the total workforce in 1945 to only 2.6 per cent in 1994, declined moderately in manufacturing from 23.5 per cent to 15.4 per cent, and increased dramatically in service activities from 6.2 per cent to 32.8 per cent over the same period (US census 1995). This structural change fed the process of urbanization as more than 30 million people left rural America, and it led to a largescale movement of Afro-American people from the South to the North (which began during the First World War). But the main driving force came from strategic demand as automation and computerization led to a demand for less skilled labour. Similarly the changing demand for labour—both ‘light’ and unskilled labour—generated by fundamental technological change was the driving force behind the shift of married women from the household to the market. This came in the 1950s after men returning from the war had had the effect 417


of shifting women back into the home. But despite the large-scale propaganda programme mounted to ease this transition at the end of the war, it was not able to prevent a massive shift of married women to paid employment in response to the steady increase in the female/male wage ratio (Snooks 1994a: 81–8). This was the only way working-class households were able to imitate middle-class consumption patterns. In the process the demand for children by these households fell, and the ability of one-parent families to survive increased. The outcome of these two developments, which resulted from the unfolding technological strategy, was a reduction in the size of the average family from 4.3 in 1920 to 3.3 in 1960, and 2.8 by 1980 (Henretta et al. 1987:974; Goldin 1990). In the space of just two centuries the average size of the American family had declined from about nine or ten to less than three as efficiency rather than numbers has become the means of ensuring survival and prosperity. CONCLUSIONS Once again we have observed the dominant role played by the unfolding dynamic strategy on institutional and organizational change. The strategic sequence of dependent-commerce, family multiplication, and technological change has had a characteristic impact on the form of American society. The emergence of the mega-state together with its mega-cities and megacorporations is a direct result of the demands of the technological strategy, as are the institutional rules and regulations required to facilitate them. And the changing political and social structures are the outcome of those momentous strategic struggles that culminated in the Revolutionary and Civil Wars. Those who won these strategic struggles became part of the ruling ‘classes’. Once again it will be clear that these institutional changes are not the result of a unidirectional evolutionary process. At a number of stages in the historical development of the USA, the major strategic struggles could have had different outcomes. We have considered what would have happened had Britain won the War for Independence in the late eighteenth century, or if the South, with the support of its co-strategist Britain, had won the Civil War in the 1860s. In the first counterfactual scenario the dependent-commerce strategy would have continued and westward expansion would have been at least delayed. This would have perpetuated colonial institutions that had been created to facilitate Britain’s commerce strategy. In the second case, the mega-state with its large and integrated continental market would have been replaced by a number of national states which would have stunted the industrialization of the NorthEast, prevented the emergence of the megacorporation and mega-city, and perpetuated the economic system and associated institutions (such as slavery) of the South. Strategic demand rather than societal evolution was at the centre of American institutional change. 418

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Part III 12. The coming clash of the mega-states: USA, EU, Russia, China 13. A global-state?

12 THE COMING CLASH OF THE MEGA-STATES USA, EU, Russia, China They look behind at every step & believe it is a dream, Singing: ‘The Sun has left his blackness & has found a fresher morning, And the fair Moon rejoices in the clear & cloudless night; For Empire is no more, and now the Lion & Wolf shall cease.’ (William Blake, ‘America. A prophecy’ (1793)) Societal organization is an outcome of the type of dynamic strategy employed and the stage of its development. This has been established in the preceding chapters. The ancient conquest society spawned the coercive empire; the ancient commerce society gave rise to the city-state and, later, to the trading empire supporting a great metropolis; the medieval conquest society led to the emergence of the nation-state; and the technological society began with the nation-state and progressed to the mega-state. It is the great clash of the mega-states that will dominate the future of the technological society. Empire may be no more, but the lion and wolf will not cease. The emergence of the first mega-state was examined in some detail in the last chapter. Here the focus is on the global response to the American challenge by the development of competing mega-states in Europe, Russia, and China. In all three cases this is a story of potential—of the future struggle between economic giants. While the future of each may appear to be in doubt, the existential model in The Dynamic Society provides good reason to believe that these potential mega-states will join economic battle with the USA in the twenty-first century to provide the intense competition required to drive human society through the fourth great technological paradigm shift. The economic foundation of the mega-state is provided by the development of the technological strategy in conjunction with the settlement of a large territorial base that provides an extensive captive market and an important source of natural and human resources. Small nation-states like Japan can, for a time, become leaders in the rush to be rich, but they can never become leaders in the struggle for global power. An integral part of the fascinating story of the emergence of mega-states is the expansion of the 421

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strategic frontier over a large land mass. Even before the European break-out into the rest of the world, the medieval Chinese Empire pursued a southward-expanding frontier. And while we are familiar with the westward expansion of the Europeans over the seas to the New World from the 1490s, and of the westward-moving frontier in North America from the 1790s to the 1890s, we hear little about the equally significant movement of Europeans eastward over the vast territory of Siberia to the Pacific coast and beyond after the 1590s. This chapter will focus on institutional change of an economic and political kind only at the society-wide level. There is insufficient space to do more. In any case, we have seen in Chapters 10 and 11 how institutions of a wider kind have emerged into the modern era. But before we proceed with the detailed case-studies we need to examine the unfolding of the technological strategy which provides the driving force for the emergence and the future of the mega-states. THE UNFOLDING OF THE TECHNOLOGICAL STRATEGY The global technological strategy has been unfolding for over two centuries since the beginning of the British Industrial Revolution. It is a dynamic process that has been driven by a series of new entrants to the industrial technological paradigm, and that has passed through a number of distinct phases or substrategies. The first phase of the technological strategy was pursued by Britain between the 1780s and the 1830s. This first-generation substrategy was based on the innovations of practical men and was undertaken through small-scale enterprises that focused on a small range of basic commodities produced in one or two factories. These enterprises began as small partnerships and family firms, but gradually gave way to larger public companies. This type of development was well suited to the nation-state that had emerged in Europe in the medieval and pre-modern periods in response to conquest and commerce. The second phase of the technological strategy was initiated by the other nation-states of Europe between the 1830s and 1870s. Earlier experimentation with industrialization on the Continent had been disrupted by a continued fascination with conquest, particularly by France. But in order to compete with Britain in the struggle to survive and prosper, France and Germany—and later Japan—used tariffs to develop the basic industries of the First Industrial Revolution and used the latest capital-intensive technology in engineering and chemicals to develop new industries. These new industries relied to a greater extent than before on scientific ideas and institutional finance (Cameron 1989:244–5). While the enterprises in this second technological phase were more extensive and operated through a wider network of large factories (except in France—ibid.: 238), they were 422

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able to develop within the existing nation-state, or in the newly emerging nation-state in the case of Germany (1871) and Italy (1861). As competition between these nation-states grew more intense during the second half of the nineteenth century, they embarked on a process of empire-building in order to defend their technological strategies. It was an extension of the balance of power concept from Europe to the rest of the world. The important point is that these European empires were not essential economically to the operation of the technological strategy, which is why they were dismantled in the mid-twentieth century when the technological strategy could be defended by the mega-states with nuclear weapons. The third phase of the technological strategy began in North America in the 1870s and continued for the following century. It was the result of a push by industrialists in the USA to drive out the Europeans from their large domestic market and, later, to make inroads into global markets. America was able to do this not by developing a radically different technology but by employing existing technological ideas on a scale that no other nation in the late nineteenth century could emulate. By large-scale investment in massproduction techniques, the USA was able to exploit its large domestic market by supplying goods and services at a price that the Europeans were unable to match. Their secret was the high degree of specialization and division of labour that could be achieved using the assembly-line techniques pioneered by Henry Ford to produce standardized products; and also by techniques of mass distribution. Once the local market had been saturated in the 1920s, American entrepreneurs turned their attention, with considerable success, to global markets, particularly after the Second World War. This domestic and international success was based on the earlier development of megacorporations—which could only emerge within a mega-state— producing an extensive range of commodities and services. Some of these corporations had a greater output in their chosen range of commodities than individual European nations. When they established branches in overseas markets these mega-corporations became known as multinational or, more recently, transnational corporations. They are, in effect, agents of the technological strategies of the mega-states, and they play a global role similar to that of the trading joint-stock companies—such as the East India Company—in the age of commerce. The fourth phase of the technological strategy was developed by innovative nation-states in an effort to undercut the post-Second World War dominance of the USA. It is interesting that those who were most successful were the nation-states that failed in the attempt to meet the American challenge by developing their own mega-states through conquest. Both Germany and Japan found in the 1960s that they could effectively compete against the USA both in its domestic and overseas markets by fully embracing the new microelectronic technology. If they could not transform themselves into mega-states perhaps they could undermine the old basis of 423

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the mega-state. Through more efficient production and organization they were able to offer consumers greater variety and choice even though this meant shorter production runs (only one-quarter that of the USA). Japan and Germany were able to combine the old mass-production methods with the new microelectronic technology to make customized consumer products that required greater attention to detail and quality (Harrison 1994:125– 49). These products included cars, household appliances, ceramics, textiles, consumer durables, computer software, as well as food and drink. Consumers, tired of standardized products, responded to this greater choice with considerable enthusiasm. The shift of consumers away from standardized products finally forced the USA in the 1980s to compete with these new dynamic strategists on their own ground. But this has not been without its costs, as it is always difficult for a society that has long specialized in a successful substrategy to make a radical change—as we saw in the case of Britain in the interwar years—owing to the heavy investment in the older substrategy. Finally we come to the fifth phase of the technological strategy that will take human society well into the twenty-first century. With the conclusion of the Second World War it became clear to the nation-states of Western Europe, on both the winning and the losing sides, that no single European nation-state had the economic resources required successfully to wage war, either economic or military, against America. It also became clear that in the future the USSR would become a mega-state as powerful as the USA. Megastatus would be important not only to defend the technological strategy of Western Europe—who had given it to the world—but also to engage in economic bargaining on a global scale, to exercise strategic control over a large market, and to control a large resource base. Clearly the future would be determined by economic giants. This is the real driving force behind the remarkable attempt to form a mega-state in Europe—remarkable because these nation-states have been competing ferociously against each other for about 1,500 years. By the mid-twentieth century, however, the competition without had finally become more critical than the competition within in the struggle to survive and prosper. But even for mega-states the struggle to survive and prosper can never be taken for granted. The first casualty in the competition between mega-states was the USSR which collapsed in 1990 after twenty-five years of attempting to reform a grossly inefficient system that could not be reformed. This was a surprise to many, but not to those who could see that the centrally determined mega-state is too inefficient to compete for long against marketdriven mega-states. As will be demonstrated, the objectives of the Soviet command system were to suppress potential strategists and to extract economic rent from the population, not to maximize material growth as it is for the technological strategists in the West. It remains to be seen whether Russia can, with assistance from the West, reinvent itself as a market-driven 424


mega-state. The remaining question, tackled later in the chapter, is whether China can do what the USSR failed to do and make a complete transition to a market economy without a complete collapse. STRATEGIC PATHWAYS OF THE MEGA-STATES The unfolding of the technological strategy over the past two centuries has led to characteristic strategic pathways of the mega-states, which can be sketched in terms of both their territorial dimensions (Figure 12.1) and their real GDP (Figure 12.2). Our territorial figure is revealing. The end of the Middle Ages was marked by a general break-out of Europeans from their former territory both westward over the seas to the New World and the Orient and eastward over the lands of Siberia to the Pacific. This break-out was an outcome of the highly competitive Europeans pursuing a dynamicstrategy mix of conquest and commerce. During the sixteenth century the West Europeans added the New World and parts of Asia to their sphere of influence, while from the 1590s the Russians crossed the Urals, colonized Siberia, claimed Alaska, and established trading posts on the western coast of North America as far south as California. At the same time the new Manchu (or Qing) dynasty in China—which established itself in Beijing (Peking) in 1644 and overran the rest of China by 1662—turned on the offensive, pushing their boundaries out in the north and west to meet the eastward-moving Russians. During the eighteenth century the empires of Western Europe, Russia, and China continued to expand. The main West European powers were England in North America and India, Portugal in South America and Africa, and Spain in South, Central, and North America. Russia and China continued to carve up the rest of central Asia between them. By 1800, as can be seen in Figure 12.1, the era of territorial expansion by Europe, Russia, and China had, in the main, come to an end. The technological strategy of the nineteenth century saw a slowing down of imperial expansion by Europe, Russia, and China; and the emergence of the USA led to the Spanish and the British being expelled from central North America. While there was an expansion of new European imperialism in the late nineteenth century for defensive reasons, this was largely offset by a decline in the old imperialism of commerce. And during the twentieth century, as can be seen in Figure 12.1, the overseas empires of Western Europe were disbanded. Only Russia, China, and the USA, which had integrated their acquisitions into their sovereign territory, maintained their earlier size. While overseas empires were no longer essential to the technological strategies of the European nation-states, larger domestic markets and sources of resources were integral to the dynamic strategies of the aspiring mega-states. In a technological society, real GDP is a better index of the unfolding dynamic strategy than territorial expansion. Figure 12.2 shows that during 425

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Figure 12.1 Territorial dimensions of the mega-states: Europe, Russia, China, USA, 1483–2000 Sources: Drawn from data in McEvedy (1972) and Maddison (1995).

the nineteenth century the most rapid expansion was achieved by the USA and the least rapid by China (still pursuing its traditional policies), while Western Europe, the USSR, and Japan (one of the most successful nationstates in the second half of the twentieth century used here for comparative purposes) expanded at much the same rate. For the entire twentieth century the USA was the clear leader largely because the USSR, Western Europe and, particularly, China experienced slower rates of expansion during the first half of the century. But this situation was transformed during the second half of the twentieth century. Japan became the clear leader in rates of change, although it began, like all the others with the exception of China, to slow down from the early 1990s. The USA and Western Europe experienced very similar rates of expansion after the 1940s, while the USSR went into absolute decline after 1973. If we can believe the figures, China’s rate of expansion continued to accelerate throughout the period after 1950, so that by the late 1960s it appears to have surpassed Japan’s rate of expansion, and after 1973 it continued at this high rate despite the slow-down or decline in all the other mega-states. China, of course, like South Korea, Taiwan, and 426


Figure 12.2 Real GDP of the mega-states, 1800–2000 Source: Drawn from data in Maddison (1995).

Thailand, is currently riding on the coat-tails of the Western technological strategy as it enjoys a catch-up phase in its living standards. The pursuit of a dynamic strategy is one thing, but the success of that pursuit is another. Figure 12.3, which shows the changing levels of real GDP per capita, reflects the relative success of the technological strategies pursued by the mega-states. It can be seen quite clearly in Figure 12.4 that those mega-states which adopted the technological strategy experienced a slowdown, and convergence of, their population growth, whereas China, which after 1949 was in the hands of antistrategists who had little interest in the technological strategy, experienced rapid population growth, at least until the rationalists took over from Mao’s successors in 1978. In terms of the levels of average material standards of living, the USA and Western Europe have dominated throughout the last two centuries, with the gap between these two widening over the hundred years before 1950 but closing thereafter. Russia and, particularly, China have always lagged a long way behind. Interestingly, since the early 1970s the living standards of these two giants have been converging from opposite directions! Only Japan has seriously challenged the Western leaders, managing to surpass Europe in the mid-1970s and getting to 84 per cent of the US level in the mid-1990s. 427

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Figure 12.3 Real GDP per capita of the mega-states, 1800–2000 Source: Drawn from data in Maddison (1995).

It should be emphasized that the period 1950 to 1973—the so-called ‘golden age’—was and always will be atypical. In large part it resulted from the release of the vice-like grip of depression and war of the 1930s and 1940s. This growth-rate outcome was similar to that in sixteenth-century Europe when the grip of war and pestilence, which had remained firm for 150 years, was finally released. The typical rate of growth of real GDP per capita for a mature technological society is more like 1.3 to 1.8 per cent per annum than the 2.4 to 3.0 per cent per annum achieved by the nondevastated Western societies during the 1950s and 1960s. But, of course, higher rates will be achieved by societies attempting to catch up with the Western leaders of the technological strategy. Hence the technological strategy, which began unfolding in Western Europe in the late eighteenth century, was transmitted to the USA from the mid-nineteenth century, to Japan and Russia in the late nineteenth century, and finally to China in the second half of the twentieth century. As the rate at which it unfolded was higher in the early stages of its adoption, each new society surged ahead in this interacting dynamic process. And as this new strategy developed, the organizations and institutions of these societies were 428


Figure 12.4 Population of the mega-states, 1800–2000 Source: Drawn from data in Maddison (1995).

transformed. In this chapter we have space only to examine the changing vehicle of technological change, which in this case is the mega-state. THE EUROPEAN UNION An unlikely beginning For more than a millennium Western Europe was the arena of intense competition between a large number of small kingdoms. These kingdoms, which were subjected to constant pressure from surrounding societies, were locked in a deadly struggle to capture additional resources through conquest. It was a zero-sum strategy in which the victor grew richer at the expense of the vanquished. But as one kingdom began to achieve a degree of dominance, the others formed temporary alliances to block and overthrow it (Snooks 1996:301–7). Borders were pushed backwards and forwards as the balance of power changed, but at the end of the day little permanent territorial change had occurred. The map of Europe in 1750 looked much as it had in 1150 or even earlier. For more than a millennium Western Europe had maintained its fragmented structure. 429

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Even with the adoption of the technological strategy, the face of Europe changed little. While the ‘national’ boundaries remained much the same, the looser network of states in Germany and Italy were transformed into nationstates to create larger markets for the products of industrialization. What had changed was the nature of Europe’s dynamic strategy. As the technological strategy was a positive-sum game, the need to savage one’s neighbour in order to generate material progress was eliminated. The record of that material progress since 1820 is reflected in Figure 12.5. Yet the need to defend the heavy investment in the new strategy’s infrastructure—cities, factories, railways, ports—became of paramount importance (Snooks 1996:307–14). Paradoxically, the rapid build-up of armaments made possible by the technology strategy undermined, for the first time in a millennium, the balance of power in Europe and led to the most destructive wars Europe has ever known. By the mid-twentieth century it was realized that a balance of power between nation-states was no longer an effective way of maintaining the status quo and of defending the technology strategy. There was in Europe a mismatch between the technological strategy and the old vehicle of strategic pursuit—the nation-state. By the middle decades of the twentieth century the nations of Western Europe realized intuitively that if they were effectively to defend and maintain die dynamic strategy that they had given the world, they would need to seek union through negotiation rather than conquest as Germany had recently attempted. Also, they realized that with the spread of industrialization, the world had changed. No longer was it possible for small European nation-states like Britain or France to dominate large sections of the rest of the world. They now faced two giants—two mega-states—the USA in the West and the USSR in the East. It became obvious that if Western Europe was to compete in this new environment, it would need to fashion the fragments of a millennium into a new form—into a great mega-state. But a curious and, to some, an unexpected thing happened. One of the two giants collapsed. In 1990 the USSR was dismantled, its satellites were set free, and Russia, its dominating republic, began the long and painful process of transforming itself from a command economy to a market economy. Suddenly the great threat to security in Western Europe and the obstacle to its influence in the East was removed. In earlier times, when the conquest strategy prevailed, this situation would have invited an immediate military takeover by the West. But, under the technological strategy, conquest is obsolete and is pursued only by irrational governments (such as Hitler’s). Western Europe is able to gain more materially by investing in the East so as to exploit these new markets in an attempt to gain extraordinary profits. And it is an exploitation that will benefit Eastern Europe by developing the essential infrastructure for new market economies. Yet, rather than reduce the incentive for European union, the collapse of the USSR has encouraged Western Europe to consider admitting the Soviet’s old satellites to the new 430


Figure 12.5 The growth of Western Europe (EU), 1800–2000 Source: Drawn from data in Maddison (1995). Notes: GDP is in $US 100m; GDP per capita in $US; population is in 100,000s.

union. No doubt the temptation for Western Europe will be to bite off more than it can chew. The road to European union In view of the intense competition between the nation-states of Western Europe over the past millennium, the rapid move to union since 1951 has taken many by surprise. Who during the first half of the 1940s would have thought such a prospect ever possible, let alone in their own lifetime? Very few. Clearly it is the outcome of very powerful forces—forces released by the unfolding technological strategy. There have been seven major steps on the road to European union. And each of these steps reflects the growing perception of the need to compete against other mega-states. These steps were: • 1951: Treaty of Paris creating, as from 23 July 1952, the European Coal and Steel Community (ECSC). Members included Belgium, West Germany, France, Italy, Luxembourg, and the Netherlands. 431

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• 1957: Treaty of Rome creating, as from 1 January 1958, the European Economic Community (EEC) and the European Atomic Energy Community. • 1965: Merger Treaty creating the European Community (EC) from a merger of the earlier three communities. • 1973: the European Community was expanded by the admission of the UK, the Irish Republic, and Denmark (1 January). • 1981: Greece also admitted (1 January). • 1986: Spain and Portugal admitted and the Single European Act (effective from 1 July 1987) was signed, thereby reshaping the Community. • 1992: Treaty of European Union which, from 1 November 1993, extended the existing treaties to include foreign and security policy, justice, and home affairs. While this outline gives the impression of systematic development, it conceals the many hesitations and reversals along the way. Indeed, some observers (Bulmer 1994) have been transfixed by the shortrun ebbing and flowing and have, thereby, failed to see the longrun dynamic forces driving the entire process of unification. The first tentative steps towards union began in an inconspicuous way on the periphery of Western Europe. At the beginning of 1948 the Benelux Customs Union—involving Belgium, Luxembourg, and the Netherlands— was formed. It was the result of negotiations that can be traced back to an economic union between Belgium and Luxembourg in 1921 which, in 1944, the Netherlands’ government in exile in London agreed to join (Van der Wee 1986:358–9). While this economic association had little to do with the Second World War, it did provide a model of sorts for France and Germany when they began to consider an economic union of their own. Cooperation between the larger European nation-states began with the need to implement the Marshall Plan, which was to provide American aid for the reconstruction of Europe as part of the cold war against the USSR (Van der Wee 1986:43; Milward 1987:364). This was achieved through the Organisation for European Economic Cooperation (OEEC) established in April 1948 to facilitate cooperation between the existing nation-states through a Council of Ministers. Although attempts were also made to reduce trade quotas and tariffs, and to establish a multilateral payments system, no attempt was made to develop a supranational decision-making structure. It was succeeded in 1961 by the more familiar Organisation for Economic Cooperation and Development (OECD). The first attempt by the larger nation-states to move from cooperation to community was the French initiative of May 1950 known as the Schuman Plan. It came about because the French were keen to ensure that German reconstruction be achieved without a renewal of hostilities (Van der Wee 1986:359; Bulmer 1994:10–11). Owing to their heavy losses in both German 432


wars, the French were among the first to realize that the old form of politicoeconomic organization in Europe was unable to defend the technological strategy. In order to avoid a repetition of the destructive German invasion of 1914–18, France had constructed a costly static defence structure, the Maginot Line, and had unwisely attempted to penalize Germany both financially and industrially. As we know, neither method worked. A reindustrialized and rearmed Germany took only a matter of weeks to sidestep French defences and take Paris in June 1940. Once again the French technological strategy was at the mercy of the Germans. If it was not possible to contain Germany, then there was no option other than to become partners with it in the same dynamic strategy. The Germans also welcomed the Schuman Plan because it was the best way to restore and permanently to secure their material prosperity. Clearly conquest was not the answer. Not in a world that had come to be dominated by technological mega-states. America and the USSR could only be held at bay both economically and militarily by creating a mega-state in Western Europe. The central principle of the Schuman Plan was that participating nations had to be prepared to relinquish national sovereignty. While it was acceptable to those nation-states that had experienced the most destruction during the Second World War, it was unacceptable to those who had escaped the worst. In April 1951 the Treaty of Paris was signed by France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg. Britain, which had avoided invasion and still had much of its empire intact, was unable to contemplate submerging its national identity in a supranational organization. And once it became clear that the ‘Six’ were serious about developing their own community, Britain entered into negotiations with Norway, Denmark, Sweden, Austria, Portugal, and Switzerland to form a free-trade area of independent nation-states, called the European Free Trade Association (EFTA) in January 1960 (Van der Wee 1986:359–64). Britain, in other words, was not convinced that the best way to defend its technological strategy was through a European union. Also, in the early 1950s the British believed that they could compete with the new mega-states through their empire and through a special bilateral relationship with the USA. Not until the Suez débâcle of 1956, and the subsequent dismantling of empire, did the British fully realize the limited role that they would be able to play as an independent nation-state on the world stage. To compete with the mega-states of the USA and the USSR, Britain had to become an integral part of a new European mega-state. This strategic interpretation contrasts with the usual ‘political’ interpretations. We are told by Simon Bulmer (1994:5), for example, that: Economic integration has not evolved as a result of some functional logic. Nor has it developed as the result of some ‘natural’ economic law enforced by Adam Smith’s ‘invisible hand’. Functional and economic 433

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determinism fail to explain both the setbacks to integration and the relaunches; economic integration has not been a smooth process following some scientific logic. Rather, it has been dependent upon political and institutional dynamics. This argument misses the point that institutional change does not contain a dynamic of its own but rather is a response to an unfolding dynamic strategy that leads to a struggle between competing groups for control of that strategy. Of course it is not a ‘smooth process’. While longrun institutional change is the outcome of changing strategic demand, shortrun hesitations, setbacks, and even reversals are a result of the strategic struggle which rages back and forth. And this strategic struggle has at its centre material rather than political objectives. It is essential to draw a distinction between the economic objectives of dynamic strategists and the political instruments they employ to achieve those objectives. Political union is required to meet the economic objectives of defending and maintaining the technological strategy, and of competing successfully with the other mega-states. The mega-state is the future vehicle of the technological strategy. We should not be misled by the many layers of political and ideological justification and rationalization devised for the decisions and actions of the dynamic strategists. The Treaty of Paris established the European Coal and Steel Community, which came into operation in July 1952. While this organization was concerned with the creation of a common market only for the steel, coal, and related industries, it became a model for later more ambitious proposals. It will repay, therefore, further discussion. The ECSC embodied five key institutions: • the High Authority (similar to the European Commission in the mid1990s) which formed the executive; • the Council of Ministers, consisting of representatives from member governments; • the Consultative Committee, with representatives of employers, unions, and consumers from member countries; • the Assembly, consisting of sixty-eight representatives from member national parliaments; • the European Court of Justice. While the High Authority was given a considerable degree of autonomy (its nine members were to act independently of the member nations), its activities were restricted by the Council of Ministers, which pursued national interests. Needless to say, this involved a fundamental contradiction in an organization that was committed to pursuing supranational objectives. Inevitably clashes arose between these two institutions—such as the attempt in 1959 of the High Authority to intervene in the coal crisis—and it was the Council of Ministers that ultimately prevailed. These two institutions 434


embody the strategic struggle in the new Europe. Yet despite this inherent contradiction, the ECSC continued to operate until its component parts were absorbed by the European Community in 1967. The next surge towards unification came with the establishment of the European Economic Community, which was served by the existing Assembly and Court of Justice. Its centrepiece was the creation of a common market by the removal of all tariffs between the six participating nations. While the projected customs union was achieved some eighteen months before the December 1969 deadline, Europe in the mid-1990s was still attempting to free itself from all the restrictions that prevent the achievement of a fully operational common market. By creating a common market, European businessmen hoped to reap the advantages long enjoyed by their counterparts in the mega-market of the USA. And certainly the common market increased through a series of admissions of new member states in the 1970s, 1980s, and early 1990s, but these market expansions have been relatively small and uneven in comparison with the opening up of markets in Eastern Europe since the collapse of the USSR in 1990. From that time European businesses have been faced with growing markets in the East (see Figure 12.6) which, like the moving frontier in America before the 1890s, have generated continuous growth. The Treaty of Rome (1957) was far more flexible than the Treaty of Paris (1951). Rather than mapping out what needed to be done in detail and enshrining this in legislation, the Treaty of Rome merely established general principles that were intended to be implemented by subsequent legislation in the Assembly. In other words, the new treaty accepted the important truth that institutions must follow, not lead, economic change. While this was a major advance on the earlier treaty, contradictions still existed, namely the splitting of authority between the supranational and national bodies, and the jostling between free-trade and protectionist interests. The emergence of heavily subsidized agricultural sectors at French insistence does not sit well with the predominantly free-trade rhetoric. The 1960s was a decade of struggle between the forces of unification and those of nationalism. On the one hand, those committed to unification were able to reflect with satisfaction on the growing legal primacy of the European Court of Justice over the various national courts. In 1963 it was accepted that national courts were responsible for enforcing the legal rules of the European Court, and in 1964 it was agreed that European law had primacy over national law. But on the other hand, France, under the presidency of Charles de Gaulle, began pursuing national objectives at the expense of unification. While this reflected the personality and outlook of the French president, it was due more to the strategic interests that supported him. This is demonstrated by the fact that even after de Gaulle’s resignation in 1969, the French continued to pursue national objectives that were detrimental to the union. 435

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Figure 12.6 Countries of the European Union in the mid-1990s Source: Drawn by Cartography Unit, RSPAS, Australian National University.

During this critical struggle for control of Europe’s dynamic strategy, applications made by Britain to join the Community were vetoed by France in 1963 (made by the Conservative government of Harold Macmillan as early as 1961) and again in 1967 (made by the Labour government of Harold Wilson). France argued that the British were not really serious about the future of European union and they, with their Atlantic interests, would be a Trojan horse for the Americans (Van der Wee 1986:365). Ironically, in June 1965 France withdrew from the Council of Ministers when it appeared that its national interests might be overruled by a qualified majority vote in 436


favour of budgetary autonomy for the EEC. Not until the Luxembourg Compromise of January 1966—by which consensus rather than a majority was required for issues of ‘vital national interest’—did France agree to return. This was a major, if temporary, victory for the forces of nationalism. While the Luxembourg Compromise has not been invoked since the mid1980s—although the French did threaten to use it in December 1992 over GATT negotiations—it has slowed down the move to union. But, by the early 1970s, the strategic struggle moved once again in the direction of union. Nations outside the EEC were beginning to realize that they had more to lose in the longrun than they would gain by not joining. Issues of defence against the USSR and of economic competition with the mega-states were involved in this rethinking. A union of all Western Europe would create the most powerful mega-state in the world. In quick succession Britain, the Irish Republic, and Denmark joined the Community in 1973; Greece was admitted in 1981; Spain and Portugal became members in 1986; and Austria, Finland, and Sweden came on board in 1995. While Norway had been expected to join in 1995, the Norwegian people refused once again to support this step (a similar referendum in November 1972 had led to their withdrawal from negotiations with the EEC). Hence, by the mid-1990s, with the exception of Norway and Switzerland, the whole of Western Europe had committed itself to the European Union (see Figure 12.6). The next step to union was taken in February 1986 when the Single European Act was signed to come into effect in July 1987. Its main provisions entailed a final attack on the remaining barriers to the achievement (by December 1992) of a ‘single European market’, or megamarket; the introduction of qualified majority voting in the Council of Ministers to release the brake on union imposed by the Luxembourg Compromise; increased powers for the European Parliament; and the mutual adoption of standards established by landmark decisions of the European Court. The new momentum achieved by these institutional changes, driven by strategic demand, led on to discussions of a European Monetary Union (EMU) and, finally, to a Treaty on European Union. While it is expected, by seasoned observers, that EMU will begin in 1999 with six to ten member states (Economist, 21–27 September 1996:24), there is a growing groundroots dissatisfaction with the unemployment costs arising from the decision to link EMU entry to targets relating to inflation, budget deficits, and foreign debt. This is just a further example of the difficulties that emerge when policy-makers (usually following the advice of unworldly neoclassical economists) singlemindedly pursue deflationary policies aimed at price and fiscal stability. The Treaty on European Union was signed in December 1991 and came into effect in November 1993. In the mid-1990s, therefore, the European Union consists of three supranational bodies that are independent of the old nation-states: the Commission, the European Parliament, and the European 437

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Court of Justice; together with two countervailing bodies—the European Council and the Council of Ministers—representing the governments of the member nation-states. As suggested earlier, these opposing institutions provide the stage on which Europe’s strategic struggles are enacted. Of the supranational bodies, the Commission, or executive, consists of seventeen members nominated by the national governments and approved by the European Parliament for five-year terms. These members include a president, two vice-presidents, and fourteen commissioners with portfolio. They are supported by political advisers and a bureaucracy that exceeds 16,000 people. This body proposes legislation, carries out policy, represents the Union elsewhere, and generally defends its interests. The European Parliament is the legislature with about 567 members elected by the people of the participating nation-states every five years. But its powers are limited to amending and sometimes rejecting legislation on policy proposed by the Commission. The important role of the judiciary has already been discussed. Of the two bodies representing the interests of the member states, the Council of Ministers includes the national ministers of various portfolios— for example, agriculture, economics, finance—who determine policy in these areas. Although the Luxembourg Compromise is still extant, since the 1970s qualified majority voting has been practised. The European Council— consisting of the French President and fourteen government heads, fifteen foreign ministers, and the Commission president and a vice-president—has become the principal body of the Union. The process of unification is still very much in the Council’s hands (as it is involved in all major decisions). Currently the European Union provides the framework for the joint economic and political action that is left to the member states to enact and administer. It is generally recognized that if East European countries are to be admitted to the Union, existing institutions will need to be revised to ensure more democratic representation and voting procedures. Under current rules it would be possible in an enlarged Europe for a majority, consisting of the smaller countries with only a small proportion of the Union’s total population, to block issues favoured by a minority of big countries containing the majority of the population (see population and voting totals in Figure 12.6). Indeed, it may be this issue that leads to the larger countries committing themselves to a more radical form of union. Also the Union will, in the future, need to overcome problems raised by the gap between rich and poor countries and between those who favour free trade and those who want a degree of protection. These and other issues were the subject of discussion at the 1996 Inter-governmental Conference in Turin. Even before these forces for union had worked themselves out, an unexpected reinforcing event occurred—the Soviet mega-state collapsed. This not only led to the reunification of Germany in October 1990 438


which—reviving security fears that could best be reduced by stronger union—but also held out the prospect of expanding markets in Eastern Europe, either through a widening of the Union or through investment in the less sophisticated societies. This is a unique opportunity in European history. The European Union would be able to achieve peacefully through the pursuit of the technological strategy what Napoleon and Hitler had been unable to do through war and conquest. This is an opportunity for the business interests in the north-west of Europe to do what the business interests in the north-east of the USA did after the Civil War—to exploit the dynamic gains of a rapidly growing megamarket. For the USA this involved westward expansion, while for the European Union it is currently involving eastward expansion. Until the eastern frontier is closed—as the western frontier was in the USA by 1890— the dynamic strategists of Western Europe will earn extranormal profits; but thereafter the Union will achieve further material progress only by focusing solely on its technological strategy—as the USA did after the turn of the twentieth century. The natural desire to exclude its competitors—the USA and Japan—from any extraordinary profits has encouraged the Union seriously to consider admitting East European states such as Poland, Hungary, the Czech and Slovak Republics, Romania, Bulgaria, Lithuania, Latvia, and Estonia. By doing so Europe could exclude American goods through tariff barriers just as America did for its own mega-market in the nineteenth century. Eastward expansion will, of course, also have its costs both in terms of subsidizing the markedly lower living standards of these old Soviet satellites—the average real GDP per capita of Eastern Europe is only 26.5 per cent of Western Europe and 46.2 per cent of Southern Europe (Maddison 1995:23)—and in terms of the declining influence of existing member states over their own dynamic strategy owing to the fact that the population of these ten Eastern European states amounts to one-third that of the existing Union. It has even been suggested by some that the former USSR states should be included in an all-embracing United States of Europe (Gianaris 1994). Such a possibility is highly unlikely, and also undesirable because if achieved it would most probably lead to the collapse of the Union owing to the extreme economic, social, and political tensions it would create. The old USSR has a population that amounts to 83 per cent of that of the existing Union, rising to 112 per cent if we add in its former East European satellites. In a union of all Europe, therefore, the former iron-curtain countries could outvote the West. In this event the West would lose control of its own dynamic strategy. But sillier things have happened. Certainly the EU’s bureaucracy has a vested interest in continued expansion—or ‘enlargement’ as they call it, but more usually called empire-building. They talk rather loosely about ‘the benefits of the EU’s single market’, without realizing that the static benefits are quite small. The Union would need to keep expanding to reap dynamic 439

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benefits in the form of extraordinary profits. There has to be an end, and in the end one has to rely on technological innovation for continuous growth. A far more sensible approach would be to encourage the total reconstruction of the Russian Federation on market principles to form a revitalized mega-state. While this approach will eventually involve Europe in fierce competition with Russia, Europe and the world will be all the healthier for it. The future of the Dynamic Society will depend upon the continued existence of intense economic competition between a growing number of mega-states. Once Russia has reconstructed itself it will wish to regain its old independence and to follow its own version of the technological strategy. If the strategists of the north-west attempted to preserve a union, which included Russia, for materialistic purposes—just as the north-east strategists in the USA did in 1861—civil war could break out and the cost to Europe would be devastating. Hence the means that Western Europe has employed to defend the technological strategy since the mid-twentieth century— unification—would actually lead to its destruction. War between nations would merely be replaced by war between brothers. Hence the European Union needs to realize that it is rapidly approaching its optimum size. THE RISE, FALL, AND RISE OF THE RUSSIAN MEGA-STATE Building a mega-state As the nation-states of Western Europe were expanding westward to the New World, Russia was expanding eastward into Siberia. This eastward expansion began in the early sixteenth century when the Principality of Moscow began to push back the Khanate of the Golden Horde. The Golden Horde, which emerged from Persia in the early thirteenth century, had overrun the southern principalities of Russia by 1240. At the same time the leaders of the northern principalities—namely the legendary Alexander Nevsky of the Novgorod principality—were struggling for survival against the Swedes (in 1240) and the Teutonic Knights (1242). Not until 1480 did the consolidated principality of Moscow begin driving back the Poles and the Tartars to reclaim the Russian steppes. By 1494 Ivan III, Prince of Moscow, felt entitled to call himself Tsar of all the Russias (Pares 1966:97). Throughout these centuries the Russian dynamic was conquest—conquest directed by one Russian principality against another as well as against other European and Asian societies. Eventually in the sixteenth century, it led to the break-out of the reunified Russians into Eurasia. Unlike the conquest societies of Western Europe in the medieval period, the Russian principalities did not adopt a feudal system by which the warrior nobility provided military services to the king in exchange for landed estates worked by a dependent peasantry of serfs. In the twelfth and thirteenth centuries Russia was divided into eight principalities each of which 440


contained numerous ‘princes’ who constantly feuded with each other over the profits of conquest. While the armed forces of the princes were paid in land, this land was worked not by peasants but by slaves. Both land and slaves were part of the profits of conquest. The peasants lived either in free communities or, where they needed princely protection, on the lands of boyars under contract. Owing to the large number of princes who were unable to reach agreement, warrior landlords attempted to attract scarce labour away from each other. We are told that at this time ‘there were many princes and it was not difficult to move from one domain to another. The princes, on the other hand, were before all things interested in retaining labour on their domain’ (Pares 1966:52). Owing to this competition between princes, the living standards of the peasantry were higher than they would have been had the princes (like the English barons in the eleventh century) been able to reach an agreement. Serfdom only emerged in Russia during the sixteenth century—and was not legalized until a century later—when a single Russian kingdom was formed and the feuding between princes was brought to an end. Yet its roots went back further. After the Tartar invasion of 1237–40 ‘vast numbers’ of peasants had their lands, livestock, and assets devastated, and were subjected to threats of further murderous raids. In seeking economic and military security many peasants negotiated sharecropping agreements with large landowners, and some even sold themselves into serfdom. While the majority of peasants were theoretically free to move wherever they wished, they quickly accumulated debts to their landlords that could be discharged only by providing labour services. In order to push back the Poles and the Tartars, the Tsars of Moscow in the sixteenth century needed to construct an effective military force. Owing to a lack of funds to pay money wages, the Tsars fell back on an expedient that had long since disappeared in Western Europe—feudalism. The form it took, however, was novel in Europe, but had been anticipated by the Tang (T’ang) dynasty in China. Alongside the system of hereditary estates (votchiny) a new system of non-hereditary land grants (pomestya) was established for the duration of active service to the Tsar by army officers and public servants. When service to the Tsar was terminated so was access to their estate. Quite early in their history pomestya could be alienated for forty years or bequeathed for four generations; from 1600 they could be bequeathed outright; and from 1674 they could even be sold. But, in all these cases, this could be undertaken only if their new owners became involved in the system of service to the state. As labour was still relatively scarce during the first half of the sixteenth century, the larger landowners attempted to attract and even to kidnap peasants from their less powerful neighbours. To prevent this the state introduced laws to eliminate competition for peasants between landlords: in 1658 flight was made a criminal offence (depriving the master of his 441

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property); in 1661 any landlord accepting a fugitive had to return him together with an additional peasant family; in 1664 the penalty was increased to four peasant families; and in 1683 it was translated into a fine of twenty roubles. By the mid-seventeenth century, therefore, peasants were regarded as chattels that could be sold with an estate (which had little value without a dependent labour force) and even legally without an estate from 1675 (Pares 1966:159–60). Service to the Tsar was not abandoned until 1762, and serfdom was not abolished until 1861. Yet, even before 1861, serfdom was not universal; free peasant communities did exist in the north of Russia and in Siberia, often as escapees from the dominant system. What began in the early sixteenth century as an attempt to expel the Poles and Tartars from former Russian territory ended in the late seventeenth century with the Russian Tsar controlling an empire that stretched from the Baltic Sea to the Pacific Ocean (Figure 12.7). For the following century there was little change to the size of the Russian Empire, as the Russians were held in check by the Swedes and Poles in the west and by the Manchu, Kazakhs, and Uzbeks in the east. Then in 1772 a new wave of expansion began with the annexation of parts of Belorussia; in 1783 Crimea, and southern Ukraine were included; in 1793–95 with the subsequent partition of Poland the rest of Belorussia and the Ukraine, Lithuania and southern Latvia were added; from 1809 to 1831 Finland, the rest of Poland, Bessarabia, and most of Transcaucasia were annexed; between 1821 and 1854 the Kazakhs were overwhelmed and Alaska was formally claimed (subsequently sold to the USA in 1867); and during the second half of the nineteenth century territory was taken from China, Turkey, and Turkestan. The territorial zenith of the Russian Empire—never to be exceeded by the Soviets—was reached in 1885. Thereafter further attempts at expansion were repulsed by Britain in its defence of India in Afghanistan, and by Austria, China, and Japan (Taagepera 1988:1–3). The two main waves of territorial expansion of the Russian Empire—each of about a century—were dominated by different dynamic strategists. Seventeenth-century expansion was driven both by private commercial interests and state interests, while nineteenth-century expansion was dominated by state initiatives. Eastward expansion beyond the Urals into Siberia became increasingly attractive to private traders and state tax gatherers after the 1590s owing to booming markets in Western Europe following its earlier break-out into the New World, Africa, and Asia. Rapidly growing living standards in the West made exploitation of Siberia’s ‘endless resources’, particularly of furs and other forest products, very attractive to Russian merchants and to the state treasury. This trade was facilitated by the establishment of Western trading companies—such as the English Muscovy Company—dealing exclusively in Russian furs.

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Source: Drawn by Cartography Unit, RSPAS, Australia National University.

Figure 12.7 The rivers, canals, and railways of Russia and China in the mid-1990s

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Russian furs, or ‘soft gold’, led to extraordinary profits for pioneering merchants and to rapidly increasing state revenues. It was the main source of both Russian exports and government revenues in the seventeenth and early eighteenth centuries. One scholar has suggested that one might even go so far as to say that, were it not for the ‘discovery’ of Siberia’s seemingly inexhaustible resources of ‘soft gold’, that is, an abundance of fur-bearing mammals—in particular the highly prized sable—the Muscovite government would have been without the economic foundation for the growth of its political power. (Wood 1991:4) The state, therefore, had every reason to participate in this commerce-led territorial expansion. There can be little doubt that a major objective during this period was ‘maximizing the income of the state by the subjection of aboriginal peoples to fur tribute’ (Collins 1991:51). As the resources of local Russian forests were exhausted, wealthy merchant families, such as the Stroganovs and Demidovs, gained government concessions to exploit resources east of the Urals (Black 1991:59). To do so the merchants needed military protection owing to the fierce opposition from Siberian natives, of which there were between 200,000 and 220,000, still loyal to their Tartar overlords. From the 1590s, therefore, the merchants organized, equipped, and paid units of Cossacks from the Don Valley to pacify the locals. While the Cossack forces were small, they were good horsemen and possessed superior firearms. Later the Siberian Department (Sibirskii prikaz) in Moscow took the initiative and sent out armed expeditions in advance of the private entrepreneurs who quickly followed. Hence, during the seventeenth century there was considerable mutual dependence between state and private entrepreneurs (Collins 1991:38–41). Following the success of the traders and military, large numbers of fur ‘hunters’, peasants, craftsmen, and administrators hurried into Siberia, establishing fortified settlements and extracting fur taxes from the natives (Huttenbach 1988:70–80). Many of the migrating peasants were escapees from the oppressive system of Muscovy serfdom. Initially they occupied land around existing settlements, but later they were assigned tracts of land by the local administrations. In addition the government brought in peasant labourers, initially free but later unfree, to work the great estates of crown and church in response to the large and growing demand in Russia for grain and livestock. The gentry, it would seem, were not interested in developing estates in Siberia. As the eastward expansion continued, increasing attention was given to the exploration of other natural resources, particularly silver, gold, tin, and iron. By 1650 there were 60,000 Russians in Siberia together with 250,000 original inhabitants, and by 1700 those Siberian settlements were largely self-sufficient (Huttenbach 1988:80–100). The dynamic 444


underlying the eastward-moving frontier exhausted itself by 1700 and the Russian objective shifted to settling the existing lands of Siberia more intensively. In the process the dynamic strategy of commerce was replaced by that of family multiplication, which led to the extension of peasant agricultural settlement. An important element in this process was the higher peasant living standards that existed east of the Urals. Between 1678 and 1710 the peasant population of Siberia increased by 50 per cent, and between 1719 and 1795 the adult male population increased by a factor of almost 2.5 (from 169,000 to 412,000) at a time when that of the Empire as a whole failed to double itself (Wood 1991:7). Yet the really massive migration of Russian people to Siberia, and the transformation of its agricultural base from subsistence to commercial farming, had to wait for the building of the Trans-Siberian Railway that began in 1891. Siberia before then was poorly provided with transport facilities. During the seventeenth century the best form of transport was by horse or camel as cart roads were maintained only locally around the larger settlements in western Siberia. The government did not begin building a more extensive network of cart roads until the following century, and in 1763 it began the construction of the Siberian highway (Marks 1991:22–7). These roads were of poor quality, particularly east of Lake Baikal, and in times of wet and freezing weather they became impassable. The Siberian highway was maintained only by settlements of peasants strung out along it at regular distances. While river and lake transport was often a better alternative, it was only useful for the north-south movement of goods and people. In this respect, faster and more efficient transport was achieved with the introduction of steamships from the mid-nineteenth century and the construction of the Trans-Siberian Railway which linked up with 40,000 kilometres of important waterways and acted as an effective feeder into what had become by the early twentieth century a national transport system (see Figure 12.7). The Trans-Siberian Railway was constructed in the 1890s for the central government by Sergei Witte both to promote greater settlement of Siberia and to move troops more quickly around the Empire. At this time international competition for trade and territory in the Pacific region was increasing rapidly. The construction of the Canadian-Pacific Railway, for example, had cut the journey between England and Japan from fifty-two days via Suez to only thirty-seven days (Marks 1991:33). And Japan and the Western nations were becoming increasingly active in and around China. It was all a matter of more haste, less speed. The Siberian railway was built too rapidly and cheaply to provide an efficient transport system that could meet the demands made on it. Horror stories about the failures of this railway are well known—of rough-cut timber bridges collapsing or being washed away; of the snail-like pace enforced by light rails and insufficient ballast; of many serious and delaying accidents; of the inevitable delays 445

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resulting from a single track; of very steep gradients and sharp curves; of poor quality materials; and of the inefficient way it was administered (ibid.: 174–9,191–5). When first opened, the railway could handle no more than six trains a day—three in each direction—and the passenger train that was claimed to take seven days from Moscow to Vladivostok, actually took twenty-eight days under the best conditions and forty-five days under the worst (which prevailed for six months of the year). This improved in the early twentieth century as the railway line was upgraded, as steel bridges replaced the old wooden ones, and as double track was laid. Yet despite these problems, the Trans-Siberian Railway was responsible for a second wave of Siberian settlement and a transformation of the region into an important exporter of grain, livestock, fresh butter, and other dairy products. While peasants from the West had begun migrating again to Siberia in significant numbers after the emancipation of the serfs in 1861, the ‘Great Siberian Migration’ did not begin in earnest until the early 1890s. Between 1891 and 1914 at least 3 million people migrated from European Russia to Siberia (Goryushkin 1991:140–1); although some have placed this as high as 5 million (Marks 1991:155). Whatever estimate we accept, this was one of the great mass movements of people in European history to take place in less than a generation. And it occurred despite the government’s attempt to control this flow, of which between one-quarter and one-half was considered illegal. It may surprise many readers that even this migration has been dwarfed by the massive movement of people, estimated at a staggering 9 million, between 1989 and 1996 both within and between countries that form the Commonwealth of Independent States. Such are the human implications of a collapsing empire. It is curious that we hear so much about the mass movements of Europeans over the seas to the west, but so little about the Great Siberian Migration to the east. The periods of most rapid migration were 1896 to 1900 when 134,000 people per annum were involved and 1906 to 1914 when this rose to 220,000 people per annum. In addition to these high rates of immigration, Siberia experienced high fertility rates characteristic of the family multiplication strategy. Even in the period of highest immigration, 1896 to 1914, natural increase still contributed to one-third of the growth in population; from 1861 to 1896 it was as high as two-thirds. Not surprisingly the population of Siberia increased rapidly during these years, from 2.7 million in 1858 to 5.8 million in 1897, and 10.3 million in 1913. Owing to the Great Siberian Migration, the amount of land cultivated more than doubled from 14 million to 31 million acres. This led to a correspondingly rapid increase in the production of wheat, rye, livestock, and dairy products, and by the time of the Revolution Siberia had become the granary of Russia. Urban life also developed rapidly as villages grew into towns and towns expanded their size and functions. The main function was commerce as the towns became centres for large numbers of small 446


merchants, thereby breaking up the monopolies of the large wholesale merchants who had pioneered the first wave of expansion in the seventeenth century. While the manufacturing activities of the towns also increased, they were organized on a workshop or ‘cottage’ rather than a factory basis prior to the Revolution. The improvements in transport and communications from the late nineteenth century not only led to the rapid economic development of Siberia, but also facilitated the integration of this vast area into a network of national and international markets. On the one hand, it provided a growing surplus of agricultural products for export and, on the other, it created a growing demand for agricultural and urban plant, machinery, and equipment produced in Russia west of the Urals, as well as in Western Europe and America. While in the Soviet period the discovery of very large reserves of natural gas and oil, the harnessing of the electricity-generating power of Siberia’s great rivers, and the relocation of Russian industry east of the Urals during the 1940s led to further rapid development of this great region, the foundations of the Russian mega-market had already been laid. The antistrategist takeover The Russian Revolution of 1917, like all revolutions, was the outcome of the failure to achieve an orderly transfer of political control from the old strategists to the new strategists. But in Russia there was an important difference. In the case of the other revolutions studied in this book—the English civil war, the Glorious Revolution, and the French Revolution—the new strategists succeeded in gaining and retaining (or at least regaining) control of the revolution against the recalcitrant old strategists. But in the case of Russia in 1917, the new strategists lost control to the antistrategists who successfully hijacked the revolution. This was a disaster for Russia because antistrategists—in this case the Bolsheviks—need to eliminate their opponents in order to establish a political and economic system that can exploit society for their own purposes. While the antistrategist takeover is a fascinating issue, it can be dealt with only briefly here. Russian society throughout its long history had been under the control of the conquest strategists—the prince or Tsar and his aristocratic supporters. They attempted to grow rich by acquiring territory and other resources through war. While there was a growing class of merchants from the late sixteenth century, who took a leading role in the economic exploitation of Siberia, the Tsar was quick to assert control over this important new source of extraordinary profits. But this bonanza was not to last. When the commerce strategy of Western Europe—which drove the demand for Russian furs—had exhausted itself by the mid-eighteenth century, Russian prosperity also evaporated. During the century after the 1770s, the Russian ruling class had more 447

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success with their conquest strategy. As can be seen from Figure 12.1, the size of the Russian Empire increased by 46 per cent over this period. But the very success of conquest precluded the development of the new technological strategy that swept throughout Western Europe during the nineteenth century. The Tsarist government restricted manufacturing development to those activities that were required for the pursuit of conquest. Only with their defeat in the Crimea by the British and French in 1856 did the Russian ruling elite realize that industrialization and modernization were essential to their longrun survival. But it would be industrialization under their control and subject to their conquest aims rather than under the control of the new technological strategists. Hence the serfs were set free in 1861, railways were built by government agencies, and manufacturing development was encouraged. And in this they had considerable success. Real industrial output doubled (a factor of 2.03) between 1860 and 1880, and then tripled (a factor of 3.6) between 1880 and 1900 (Nove 1992:2). With industrialization came an acceleration in economic growth rather than just economic expansion (see Figure 12.8). While this led to a growing business class in Russia, it was treated largely as an agent of the state. But by the turn of the twentieth century the old conquest strategists had lost their way. By the 1880s, the conquest strategy had exhausted itself and, to prove it, Russia was badly defeated both on land and at sea by an upstart Japan in 1905. Without the driving force of conquest, the state-led process of industrialization began to slow down: between 1900 and 1913 industrial output increased by a more modest factor of 1.6. What was needed to redynamize Russian society was a transfer of strategic control from the old warrior class to the newly emerging business class. But the Tsar and his aristocratic supporters refused to do so, and the underdeveloped middle classes were not strong enough to force them. It was only the tidal wave of unrest generated by Russia’s defeat at the hands of Japan that led to the unexpected establishment of the Russian Duma or parliament. Curiously, an imperial Duma based on a widespread franchise was first suggested by Michael Speransky in 1808 as part of the programme of reforms for Russian institutions which was instigated by Tsar Alexander I (Pares 1966:306–7). This came, not surprisingly, after a century of relative stagnation for Russia. The Tsar’s adviser, like many modern counterparts, mistakenly thought that the problems were purely institutional. In reality it was a strategic matter. But before the Duma could be introduced, Russia became involved in the war with Napoleon, and Speransky, now out of favour, was exiled in 1812. After Napoleon’s defeat, Russia, resuming its territorial expansion through conquest, had no need of, and hence no desire for, new political institutions. It was not until the obvious bankruptcy of the conquest strategy that political reforms could be forced onto the old strategists.

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Figure 12.8 The growth of Russia, 1800–2000 Source: Drawn from data in Maddison (1995). Notes: GDP is in $US 100m; GDP per capita in $US; population is in 100,000s.

An imperial Duma was finally agreed to by the Tsarist government in August 1905 in order to reduce the dangerous level of internal disorder and discontent. But as the Duma was only to be consultative and its franchise highly restrictive, the gesture failed to satisfy public demands and led to an uprising in Moscow. Frightened by this reaction the prime minister, Sergei Witte, issued a new regulation in December 1905 which virtually made the franchise universal and gave the Duma power to control its own elections (ibid.: 450–5). But even with this change the Duma was only a consultative body as the real government was chosen by the Tsar from the aristocracy. While the first two Dumas were quite radical, and therefore dismissed prematurely by the Tsar, the third Duma of 1907 to 1912 was more conservative because, just prior to its election, the new prime minister, Peter Stolypin, rectifying the ‘error’ of his predecessor, excluded a large proportion of the peasant and working-class population from the franchise (Ragsdale 1996:164). The dominant party in the third Duma was the Union of October 17. The Octobrists were country gentry, merchants, businessmen, and former administrators. Hence, by 1907 the middle classes were beginning to 449

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achieve some influence over the dynamic strategy of Russia. And they did what their counterparts in other European constitutional monarchies had already done: they passed the expenditure estimates of government ministers (appointed by the Tsar) only if they agreed with the programme being proposed. The Tsarist government was beginning to understand that if you are forced to rely on middle-class taxes then you have to take their representatives into your confidence. The third Duma was remarkably successful. It provided, for the first time, a public forum for serious discussion of public policy in Russia, and it supported the reforms of Stolypin. By 1912 not only did this new institution have the support of the Russian people, but it had come to be accepted by the bureaucracy and even the Court. As a result, the confidence of the country, which had been dashed by the lack of effective leadership, rose substantially during these years, and foreign respect for the Russian government increased. In the absence of the Great War it is highly likely that Russia would have become a constitutional monarchy with the Duma gaining effective control of the new technological strategy. But, as we know, war broke out in Europe in 1914. It was a war that devastated Europe and destroyed any hope in Russia of a transfer of political control to those who were capable of driving the technological strategy. The war placed power back in the hands of the Tsar and the aristocratic warrior class, and their bungling, together with Russia’s technological backwardness, led to a disaster of monumental proportions on the battlefield. By taking personal charge of the conduct of the war, Tsar Nicholas ensured that the Russian monarchy would not survive to preside over the transfer of strategic control to a democratically elected Duma. The disorder created by Russia’s military failure led to crowds of people, supported by a disillusioned army, taking over the streets and public buildings of Moscow on 11 March 1917 (new calendar). On 14 March a provisional government was formed to take over the conduct of the war— the middle classes were keen to defend their investment in the technological strategy—and the Tsar abdicated. But, as it was locked in dispute with the Soviet, which represented the proletariat and the radical members of the army, the provisional government cannot be said to have ruled the country over the following eight months. The middle classes were still not strong enough to assert their authority. Once again the crowds on the street, backed by the army, surged forward to take the initiative (Pares 1966:467–94). And, as is well known, in November 1917 the Bolsheviks managed to gain control of the chaos and to hijack Russia’s dynamic strategy. The Bolsheviks, or antistrategists, gained control of the army and used it to eliminate both the old and new strategists. These victims of Bolshevism were either killed outright or sent to camps in Siberia. This was done initially with the support of the nonstrategists—the peasants—by redistributing to them all the lands of Russia. But when the arch-antistrategist, Joseph Stalin, 450


gained complete control of the institutions of terror, he turned them against the nonstrategists and forced them into collectives. Like Mao Zedong after him, Stalin realized that, given the opportunity, the peasants would transform themselves into small capitalists. Russia between 1917 and 1990 was ruled by antistrategists—by rentseeking political opportunists. Their interest was not in pursuing the technological strategy but in using the institutions of command and terror to exploit the entire people of Russia for their own economic advantage. While Stalin physically eliminated the existing strategists, his unacknowledged master stroke was to transform potential strategists—intelligent and energetic risk-takers—into antistrategists by rewarding their talents within the institutions of command. In other words, the potential strategists were perverted by the Soviet leadership into supporting the command system from the inside. It is ironic that these people had a vested interest in maintaining the command system, which in turn prevented them from pursuing the technological strategy in their own right. This is the basis for what has been called the ‘paradox of the middle class’ (Amalrik 1970). It is recognized that while the middle class had the education and intelligence to understand both the problems plaguing the command system and the remedies required to resolve them, it was also the class that had most to lose from these reforms. While some observers have been puzzled by this paradox, it can be explained quite satisfactorily by the dynamic-strategy model. Stalin would have enjoyed immensely both the irony and the puzzlement. This was not a dynamic society but rather a parasitic society in which the ruling elite lived on the blood of its own people. As such it was a society headed for stagnation and collapse (see Figure 12.8). The command system of the antistrategists The antistrategists of the USSR, like those of the Russian Empire after the exhaustion of the conquest strategy, pursued industrialization not to maximize the material advantage of the Russian people, but to survive and to exploit. They took direct control of industrialization in order to prevent the re-emergence of the middle classes that would have posed a threat to their rule of the USSR. To do so the antistrategists needed to develop an economic system that could promote industrialization but over which they had complete control. Their response was the command system initiated by Lenin but developed by Stalin. Yet, while it was the perfect instrument of exploitation and control, it could not compete with the market systems of strategic societies that were developed to maximize economic growth. Only in a world without competition would Stalin’s command system have been a total joy to its maker. While we have no time to consider the development of the command economy in detail, it is a well-known story (Dobb 1960:97–260; Nove 1992: 451

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39–272). The construction of this evil system occurred via a number of distinct steps. First was the phase of War Communism from 1918 to 1921, which involved the rapid adoption of central economic control to revitalize the economy to meet the threat of invasion and civil war. It was not until 1920 that the White armies were retreating on all fronts. During this period the Soviets nationalized all land and all industry. Economic control was exercised through two central planning bodies: the Supreme Council of National Economy (VSNKH) to plan and control industrial development; and the Council of Labour and Defence to distribute the scarce resources of capital and skilled labour. It has been suggested that the model Lenin had in mind at this stage for centralized planning and control was the organization created by Sergei Witte to develop the Trans-Siberian Railway (Marks 1991:225–6). While Lenin’s system, which abolished money, was able to achieve the objective of winning the war, it was unable effectively to organize agriculture (the requisitioning system, reminiscent of the conquest strategy, was highly counterproductive) or prevent the re-emergence of private trade through the black market. The difficulties experienced during War Communism produced much discontent, leading to disorder and, finally, to rebellion by the Kronstadt sailors in February 1921. In order to survive, the Bolsheviks retreated from their primitive command system during the phase known as the New Economic Policy (NEP) from 1921 to 1928. A major problem facing the antistrategists was how to extract an adequate supply of food and raw materials from the agricultural sector. Requisitioning did not work. Hence Lenin decided, as a matter of necessity, to relax his requisitioning policy and to allow the reemergence of private traders and the production of consumer goods by private entrepreneurs. But he maintained strict control over the economy’s ‘commanding heights’—heavy industry and the banking system. The strategists who had survived to this point—they could be dealt with later—were not to be allowed any real power. While Lenin relaxed controls in these peripheral spheres, he continued to develop the command system to control the key heavy-industry sector. In February 1921 he established the State Planning Committee or Gosplan to ‘work out a single general state economic plan and methods and means of implementing it’ (Nove 1992:95– 6). But at this stage planning was partial, ad hoc, and not yet coercive. By 1926 Lenin had been dead for two years, the economy had been restored largely to the 1913 level, and members of the Party began pressing for a renewed offensive against the remaining capitalist (strategist) elements in society. Also, something had to be done about agriculture to extract a greater surplus. These issues led to the ‘great debate’, which was really a struggle among the antistrategists for control of their rent-seeking monopoly. This was the last public debate in the USSR until that in the early 1960s when it became clear that reforms to the Stalin command system were needed. It was a debate skilfully manipulated by Stalin to eliminate at first 452


those on the left who advocated rapid unbalanced development and, in the end, those on the right who wanted gradual balanced development (Nove 1992:115–32). Having assumed total control over the antistrategists, Stalin announced a renewed drive to ‘socialism’ through the First Five-Year Plan, 1928 to 1932. There is considerable discussion in the literature about whether Lenin regarded NEP as a necessary phase in the drive to a command system or whether it was the beginning of a new road towards market socialism which was not taken owing to his premature death. Was Stalin heir to Lenin’s plans for Russian ‘socialism’, or was he the great betrayer? Until now, scholarly argument has been inconclusive. To my mind there is little doubt about Lenin’s intentions. Like Stalin, Lenin was the archetypal antistrategist. Like Stalin, Lenin knew that the only way political opportunists of his type could survive was if existing strategists were eliminated and potential strategists were redirected into serving and benefiting from the antistrategic system of control and exploitation. Even during NEP, Lenin continued to experiment with, and to develop, the institutions of a potential command system. The difference between these co-founders of the command system is that Lenin wanted to eliminate only those strategists who could not be redirected, whereas Stalin was happy to eliminate the lot. Strategists are the mortal enemies of the antistrategists. While more brutal, there can be little doubt that Stalin was the natural if not the anointed heir of Lenin. The First Five-Year Plan has been called the ‘Soviet great leap forward’ (Nove 1992:137)—rather it was Russia’s great leap into purgatory— involving a frontal attack on the ‘capitalist’ (strategist) elements in society, namely in agriculture, trade, and the consumer-goods industries. It involved the unacceptably costly drive to collectivization of agriculture and to the development of heavy industry. Millions of peasants died from starvation and millions more, often chosen at random from all strata of Soviet society, were murdered or incarcerated in inhuman labour camps. Terror was used by Stalin as an instrument to impose his will and to destroy the potential strategists. To engineer the ‘great leap’, which was to be planned and directed by the Party now controlled by Stalin, Gosplan developed its First Five-Year Plan. This was a tremendous task because there was no precedent on this scale that could be imitated by the Soviet—no existing input—output matrices—and very limited information available about the Soviet economy. It was largely a leap of misdirected faith. Needless to say, the plan was overoptimistic and its execution was highly inefficient, but it did generate the first impressive surge in real GDP per capita since the late nineteenth century (see Figure 12.8); and successive Five-Year Plans did enable the USSR to defeat Germany on the eastern front, and seriously to confront the USA in a cold war that lasted four decades. What then was the set of institutions that temporarily rejuvenated a backward and bankrupt empire, and how did they work? 453

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Figure 12.9 Diagrammatic model of the classic USSR command system

Once again we must be brief. Our main interest focuses on the policy and planning hierarchy because it is through this set of institutions that the antistrategists attempted to control and exploit the natural and human resources of the USSR, without relying on the technological strategists who alone could challenge their authority. The economic and policy network of the ‘classic’ Soviet command system in the mid-1960s, prior to the first abortive attempts at reform, is shown in Figure 12.9. The legislature (first column) consisted of four levels of territorial organization: at the top was the federal government of the USSR; below this were the governments of the national republics; then there were about fifty regional councils; and finally there were the provincial, municipal, and county governments (Oxenfeldt and Holubnychy 1965:89–94). The legislative organs of each of these four territorial levels of government, called Soviets, adopted economic plans and other economic legislation covering their spheres of influence. Enforcement 454


of this economic legislation was the responsibility of the Council of Ministers (column 2, Figure 12.9) at every level. Each of the ministries, which were concerned with various sectors of the economy (such as railways, agriculture, finance, etc.), worked through a number of ‘economic councils’ or sovnarkhozy under the control of VSNKH, and ‘planning committees’ or Gosplan (column 3, Figure 12.9). The economic councils prepared the annual plans for their designated sector, and the planning committees prepared the Five-Year Plans (and the longer plans) and coordinated the individual annual plans. The whole system of planning was extremely complex. There were five types of periodic plans: the perspective plans that established the targets and broad outline of development over a twenty-year period; the long-term ‘control’ figures of the Five-Year Plans; the very detailed annual plans; the quarterly plans; and the monthly plans (Davies 1969). To see how the system worked we need to focus on the annual plan. It had five dimensions: an output and consumption plan framed in physical terms; a financial plan; a capital budget; a labour plan; and a regional plan. To simplify the exposition we will focus on the first and most important of these five dimensions. The output and consumption plan passed through four main stages. • Stage I. In May of the year before the planned period, Gosplan issued a statement of the main economic targets, which were based on the objectives of the longer-term plans and on feedback from recent enterprise performance. The targets involving quantities of output, investment, labour productivity, and other inputs were arrived at using a system of ‘material balances’ similar to an input-output matrix. • Stage II. Each ministry received both a set of directives from Gosplan, and information concerning the expected output and input requirements of enterprises from their directors. • Stage III. Gosplan would then attempt to coordinate the various plans prepared by the ministries and to reconcile them with its own draft plan. This stage involved negotiations between heads of ministries and enterprises, and the central government. From these negotiations emerged (about October) the national economic plan, which included an extremely comprehensive and detailed set of directives concerning output, inputs, and investment. • Stage IV. This involved the disaggregation of the national plan (in December), making its way back down the hierarchy to the enterprise level. Each enterprise received from its economic council an output target specified in physical terms, together with the information and authority to obtain specified physical units of a variety of raw materials and intermediate goods. This was done each month. The objective of Soviet enterprises, which were directed by engineers rather than entrepreneurs, 455

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was merely to implement the blueprint supplied by their economic council. These plans also had to be reworked in financial terms because, despite Lenin’s early attempt to eliminate it, money was required to balance individual as well as national budgets. How did the antistrategists attempt to make this complex system work? The essential underpinning of the command economy was the terror Stalin maintained throughout his brutal rule, which was directed against anyone who was even suspected of questioning his commands. Against this background of fear the main, although not exclusive, positive incentives in the classic command system were of a material nature, involving bonuses for fulfilment and overfulfilment of output targets. While this incentive system enabled the Soviet leaders to achieve their broad objectives, it led to excessive wastage of resources and to unacceptable levels of inefficiency. But, until this inefficiency posed a threat to the survival of the antistrategists, from internal and external sources, it was not a matter of serious concern. Their objective was to maximize not the material advantage of the nation but the economic rent they could extract through this command system. None the less, a minority of conscientious planners and economists, who did believe that the Soviet system should serve more than just the Party functionaries, were concerned about wastage arising from: the deliberate understatement of enterprise capacity in order to meet targets and obtain bonuses with a minimum of effort; the falsification of reported production; the dilution of product quality; and the fulfilment of output targets specified in weight units by making fewer but heavier items of production. But these concerns only surfaced when the leadership became anxious about their longer-term survival. How much did this command system owe to the ideas of Marx? This is an old question that has yet to receive a satisfactory answer. I wish to propose that the Soviet command system was not Marxian in either the letter or the spirit of the master’s work. In the first place, Marx viewed socialism as a system in which each worker would be rewarded according to his or her contribution, and communism as a system where each would be rewarded according to need. The Soviet system did neither. It exploited workers not only in the Marxist sense of failing to pay them the total value-added in their enterprise (the labour theory of value), but also in the neoclassical sense of paying them less than their marginal product (the marginalist theory of value). As already suggested, this system was designed to maximize the extraction of economic rent. It is ironic that Soviet Communism, which eliminated the enemy of Marxism—the capitalist—introduced pure rentseeking—a far greater form of exploitation. Second, as is well known, Marx said very little about the future stages of socialism and communism. While he regarded such discussion as ‘utopian socialism’, the truth is that his model 456


was unable to predict such future institutional arrangements. Inevitably Marx did make a few scattered comments about the future in his less ‘scientific’ works, such as the Communist Manifesto and the Critique of the Gotha Programme. These included unexplored statements about the abolition of markets, nationalization of the means of production, abolition of money, valuing goods by their labour content, and distribution according to ‘contribution’ under socialism and to ‘need’ under communism as human nature is transformed. Clearly there is little here that could have helped Lenin and Stalin develop an alternative system to capitalism, particularly as their objectives as antistrategists were diametrically opposed to his own. During the first three decades of its operation, the Stalin command system served the Soviet leadership well. It suppressed the new strategists, redistributed income from the people to Party functionaries, enabled Russia to collectivize and industrialize, defeated Hitler, launched the world’s first artificial satellite into space in 1957, and created the world’s second most powerful mega-state. Stalin was also able to use this command system in the early 1950s to deify himself, as Augustus had done 2000 years earlier. As dictator, Stalin became the embodiment of the antistrategic system. The antistrategist as god! Some readers may be puzzled by the Soviet’s ability to crush Germany but its failure in the struggle against the West. My explanation is that the command economy is ideal for feeding the war machine but not for generating economic growth. Basically the problem for a wartime economy is one of maximizing the amount of output from a given supply of inputs. The Soviet command system was better designed to achieve this objective than the unplanned Nazi economy, at least until Albert Speer took control in 1942. Even the democracies temporarily assumed some of the core characteristics of the command economy during the Second World War, because during this short-term crisis maximization of output (which depended on engineering efficiency) rather than maximization of extraordinary profits (which depended on innovation) was a more effective method of survival. As the reverse was true during the cold war, the USSR was unable to compete with the USA and Western Europe after the mid-1940s. Last, but by no means least, the Soviet command system created a megamarket from the resources bequeathed to it by the old Russian Empire. It was created by extending the system of Tsarist railways throughout European Russia, Kazakhstan, and in the region between the Ural Mountains and the River Ob; and by improving transport and communications between the Baltic and the Pacific coast. The main industrial centres are to be found in European Russia around Leningrad (now St Petersburg), Moscow, just north of the Black Sea, the Urals, and the Caucasus; and in Asian Russia around Kuznetsk, Lake Baikal, Kazakhstan, and Uzbekistan near Tashkent. These centres provide the industrial requirements for the military, for infrastructure and a limited range of consumer goods for urban areas, and the requirements 457

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of the agricultural districts. But this vast mega-market until the early 1990s was driven not by the technological strategists pursuing extraordinary profits, but by the demands of the antistrategists and their supporting military-industrial complex (VPK). The reform that could never be The Stalin command system was ideal for imitating the technologically advanced nations because it was run by engineers and accountants who were skilled in implementing technical and economic plans. They just followed the blueprints handed to them, and practised a little embezzlement on the side. The initial results in terms of growth rates were impressive, because they had a great deal of catching up to do. But they were achieved at great cost in terms of human lives, human oppression, and gross inefficiency in the use of resources. On bridging much of the technological gap between itself and the USA, the USSR faced even greater difficulties. How were they to proceed in the future? This is a major problem for a system that has effectively eliminated the potential strategists who would normally explore and invest in new technologies in order to achieve extraordinary profits. By the 1960s, imitation of the West was no longer enough. To forge ahead in the cold war the USSR needed to become an innovator rather than a follower. But the command system mitigated against this: the incentives were perverse; the enterprise directors were engineers not entrepreneurs; the most intelligent and energetic section of the population was materially committed to supporting a vast system of rent-seeking; and, as factor and commodity markets had been abolished, there was, as foreseen by Friedrich Hayek (1935), no reliable information on which to base innovative decision-making. Only when Soviet growth rates began to decline after the late 1950s and to stagnate in the early 1960s (see Figure 12.8), in the midst of a cold war with the West, did the Soviet leadership begin openly to express concern about the nature of Stalin’s command system. This occurred under the leadership of Nikita Khrushchev, who was one of many to be personally humiliated by Stalin (Bullock 1993). On gaining power in 1953 Khrushchev attempted to make the command system more responsive to his perception of the needs of the Russian people, and in the early 1960s he began to consider reforming the command system itself to make it more efficient. This led in 1962 to the publication in Pravda of an article, originally written in 1956, by the Russian economist E. Liberman on the planning process. Liberman’s concern was to improve the enterprise incentive system, to encourage the introduction of new technology, and to improve the quality of output: ‘in a word, in achieving the greatest production efficiency’. To achieve these objectives, he advocated greater decentralization of decisionmaking power by linking enterprise bonuses to profitability once the output 458


target had been achieved. This Pravda publication began the second great debate in Soviet history, during which a large number of issues were enthusiastically discussed, including the need for a rate of interest to enable the more rational allocation of capital, for greater innovation, and for a formal recognition of consumer demand. In 1965, the year after Khrushchev had been removed because of the adverse impact of his impetuous and ill-informed initiatives on the economy and foreign affairs (Ragsdale 1996:240–8), the first major reforms of the command system were announced by Aleksei Kosygin, co-premier with Leonid Brezhnev. The fact that the military—industrial complex had reasserted its control after the dismissal of Khrushchev in October 1964 was not a good omen for the fate of these reforms. In general the reforms followed the Liberman proposals and were framed to provide enterprises with greater independence and motivation. To do this they ‘reformed’ the pricing system, introduced profit-related bonuses, and recognized a rate of interest in financial dealings. Yet despite these ‘reforms’, the enterprises did not act more entrepreneurially because the ministries refused to give up their powers, and enterprise directors did not wish to be released from them as it would either undermine their existing privileges or would expose them to risks that, as engineers, they were not trained to handle. As Alec Nove (1972:357, 354) has said: ‘The system in the USSR has an inner logic which defies gradual change’; and these changes were ‘the reform that never was’. While growth rates (Figure 12.8) did pick up in the second half of the 1960s, they stagnated again in the 1970s, and all further ‘reform’ attempts proved to be futile. None of this is surprising. It is just not possible to fine-tune the institutions of a command system to enable it to compete in the longrun with market systems run by dynamic strategists. The fundamental reason is that command systems and market systems are not alternative institutions for achieving the same objective. They have entirely different objectives. The command system is an excellent instrument for repressing and perverting potential strategists and for extracting economic rent from the people; and the market system is the best available vehicle for dynamic strategists wishing to maximize their material advantage through economic growth. But the market system is a total failure as an instrument of mass repression and exploitation; and the command system is hopeless when it comes to longrun innovation and growth. If a society wishes to achieve rapid and sustained economic growth there is no point in trying to reform the command system, because the oppressive mechanisms will merely reassert themselves owing to vested rent-seeking interests at all levels. Innovation and sustained growth can be achieved only by destroying the entire command structure in order to allow the reemergence of the dynamic strategists. Until the command structure is destroyed, the potential strategists will not be released. They will continue to hold on to their privileges based on rent-seeking. Rather than ‘the reform 459

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that never was’, the longrunning attempt to modify the Stalin command system was ‘the reform that could never be’. Destruction of the command system For twenty-five years after the Kosygin initiative, the antistrategists attempted to ‘reform’ the command system without really changing it. During this time they were involved in a struggle for survival on two fronts— the international front and the home front. Internationally the Soviet leadership was involved in an escalating confrontation with the West in military and space-exploration terms, and at home they were faced with the growing dissatisfaction of the populace concerning the general standard of living. But because the economy had been performing so badly for a generation there was little the Soviet leadership could do about either problem. If they continued to compete with the USA, as Brezhnev had attempted to do, they would need to squeeze the living standards of the Russian people and could be faced with rebellion, even revolution; and if they attempted to increase the consumption levels of the people, they could be faced with international humiliation, even invasion. It was against this background that Mikhail Gorbachev was elected general secretary. While Gorbachev was recognized as a ‘liberal’, and only narrowly came to power in 1985 with a mandate to revitalize the old system, no one realized how radical he was to become. He began predictably enough, attempting to reform the system from within. His initial anti-alcoholism programme, aimed at increasing labour productivity, was an expensive failure. Undaunted he followed up with his programme of glasnost, or ‘openness’, aimed at exposing corruption in government, encouraging good civic behaviour, and enhancing confidence in public bodies. It also encouraged open criticism of the existing system and led to calls from economists and an increasingly free media for radical reform. Gorbachev was determined to use markets to make state enterprises more responsive to consumer requirements, and more innovative. In this programme of perestroika, or ‘restructuring’, enterprises were to be given greater independence, the bureaucracy was to be pruned, research was to be geared more closely to production, and price reforms and self-financing were to be introduced. Privatization, however, was not part of the restructuring programme. And as always the command system reasserted itself. By mid1990 the reforms had ground to a halt. This failure stimulated an even more radical demand for reforms including privatization. In response, Gorbachev publicly advocated greater enterprise freedom, radical price reform, and even the creation of stock and commodity exchanges (Nove 1992:408). Naturally this was strongly resisted by those who had most to lose, including the military-industrial establishment. In the face of this determined opposition Gorbachev hesitated 460


and seemed to lose his nerve. This led to his famous ‘shift to the right’ between October 1990 and April 1991, during which he lost the support of the intellectuals to Boris Yeltsin who already enjoyed the confidence of the working classes (Dunlop 1993:52–4). While he moved back to the left again after April 1991 to compete with Yeltsin’s growing power, Gorbachev failed to regain control of the revolution he had started. The USSR in 1991 was rushing headlong into chaos and collapse (see Figure 12.8). The various captive nations together with the USSR republics were demanding independence, central authority was collapsing, and trade between enterprises, individuals, and regions was breaking down. In January 1991 radical price reforms were finally introduced; in April a law was adopted to allow individuals to trade and employ others; and commercial banks and stock exchanges were emerging. Owing to the impossibility of reforming the command system, Gorbachev, through his demokratizatsiya programme, had finally unleashed the forces of chaos that had been contained by Stalin in 1928. He attempted to use the people to force through the reforms that were being resisted by the command structure, but was surprised by their general apathy and ill will. What he did not realize was that the potential strategists who could revitalize the economy would be released from Stalin’s bonds only once the command system had been completely destroyed. Reform was not enough. In the end he inadvertently destroyed what he had hoped to save—the system of ‘Leninist socialism’ (as opposed to Stalinist coercion). By mid-1991 the command system was no longer effective, and in August the military-industrial complex staged an unsuccessful coup, after which the Communist Party was dissolved, all the republics and captive nations declared their independence, the USSR ceased to have any meaningful existence, nor Gorbachev any effective role. Boris Yeltsin, who had been President of Russia since June 1991 and had the confidence of the majority of the people, emerged as the decisive leader of the day. Gorbachev was not alone in failing to understand that the command system was incapable of reform. Even detached and seasoned observers like Alec Nove have, after the event, made a similar judgement. Nove (1992:418–19) writes: Looking back, one is struck by a paradox, or dilemma. To carry through the fundamental perestroika of the economy required strong government. In the first three years of Gorbachev’s rule the mechanism for imposing a policy did exist, but the apparatus…was not inclined to do the job, since marketization threatened its powers and privileges. So Gorbachev set about dismantling the apparatus, changing its personnel, allowing criticism of its privileges… Glasnost and demokratizatsiya doubtless weakened the powers of resistance and obstruction of the apparatchiki. However, the effect was also to 461

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undermine the power to implement policy. So by the time the reform programme was radicalized, the means to enforce it no longer existed. The point is not that the command system could have been reformed had Gorbachev retained the power to implement policy, but rather that the system was incapable of reform. Only an entirely new economic system and a new society dominated and led by the dynamic strategists could achieve the rapid and sustained growth that was necessary to compete with the other mega-states. This is an interesting illustration of the central thesis in this book, that institutional change responds to strategic demand and not the other way around. It was not possible to establish a set of institutions to arrange the transition from antistrategic to strategic control of Russia. The old system had to be destroyed and the new strategists had to take over from the antistrategists—a change from rent-seeking to profit-seeking—before the appropriate institutions could be rebuilt. This is also the experience of Western advisers who helped to reconstruct Russia’s economy from 1991 to 1994. Anders Åslund (1995:10–11) tells us that new laws, institutions, and property rights ‘are undertaken more easily and appropriately after liberalization [i.e. dismantlement of the old system]; it is extremely difficult to carry them out in advance’. For similar reasons many Western experts failed to predict the collapse of the Soviet system. Those at the Centre for Strategic and International Studies at Georgetown University wrote boldly in the early 1980s: All of us agree that there is no likelihood whatsoever that the Soviet Union will become a political democracy or that it will collapse in the foreseeable future, and very little likelihood that it will become a congenial, peaceful member of the international community for as far ahead as one can see. (Byrnes 1983:xvi–xvii) And Paul Kennedy, the historian who wrote The Rise and Fall of the Great Powers (1989:663–4), said in the late 1980s just a few years before the complete collapse of the USSR: However one assesses the military strength of the USSR at the moment, therefore, the prospect of its being only the fourth or fifth among the great productive centres of the world by the early twenty-first century cannot but worry the Soviet leadership, simply because of the implications for long-term Russian power. This does not mean that the USSR is close to collapse, any more than it should be viewed as a country of almost supernatural strength. It does mean that it is facing awkward choices. Both missed the greatest societal collapse of modern times because they did 462


not recognize what might be called the ‘antistrategic paradox’—the use of the antistrategic command system in an attempt to achieve the outcomes— innovation and economic growth—of strategic societies. While my dynamicstrategy model can explain only what has happened in the USSR (although it would have predicted it), it can be used in a predictive sense for China and other lesser developed nations. A future mega-state What of Russia’s future? Some observers have suggested that Russia will build on its earlier traditions. Traditions of centralization, respect for authority, a strong sense of national identity, a spirit of social justice and egalitarianism, and a love of spiritual values. Traditions that will embrace a slower rate of economic growth along non-Western lines (Urban 1991:17). But is this very likely? As we have seen in this study, social institutions emerge in response to the type of strategy adopted and they change as that strategy unfolds and is succeeded by new strategies. Older traditions will influence only the more superficial, not the more functional aspects of institutions. The idea that Russia will be content with a slower rate of development is completely ahistorical. Economic survival will depend on the ability to compete with other mega-states. As we have just seen, the collapse of the Soviet system was the outcome of an inability to do so. Others have wondered whether Russia might seek to re-establish an empire (Ragsdale 1996:272–3). As this study has shown, a conquest empire is an anachronism for a modern technological society and is only attractive to irrational individuals. This can be illustrated by the certainty that in an earlier era a collapsing Russia would have been invaded by Western and Eastern powers. In our modern technological era the net benefits from investing in a fallen Russia are greater than those that might result from conquering it. Only irrational societies led by antistrategists like Hitler and the Nazi Party would see it otherwise. And such irrational forces are released only by the severest of conjunctions of economic crises. Perhaps in the final analysis, the survival of Russia owes much to the restraint imposed on national forces by a halfcentury of unprecedented prosperity, combined with the checks and balances of the European Union. If Russia is able to reinvent itself as a stable market economy it should be able to look forward to joining a select league of megastates including the USA, EU and, later, China. To see what Russia might become we should focus briefly on the dynamics of transition from a collapsing command system to an emerging market system. The driving force in this transition was strategic demand—the demand of the new strategists for control over the economic resources and income of Russia. The dynamic process of transition involved a struggle for economic and political control between the new strategists and the remaining elements 463

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of antistrategists (the nomenklatura). It was a struggle between the profitseekers and the rent-seekers—between those with a vision of a new Russia and those who yearned for the privileges of the old USSR. The new strategists demanded privatization so that they could control Russia’s resources, marketization so that they could pursue their economic objectives as efficiently as possible, democratization so that they could gain control of the dynamic strategy, and legalization so that they could be protected from intimidation by bureaucrats and the Russian Mafia. By the mid-1990s the strategists had achieved many of these objectives: the rate of inflation was reduced from 2,510.4 to only 48.3 per cent per annum between 1992 and 1994; unemployment was reduced to 2.4 per cent by 1994; the transition-induced recession reached its nadir in 1995; government revenue as a proportion of GDP was reduced from 41 to 28 per cent between 1989 and 1994; an index of democratic rights has increased from 25 to 58 (with 100 the level in Western Europe); an index of the degree of economic freedom has increased from 3 to 67 between 1989 and 1994 (Murrell 1996; Fischer et al. 1996). A major reason for this is that a number of Russian politicians closely identified with the interests of the new strategists. These politicians included Boris Yeltsin, the Russian president, who came to power on the reform platform and who chose the team and the strategy for transformation; Yegor Gaidar, who developed and implemented the transformation programme; Boris Fedorov who, as Minister for Finance, helped to stabilize the new market economy; and Anatoly Chubais, whose privatization programme was highly successful (Dunlop 1993:38–66; Åslund 1995:314–16). While the usual response is that these changes were the outcome of a period of high ideals on the part of a few extraordinary men, the truth is that it was a response by these few extraordinary men to a growing strategic demand. Their remarkable skill was successfully to ride the surging strategic wave. But there are some worrying signs. In particular, during 1995 and 1996 the powers of the Russian president have been growing relative to those of the Duma, the courts, and the prime minister. This has not only led to wasteful administrative duplication, but is beginning to resemble the old Communist Party Central Committee that it replaced. The main opponents of the new strategists were the old bureaucrats and enterprise directors rather than the military—industrial complex (VPK) as many expected. This was because the massive structural change after 1991 slashed the size and status of the VPK and elevated that of agriculture and energy which were responsive to consumer demand. The antistrategists were able to retain vestiges of their old economic power because of the time it took totally to deregulate the Russian economy and to introduce a democratic form of parliamentary government. In the interim they gained considerable concessions from Yeltsin at a time (1992) when the populace was disoriented and unusually passive (Dunlop 1993:296). It was the struggle for survival between these two groups that slowed down the reform process. 464


With the reduction in the influence of the state and of workers organizations, enterprise directors assumed control of their economic units and through their well-organized associations—such as the Russian Union of Industrialists and Entrepreneurs—they became a powerful government lobby before democratic reforms, including a new constitution, were introduced in December 1993. While these reforms finally gave political control to the new strategists, some of the old antistrategists had become well entrenched. During the two years from late 1991 to late 1993, many enterprise directors became very wealthy by exploiting the system of price control, trade barriers, multiple exchange rates, and subsidized financial support (ibid.: 303–6). But, once the new strategists had achieved their goals of privatization, marketization, democratization, and legalization, the opportunities for this type of rentseeking were reduced to something approximating normal levels and profitseeking assumed the role it plays in other market economies. Accordingly, in the democratic election of December 1993, the first since the early 1900s, the electoral representatives of the industrial enterprise directors—Arkady Volsky’s Civic Union Party—captured only 2 per cent of the vote. No doubt many of the old antistrategists have switched their talents from rent-seeking to profit-seeking. They have finally been released from the ensnarement Stalin had cleverly planned for them. The important conclusion to come from this examination is that, without the demands generated by the new strategists, none of these reforms would have succeeded and the antistrategists would have continued their rentseeking activities until the entire system collapsed. As it is, Russia has been converted into a market economy that, at long last, is largely driven and controlled by the technological strategists. And the cost of achieving this, in terms of a reduction in living standards, is probably no more than 10 per cent of GDP (ibid.: 313–14). There will be further attacks from the remaining antistrategists who will attempt to exploit the mistakes and difficulties of the present regime, and there will be temptations for ambitious politicians to advance their personal power. But now that Russia is largely under the control of the new strategists and is in receipt of financial and technological assistance from the West, there is every reason to be optimistic about its ability, over the next generation or so, to take its place as one of the world’s four great mega-states. THE EMERGING MEGA-STATE OF CHINA China is a mega-state of the future. Our focus here, therefore, will be on how far it has travelled from empire to mega-state and what its future might be. In particular, we will focus on the last 1,400 years, from the restoration of the empire in about AD 600—when the northern Sui dynasty conquered the southern Chen dynasty—to the present. And beyond.

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Constructing a mega-market, 600–1840 The dominant Chinese dynamic for much of the past 1,400 years has been the family-multiplication strategy, by which the extensive land resources of eastern Asia were brought into production. This is the process of environmental dynamic change (EDC), by which a growing population exploits unused (or underused) natural resources by employing best-practice technology. While it involves economic expansion—an increase in the size of the economy or an increase in the total number of families in the society—it does not involve economic growth—an increase in the real living standards of families usually measured by real GDP per capita or, better, by real Gross Community Income (market plus household income) per household. The reason that economic expansion is not accompanied by economic growth is that there is no technological change. In the case of China in this period, the family-multiplication strategy led to a southward movement of the settlement frontiers between 280 and 1800 and, once this had been exhausted, to a northward movement into Manchuria from 1860 to the 1930s. The reason China was able to continue to ignore the West was not only that the distance from which the foreigners came was great but also that there was adjacent territory that could be settled. China’s long-standing family-multiplication strategy, therefore, was an outcome of its isolation and its abundance of land. It is important to realize that a moving frontier does not generate increases in real GDP per capita as some have suggested (Elvin 1973:211– 12). While at the margin the returns on investment were higher in the south than in the north during the Song (Sung) dynasty—thus providing the motivation required for individuals to migrate—the average returns would have been approximately the same because migration resulted in the application of a given level of technology to a similar range of natural resources. Even if the new land was richer it would merely be cultivated more intensively than the old land. Hence, while a moving frontier will generate an increase in the number of households, it will not increase the level of material living standards per household—expansion without growth. Of course, whenever family multiplication occurred in the presence of a static frontier, average material living standards fell, and the family-multiplication strategy was suspended until more land could be acquired. The family-multiplication strategy was temporarily upstaged in Song China, AD 960–1279, by the need to defend the Empire against the Manchurians and, later, the Mongolians. While China was not subjected to sustained longrun competition from the surrounding barbarians, there were times when these societies successfully imitated their technological and military achievements and, temporarily, provided a dangerous threat. During the SuiTang period (581–907), considerable expenditure on defence against the 466


Tibetans, Turks, and Koreans had been required, but it was in the Song dynasty that an acute external challenge was mounted. To meet it the Empire needed to raise additional taxes in the form of cash, food, and raw materials (Shiba 1970:54–8, 109–35). This unusually high demand for surpluses appears to have passed a critical threshold level that could only be reached and sustained through systematic technological change in agriculture and the armament industry (particularly the production of iron armour and weapons). By the mid-eleventh century China had to generate surpluses that could maintain an army of 1.25 million men, all fully equipped with iron armour and iron weapons. As Mark Elvin (1973:84) has concluded: ‘The economic revolution which underpinned the Sung empire allowed it to maintain the most formidable military machine that the world had yet seen.’ But the Song ‘economic revolution’ was a false dawn. As it did not herald a new technological paradigm shift, it was not the beginning of an industrial revolution. An industrial revolution could occur only once the old neolithic technological paradigm was exhausted and only in the face of sustained and intense external competition (Snooks 1996: Chapter 12). Neither condition had been met by the late thirteenth century in China or in any other part of the world. Neolithic exhaustion—the application of best-practice neolithic technology to all accessible natural resources—was not evident in Western Europe until the mid-eighteenth century or in China until the early twentieth century. As we have seen, China continued to settle new regions on a large scale until the 1930s. Further, after the Mongol takeover of the Chinese Empire in 1279, all serious external competition was eliminated. Even the subsequent Manchu takeover in 1644, which was largely engineered by defecting Chinese generals, has been regarded as ‘accidental’ (Elvin 1973:106). Hence, as the Yuan, Ming, and Qing (Manchu) dynasties had no serious rivals, at least until the mid-nineteenth century, they were able to reduce military expenditures (ibid.: 93). And with the reduction of military expenditures the need for large surpluses declined—as can be seen in the halving of land tax to 5 or 6 per cent in the 1750s—and the pressure for innovation evaporated. After the thirteenth century the Chinese once again depended solely on their traditional dynamic strategy of family multiplication. China, like Western Europe, has experienced three great waves of economic change during the past millennium: between 1000 and 1300, 1500 and the early eighteenth century, and the late eighteenth century to the present (Snooks 1996:386–7). But unlike Western Europe, after the first great wave, China generated economic expansion without economic growth— population increase without an increase in material living standards. In this section we will contrast China’s experience during the first and second great waves, when China first fashioned its mega-market. The current wisdom about the Song period—the first great wave of economic change—is that: 467

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In brief, what happened was that an economic and technological revolution reduced the burden of the imperial administrative superstructure, increased the efficiency of the Chinese war-machine, and created enough economic integration to be a real obstacle to renewed political fragmentation. (Elvin 1973:69) Technological change in agriculture included better soil preparation, better grain varieties (heavier yields, multiple cropping, drought resistance), better hydraulic and irrigation methods, the distribution of better information in printed form, and greater regional specialization based on comparative advantage (Shiba 1970:50). By the thirteenth century, we are told, ‘China… had what was probably the most sophisticated agriculture in the world’ (Elvin 1973:129). Important changes were also made by the Song in water transport, thereby linking the increasingly productive rural areas with the growing cities (Shiba 1970:4–45). These changes focused largely on China’s internal waterways through the construction of canals and locks that converted the rivers into a great national network of transport and communications. On this internal transport system plied tens of thousands of sailing vessels carrying cargoes of all kinds from all parts of the country. In the early seventh century the forerunner of the Grand Canal, which connected the Yangzi (Yangtze) and Yellow Rivers with Beijing, was opened; and, while it went into decline after the Song dynasty, it was reconstructed in the early fifteenth century (Figure 12.7). This great canal was initially constructed for military purposes in order to transport rice, supplies, armaments, and troops from the south to the vulnerable north, without having to negotiate the dangerous northern seas that did not come under Chinese control until the seventeenth and eighteenth centuries. But once built it became an important link in the creation of a great national market. With the growing surplus generated by agriculture, and the improved transportation system, a vast network of local and national markets displaced the earlier system of state-regulated markets (Shiba 1970:45–164). This led to the commercialization of the peasant economy, as trade expanded between rural areas and the rapidly growing cities. Chinese cities were much larger and more numerous than those in the nation-states of Western Europe. By 1300 about 10 per cent of the population lived in cities of 100,000 or more people, whereas in Western Europe at this time only Paris (150,000 people) had a population in excess of this level (Elvin 1973:176; Bairoch et al. 1988:283). By 1300, therefore, China had developed a mega-market that played a central role in stimulating manufacturing and in promoting general economic growth. Yet this cannot be regarded as industrialization in the modern sense, as manufacturing development took place within the 468


traditional framework of craft techniques and guild organization. Indeed, this traditional technical and institutional framework continued to develop into the twentieth century (Elvin 1973:277). Some scholars are ‘puzzled’ by Chinese failure to develop both the relatively advanced iron industry as the foundation for a process of modern industrialization (Needham 1958; Hartwell 1962;1966;1967) and the existing crude textile technology as a basis for ‘a true industrial revolution in the production of textiles over four hundred years before the West’ (Elvin 1973:198). But it is clear from my model that, as the neolithic technological paradigm had not been exhausted under conditions of intense external and internal competition, there was no strategic demand for this type of technological change. The major technological change that did take place in manufacturing, namely that in the coal-fired iron industry, was to be found in the armament factories feeding the defence objectives of empire. As early as the eleventh century the large state armaments industry was employing standardized massproduction techniques (ibid.: 84). But these innovations, like those in the arsenals of Greece, Rome, and Venice, were abandoned when strategic demand arising from conquest and defence subsided. The second great wave of economic change from 1500 to 1800 was, as we have seen, restricted to population increase rather than economic growth. This was a period of growing isolation and overseas trade restriction, which should not surprise us because it was dominated by family multiplication, the only dynamic strategy that could operate without an open-door policy. Hence, the isolationism of China during these centuries is not the irrational policy that it has been widely proclaimed to be by observers from nations pursuing either the commerce or the technological strategies. But this did not mean that internal trade was unimportant. Quite the reverse. During the seventeenth century the number of market towns increased even more rapidly than population (Elvin 1973:268). This was, however, a response to the family multiplication strategy and not to the commerce strategy. While the number of large cities does not compare with those existing in the Song period—the proportion of population living in cities of 100,000 or more declined from 10 per cent in 1300 to 4 per cent in 1900 (ibid.: 178)—there was a rapid growth of small and middle-sized towns. Most of these came under the control of the gentry who moved from the rural areas, while the administration of rural areas passed from the gentry to local government clerks. It is true that manufacturing activities, particularly in cotton, tea, and silk, developed rapidly in the growing urban centres, but they did so using traditional techniques and institutions. Where large manufacturing organizations were created, they were the outcome of linking large numbers of traditional producers. This was arranged by merchants who handled the finance and distribution but rarely the production. Admittedly some improvements were made in the manufacture 469

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of military weapons and equipment, but none was based on any fundamental breakthrough in technology (ibid.: 95). Between 1580 and 1850 the population of China more than doubled to 410 million, without any systematic technological change (ibid.: 255). This, as we have suggested above, was due to the family-multiplication strategy and, until about 1800, fine-tuning of the administrative and agricultural systems. Presiding over it all was a central government that pursued its traditional rent-seeking role through a scholarly bureaucracy. In reviewing the period 1000 to 1800 should we, as Mark Elvin has done, call the Song period a ‘medieval economic revolution? Of course, we can use whatever phrase we wish to describe these years, provided we define what we mean. Personally I would hesitate to use the word ‘revolution’ to describe this period for at least three reasons. First, ‘economic revolution’ is normally associated with major turning points in the history of human society such as the Palaeolithic, Neolithic, and Industrial Revolutions. These revolutions were technological paradigm shifts, whereas the Song period was merely a false technological dawn. While some scholars (Hartwell 1962; Elvin 1973; Jones 1988) give the impression that the Song period could have given rise to an early industrial revolution, this was just not possible because, as already suggested, the underlying conditions—the exhaustion of the neolithic paradigm in an intensely competitive world—did not exist in China (or anywhere else) in the late thirteenth century. Even when, by the late eighteenth century, the neolithic technology paradigm had been taken as far as possible in the settled areas of China—as can be seen in the shortages of organic materials, in agricultural yields that were not exceeded anywhere prior to the Industrial Revolution, and in a transport system as efficient as possible short of the steam railway (Elvin 1973:301–6)—the Chinese merely opened up a new frontier in Manchuria. For the Chinese, family multiplication was still a more economical strategy than technological change. As argued in The Dynamic Society (1996:322–4), there was no deficiency of aggregate demand as Mark Elvin claims in his ‘high-level equilibrium trap’ hypothesis, but rather an absence of strategic demand for a new industrial technology. This is why, much to the exasperation of some (Elvin 1973:225–34), Chinese scientific thought after 1300 became increasingly subjective and little concerned with reality—why ‘China failed to create a modern science of her own accord’. There was just no strategic demand for realistic or applied science as there had been in the Song period. But there did exist a strategic demand for investment in new families, migration, and settlement in new areas, none of which required investment in modern science. In the face of the dynamic-strategy model, the puzzle about Chinese science just evaporates. Second, I am not convinced that the economic and technological changes in Song China were all that different in effect to those in Western Europe at the same time. It was more a matter of degree than kind. During the first 470


great wave, England, a major supplier of raw materials, experienced quite rapid economic growth (0.6 per cent per annum) and technological change in agriculture, while northern Italy and north-west Europe saw the rapid growth of prosperous urban/manufacturing centres. These rural and urban areas were bound together by a network of navigable waterways, which permitted the development of European trade and specialization of productive activity according to comparative advantage. Only the scale of such operations in China was more impressive. Third, these economic and technological changes in China and the West were in response to a similar dynamic—conquest and defence against conquest. This is a fundamentally important point. Technological change during the first great wave was a direct response in both East and West to a strategic demand for large surpluses to pursue war with their neighbours. While the detailed structure of the strategic demand and, hence, the response was different as between East and West, as soon as it disappeared so did the response in both cases. In this vitally important sense China was no more advanced than the West. Any advantage that China may have had in, say, coalfired iron production, was merely a regional response to the same type of strategic demand. It is not an ultimate advantage unless it can be built upon in a systematic way. And this is possible only in a competitive environment when a new dynamic strategy emerges to replace an exhausted one. Western Europe, in this more important sense, always had the advantage over China. It is for this reason that Western Europe generated not only a new technological paradigm but also a new and modern form of science. Finally, we need briefly to address the question: How did China’s unfolding dynamic strategy influence its institutional characteristics between 1000 and 1800? In the early eighth century the Tang government allocated large estates to civil and military officials in return for service to the state. As in Russia during the sixteenth century, this ‘office land’ was granted only for the term of service. Later in the century these officials, like their later Russian counterparts, began building up hereditary holdings through illegal purchases from the peasantry. This led to the emergence of large estates that by the Song dynasty became manors worked by a dependent labour force of serfs. Manorialism became the dominant institution throughout the countryside under the Song because it enabled the extraction of surpluses for military purposes to be maximized. The parallels with Western Europe during the same period and with Russia during the sixteenth and seventeenth centuries, when both pursued a conquest strategy, are instructive. Attempts were made to ensure that serfs did not leave their manor and that if they did leave they were caught and returned. Otherwise, as scarce resources, they might be able to gain a greater share of their productive effort. But there was a major difference in this matter between Song China and the West. In China it was a manorial system 471

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without feudalism, as the scholar-landowner replaced the warriorlandowner. In other words, the defence of empire was in the hands of state officials rather than feudal lords as in Western Europe and, to a lesser extent, Tsarist Russia. And entry into the Chinese ruling elite was through an elaborate examination system. The manorial system in China began changing in the sixteenth century and finally disappeared during the eighteenth century, owing to the gradual demise of the modified conquest strategy. In other words, the rise and fall of the manorial system are a direct consequence of the rise and fall of the Chinese version of the conquest strategy. There are two issues involved with the demise of manorialism. First, after 1300 the external pressure to maximize the extraction of surpluses from the labour force disappeared. And as the manorial lords no longer needed to supervise production on their estates so closely, they shifted from their old manors to the cities where they could oversee their, now, more profitable commercial and manufacturing activities. By the seventeenth century the return on investment in rural land had fallen relative to that in trade, pawnbroking, and urban real estate (Elvin 1973:248). Second, the peasantry was freed from the restriction of militaryinduced serfdom to pursue the traditional strategy of procreation and migration. Much more economic and social freedom was required by the peasants to achieve the social and geographical mobility of family multiplication. The rebellions of the serfs after the sixteenth century merely accelerated this process. As Elvin (ibid.: 257) tells us: ‘The passing of serfdom thus increased the proportion of the female and probably also of the male population available for reproduction.’ The origins of China’s scholarly bureaucracy are to be found in the seventh century when the rigorous examination system, based on the Confucian classics, was introduced. This remarkable system of administration emerged and grew in response to the growing role of the family-multiplication strategy in the Sui-Tang period (Ho 1962). Under the Song the system was further expanded to maximize the surplus that could be extracted from the growing population in order to defend the dynasty against the northern barbarians. Although disrupted by conquest, Chinese bureaucratic government was re-established following the collapse of the Mongol dynasty. Thereafter it was employed by the emperors to take advantage of the revived family-multiplication strategy. This relatively small social elite—numbering no more than 10,000 to 15,000 individuals in the late sixteenth century (Gernet 1982:393)—provided the Emperor with advisors and ministers for the central government in Beijing, together with bureaucrats at the provincial, prefectural, and district levels. At the grassroots level they collected taxes, supervised public works, kept the necessary records, provided justice, and performed state religious ceremonies. The Chinese bureaucracy, therefore, was neither a source of, nor a barrier to, technological change or economic progress as some have claimed (Jones 472


1988), but rather an instrument for the control and exploitation of the dominant dynamic strategy of family multiplication. Responding to the West, 1840–1949 China’s response to the modern technological superiority of the West has been a long and painful process in which it has struggled free from its traditional dynamic strategy This struggle has passed through a number of phases: passive resistance to Western technology and influence in the second half of the nineteenth century; Manchu acceptance of the need for modernization in the first decade of the twentieth century; middle-class revolution that was taken over by regional warlords and, finally in 1928, by the Nationalists under Chiang Kai-shek (Jiang Jieshi); the struggle between the Nationalists, Communists, and the Japanese in the 1930s and 1940s which led to the defeat of the Japanese in 1945 and the Nationalists in 1949; and the rule of the Communists since 1949. With the loss of the First Sino-British (or Opium) War of 1840–42 the Manchu government could no longer ignore the West but, at this stage, it did not have any intention of actively cooperating with it. Once they established that these foreign devils were interested in trade rather than territorial acquisition, the official policy of the Manchu dynasty was one of passive resistance to Western influence. The only tradeable commodity possessed by the British and of interest to the Chinese was opium from India. While the Manchu may have regarded European civilization as inferior to their own (Blunden and Elvin 1983:152), and resented being forced to deal with Europeans on an outwardly equal basis after the destruction of the old ‘tributary system’, this was not why the Chinese government refused to modernize. To modernize, China would need to replace the traditional family-multiplication strategy with the technological strategy, and this would challenge the rent-seeking activities of the Manchu dynasty. The central issue concerned the survival and prosperity of the Chinese ruling elite, not the issues of culture or race. The Nanjing (Nanking) Treaty of 1842 between the Chinese and the British established a limited number of treaty ports in which foreign merchants could operate. But the Chinese drove a hard bargain. Foreigners could not engage in non-mercantile activities, and they were denied access to the Chinese hinterland. China was not to be the source of unlimited profits that the West had hoped for. At least not yet. Even after further wars, which led to new and more invasive treaties, the foreigners were kept on the margins of the Chinese economy. The Treaty of Tianjin (Tientsin) in 1858, for example, substantially increased the number of treaty ports and opened the Yangzi River to foreign shipping, but it prevented foreigners extending their interests beyond trade. Not until the Treaty of Shimonoseki in 1895, after the First Sino-Japanese War, 473

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were foreigners able to establish factories in the treaty ports, and even then the rich natural resources of China were withheld. The modernization of China before 1900 was very limited both in terms of scope and scale. This is reflected in the very slow upward movement of real GDP per capita from about 1870 (Figure 12.10). European technology probably had its greatest influence on China through shipping and shipbuilding which affected the economic environment of coastal regions and river hinterlands (Broeze 1994:131–4). Utilities like gas, piped water, electricity, and the telephone were limited to large cities under foreign influence like Shanghai, and railway construction did not even begin until 1882. While a stock exchange was established in the 1870s, few of the resulting share transactions involved modern manufacturing companies. Indeed, even by the 1890s there were only seventy-four companies in Shanghai using foreign (that is, modern) machinery; and of these only onehalf were involved in manufacturing activities; and only one-quarter were Chinese-owned. There were a few modern state-owned enterprises but these were for defence purposes—such as the Jiangnan Arsenal (1865), the arsenal at Lanzhou (1872), the shipyards at Fuzhou (1866) and Dalian (Port Arthur) (1882), and an engineering factory at Tianjin (1870). Also there were some joint Chinese-foreign enterprises, such as the Kaiping Mining Company (1878), the Imperial Telegraph (1880), the Huasheng textile mill (1891), and the first railway (1882). But these were no more than pilot schemes, they suffered from inadequate financing and poor administration, and they had little impact on the rest of the economy (King 1969:56–61). Essentially this period was marked by a clash of strategies. The foreign interests used their industrial—military power to force an ‘open-door’ policy on China, in order to pursue extraordinary profits through trade and, more optimistically, through the exploitation of China’s abundant natural resources. While there were profits to be made in trade, they were limited by China’s refusal to allow foreigners to gain access to mineral and other natural resources of the interior. Rather than engage in extensive commerce and modernization with the West, thereby releasing dangerous political forces, the Chinese administration continued to pursue its traditional rent-seeking policy of overseeing and exploiting the long-running dynamic strategy of family multiplication. As we have seen, in 1860, when there was finally no further scope for more intensive settlement in the south, the Manchu government opened the Manchurian frontier in the north. But this was merely a short-term expedient. Eventually China had to come to terms with the Western strategy of technological change. The problem was that by the time the old dynasty realized its mistake it was too late both to pursue modernization and to survive as the constitutional monarchies had done in Europe. The Manchu dynasty was finally forced to face reality by the combined disasters of the First Sino-Japanese War of 1894–95 and the Boxer uprisings in 1899 and 1900. Owing to the military success of the Japanese, 474


Figure 12.10 The growth of China, 1800–2000 Source: Drawn from data in Maddison (1995). Notes: GDP is in $US 100m; GDP per capita in $US; population is in 100,000s.

ultra-conservatives at court were able to convince the Empress Dowager Cixi (Tz’u-hsi) to support the Boxers—chauvinistic fanatics—to eliminate all foreign influence from China. The failure of this desperate act of ideological resistance against technology finally convinced the Chinese leaders that the refusal to modernize endangered not only their prosperity but also their very survival. At the same time there was increasing pressure from the gentry and merchant classes in the provinces and the cities for greater political influence over the sources of their wealth. Although the middle-class reform movement, which had begun in 1898, was initially crushed, it re-emerged after the failure of the Boxer Rebellion (Wu 1992:30–1). In a complete reversal of policy, the Empress Dowager decided to adopt the ‘strong points of foreign countries’. It was a reversal that resulted not only in the encouragement of industrialization but also the transformation of Chinese institutions. The civil service examination system, which was the gateway to the Manchu rent-seeking apparatus, was abolished; a chamber of commerce was established to increase the influence of the new strategists; elections were held at the local and provincial levels; and, in 475

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1910, a proto-parliament was established with half the members indirectly elected (Blunden and Elvin 1983:157). These changes gave formal powers at the local and provincial levels to the gentry and the merchants who had long ruled informally and held out the promise of control over the new dynamic strategy imported from Western Europe at the national level. Once given their opportunity, middle-class groups were keen to exercise political control over the sources of their wealth. While these groups were diverse—including merchants, gentry, and officers in the modernized military—they were temporarily united by their anti-Manchu sentiments. In 1911 they joined forces with a number of professional revolutionary organizations and overthrew the old Empire with virtually no bloodshed. What had begun in the cities spread quickly throughout the countryside, owing to the newly established network of telecommunications. A republic was established and, unfortunately for democracy, Yuan Shikai, a retired high Manchu official, was selected as its first president. Almost immediately Yuan, using his newly acquired military power, turned on his middle-class supporters and set out to destroy the democratic institutions that had been established over the preceding decade. By 1914 he had largely achieved his aims. When Yuan died in 1916 the middle classes had lost control of the new dynamic strategy, and the country had been delivered into the hands of regional warlords. But, during the decade that the middle classes exerted control over the new dynamic strategy, the Chinese economy responded dramatically. Between 1895 and 1913, 549 modern industrial and mining establishments were established with Chinese capital, of which 83 per cent were in the private sector. Some of the newer industries—such as tobacco, flour, cement, and power—grew very rapidly, at rates of between 15 and 20 per cent per annum; and even the more established industries such as textiles grew at rates as high as 6.3 per cent per annum (Wu 1992:30). Although on a smaller scale, the government invested in railways, shipping, and telecommunications. Evidence suggests that economic growth was also experienced in the rural sector with the growing concentration of landownership, diversification of economic activity, and increasing real wages (Brandt and Sands 1990). This was the opportunity that foreign interests had been waiting for throughout the previous half-century. Between 1895 and 1913 foreign investors established 136 modern mines and factories and were actively involved in the construction of railways and ships. Just before the beginning of the First World War, foreign ownership of modern productive capital amounted to 80 per cent of the total (ibid.: 32). Foreign ownership and expertise were particularly prominent in transport and communications. Western persistence, therefore, appeared by 1913 to have paid off. China was, at long last, providing the extraordinary profits that had initially attracted Western interest in this part of the world. But it was to be a difficult journey thereafter not only for foreign interests 476


but also for the Chinese new strategists. During the period 1916 to 1928 much of China outside Beijing was dominated by regional warlords who forcibly extracted surpluses from the farming communities and used this to further their own prosperity and to maintain their power by allocating a part of it to their subordinate officers. This was a rent-seeking form of feudalism. One of these warlords, Chiang Kai-shek, leader of the Nationalists, had by 1928 gained control of much of China south of Manchuria, and between 1928 and 1937 he ruled over existing warlords as a military overlord. While he encouraged and protected the middle classes in rural and urban areas—as they were his main source of revenue—he was certainly not their political instrument (Blunden and Elvin 1983:163). Chiang had emerged from the right wing of the Nationalist Party which had been founded in 1891 and later drew inspiration from the Russian Bolsheviks. Once in control of the Nationalists, Chiang turned against and destroyed both the Communists (who had joined the Nationalists) and the left wing of his own organization. Like Yuan Shikai before him, Chiang eliminated much of the organization that had brought him to power. And like Yuan, he was an antistrategist. Despite their rent-seeking objectives, the warlords of the interwar period recognized that their survival and prosperity depended on the ability of China to learn the secrets of the Western Industrial Revolution. And they had to learn quickly because they were faced with serious dangers within (the Communists) and without (the Japanese). While the Nationalists finally succumbed to the combined effects of these forces in 1949, they did achieve considerable industrialization up to the mid-1930s with loans from, and direct investment by, the Western powers. Between 1920 and 1949, modern industry in China as a proportion of total industrial and agricultural output increased from 5 to 17 per cent (Wu 1992:42). Although 78.4 per cent of this development was financed with foreign capital, it was still a substantial achievement with the output of Chinese-owned enterprises increasing from 45 per cent in 1920 to 63 per cent in 1936. More significantly, there was a marked structural shift in manufacturing activity during these years from consumption (a fall from 44 to 31 per cent) to capital goods. Also, during the interwar years 10,275 kilometres of railways were constructed, which was only marginally less than the 10,763 kilometres built between 1895 and 1899. Even in agriculture the proportion of cash crops increased from 17 to 21 per cent over the period. And, finally, real GDP per capita (see Figure 12.10) increased by 0.72 per cent per annum between 1920 and 1936 (although it declined at the rate of 2.95 per cent per annum from 1936 to 1949), compared with only 0.46 per cent per annum between 1887 and 1920 (Wang 1992:63–73). The continued interest of the West in China from the mid-1930s was an outcome of political as well as of material forces, as Japan’s conquest aims in eastern Asia became increasingly apparent. But by ‘political’ forces I mean the determination of the West to defend their own dynamic strategy in this area. In 477

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the 1930s and 1940s, therefore, the interest of Western powers in Chinese economic development became increasingly constructive (King 1969:123). The new antistrategists—the Chinese Communist Party since 1949 The civil war between Communist and Nationalist forces can be seen, in retrospect, as a struggle between competing antistrategists. Neither side had any intention of working for, or representing, the interests of the new technological strategists in China. Both sides intended to exploit the Chinese people by developing economic and political systems that would maximize the surpluses that could be extracted. While it is possible that the Nationalists may have continued to operate through the middle classes that they were exploiting—as they did in Taiwan after their expulsion from the mainland until the middle classes took over the Party—the Communists had no intention of doing so. Like the Bolsheviks in die USSR, Mao Zedong— who became Party leader in 1935—and his supporters intended to purge the middle classes from China and to establish an economic and political system that would prevent their re-emergence. When the People’s Republic was established in 1949, its rulers attempted to destroy all existing social, economic, and political institutions. We are told that their ‘intention was to eliminate every source of power, prestige, influence, information and creativity that was not under the influence of the Communist Party’ (Blunden and Elvin 1983:167). This drive against the ‘counterrevolutionaries’—which included new strategists and potential strategists as well as the old antistrategists (that is, Nationalists)—involved the confiscation of middle-class property, the selective torture and execution of their enemies, the humiliation and ‘remoulding’ of intellectuals, and the establishment of forced-labour camps. What emerged,’ we are told, ‘was fundamentally a twoclass society: members of the apparatus (known as “cadres” or kanpu) and the masses. (Both classes, of course, had numerous subdivisions)’ (ibid.). The masses were divided, in Mao’s thinking, into ‘people’—workers, peasants, soldiers, and ‘good citizens’—and ‘non-people’—ex-landlords, ‘rightists’, ‘reactionaries’, ‘revisionists’, and ‘capitalists’ (Cheng 1982:52). Of course, Mao did not publicly acknowledge the distinction between ‘cadres’ and the ‘masses’. The rent-seeking activities of the antistrategists were disguised by propaganda about both the spartan lifestyle of the rulers and their henchmen and the constant conspiracies perpetrated by the ‘reactionaries’. In terms of the analysis of this book, Mao’s two categories correspond to the new antistrategists, on the one hand, and potential strategists, nonstrategists, and remnants of the old antistrategists, on the other. In order to survive to enjoy the returns from rent-seeking, antistrategists in power have to contend with competition from the most advanced nations. Hence it is necessary for the antistrategists to employ their rent-seeking system to emulate the economic performance generated by nation-states and 478


mega-states run by technological strategists. As the antistrategists have eliminated all former strategists and are determined to prevent any potential strategists taking their place, they are forced to take on the task themselves. As the antistrategists are not responsive to market forces they need to make hard decisions about how they should proceed—decisions that are made by markets of buyers and sellers in strategic societies. As we have seen, in the case of the USSR after the death of Lenin there was a clash among the Bolsheviks as to whether they should proceed by continuing the material incentives of NEP or whether they should push on more rapidly to ‘socialism’. A more striking difference existed between leading members of the Chinese Communist Party. Whereas most Bolsheviks followed Marx’s view that self-interest and materialism were at the centre of historical change, there was a sharp difference of opinion over this issue amongst the Chinese ruling class. Mao took the view that it was possible to convert pre-revolutionary economic man into ‘communist man’, even before the final stage of communism, through re-education and class struggle. The main characteristics of communist man, according to Mao, are self-denial, a determination to overcome natural limitations, and an altruistic desire to work for and subordinate his will to that of the community. He further argued, in contradiction of Marx, that communist man was the most important factor of production and instrument of economic and social change. Hence, Chinese society could be economically transformed by organizing the masses through the exercise of will-power. There was no need for material incentives as communist man is altruistic and hence the people (that is, non-cadre people) could be given the same rations and wages. Only moral incentives were required. Mao’s central ideas were expressed in the slogans: men rather than machines, ideology rather than technology, and politics commands economics (Cheng 1982:29–35). While Mao seemed genuinely to believe in the superiority of ideology over technology, he was far more cynical and cunning than this simplistic philosophy would suggest. He knew that the peasants were not altruistic and that, if oppressive controls were relaxed, self-interest would come to the fore. This is one of the reasons he persisted with the destructive idea of continuous revolution. The dynamic strategists had to be continuously purged in a system that, as we shall see, was not as tightly controlled as the Soviet command system. Of course Mao also used the instrument of continuous revolution in his battle to retain political leadership. Mao’s views, however, were not universally accepted by the ruling members of the Party. Former chairman Liu Shaoqi, Deng Xiaoping, and many others did not accept the arguments that politics always commands economics, that continuous class struggle was necessary or desirable, or that material incentives were not required. It should be realized, however, that they held these views not because they had a greater interest than the 479

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Maoists in the welfare of the Chinese people, or in the economic development of the nation—the 1989 massacre of dissenters in Tiananmen Square on the orders of Deng put paid to that myth—but because they believed it was the only way they would survive to enjoy their rent-seeking monopoly. They were convinced that Mao’s approach would destroy them all. Of course both the Maoists and the conservatives also used their very different approaches to economic development against each other in their continuous struggle to control their antistrategic organization. Because neither group within the Chinese leadership was able to eliminate the other, as Stalin had done in the late 1920s—at least not until after Mao’s death in September 1976—the approach to economic and social organization oscillated between the Soviet command system and the Maoist revolutionary system (see Figure 12.11). In the beginning (1949) the entire Party agreed that it was necessary to purge all middle-class elements from

Figure 12.11 The unstable Chinese ‘command’ system, 1953–2000 Source: Based on data in Cheng (1982).

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Chinese society. As their support base was the poorer peasant class, the Party embarked upon land reform from 1949 to 1952 as a means of manipulating the great mass of the Chinese population so as to eliminate the landlord class. All land held by landlords, and all land leased out by the rich peasants (but not the land they worked themselves), was redistributed to the landless peasants. This involved the majority of the Chinese people in a ‘shared blood-guilt’ (Blunden and Elvin 1983:167). But, as the Party goal was rentseeking, as soon as the landlord class had been eliminated they, like Stalin in 1928, nationalized the land through the process of collectivization between 1951 and 1957. Collectivization not only imposed tight control over the peasantry—and, hence, over most of the population—it also enabled the ruling elite to maximize their extraction of surpluses from agriculture. The alternative of small-scale peasant agriculture would have yielded little surplus to be skimmed off the top by the Party and would have permitted the re-emergence of ‘capitalists’. Nevertheless, there was some debate about this issue. Some leading Party officials, such as Liu Shaoqi and Bo Yipo, were not convinced of the desirability of a Stalinist programme of forced collectivization, at least not at the pace demanded by Mao (Cheng 1982:69– 77). As Mao, unlike Stalin, was unable to eliminate his political opposition, this disagreement began the ‘struggle between the two lines’ that was to dominate Chinese politics over the next twenty-five years. Once the new strategists had been eliminated and the agricultural surpluses secured, the Party needed to consider its longer-term survival in the face of possible internal discontent and of aggression from more advanced foreign nations. The solution appeared obvious. The Soviet command system provided a means not only of controlling society in order to prevent the re-emergence of the new strategists, but also of maximizing the extraction of surpluses from the people. Also it appeared, in the early 1950s at least, that the Soviet command system would generate the type of economic growth that was necessary to compete with the West. All this seemed to be the answer to the antistrategists’ dreams. And as a bonus, the USSR was prepared to provide capital and expertise, both of which were scarce in China, to establish their antistrategic system. But the dream turned into a nightmare. The Soviet command system was never rigorously applied in China even when the rationalists held the reins of power. This was due to the destabilizing influence of Mao, the survival of a strong pragmatic influence in the Party (namely Liu and Deng), to the greater backwardness of the Chinese economy, and to the enormous size of China (with a population greater than that in the USSR by a factor of four). Hence, while China has had a centrally planned system since 1953, it has never been able to either exercise the control or replicate the early performance of the USSR. Because of this, direction in economic matters became the responsibility of provincial and local officials, and a major outcome of this is what has been called ‘cellularization’—the fragmentation 481

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of the national market. Hence the Party under Mao converted a longstanding mega-market into a multitude of regional markets. For our purposes the oscillating story of economic control summarized in Figure 12.11 can be briefly told. It is a story of delays, ineffectiveness, incompetent and self-absorbed leadership, and a callous waste of human and physical resources. The First Five-Year Plan (1953–1957)—modelled on the Soviet approach with its emphasis on heavy industry at the expense of agriculture and consumer industries—was drafted in 1952 but was not finalized until 1955, halfway through the planned period. Not surprisingly, economic performance in real terms during the plan period was only modest, with grain output increasing by 18.6 per cent, industrial output by 108.3 per cent, foreign trade by 57.9 per cent, and GDP by 39.8 per cent (Cheng 1982:314). While the Second Five-Year Plan (1958–1962) began more auspiciously— with targets approved by the Party Congress as early as September 1956—it ended in utter chaos after it was overridden in its initial year by Mao’s Great Leap Forward. This amounted to a rejection of the Soviet’s unbalancedgrowth approach in favour of a balanced attack on both agriculture and industry simultaneously, called ‘walking on two legs’. Initially a sensible proposal made by Chinese economists and planners sensitive to their country’s relative backwardness, it degenerated under Mao’s influence into an irrational leap of faith, involving an attempt to substitute abundant unskilled labour for scarce capital and technological expertise, as in the notorious scheme for a million backyard iron and steel furnaces. It was a disaster of monumental proportions that reversed the modest successes of the first plan. While industrial output rose by a mere 11 per cent, grain output fell by 5.8 per cent, foreign trade fell by 10 per cent, and GDP declined by 5.3 per cent. It did not help that in August 1960 the USSR withdrew all its technicians and suspended all aid to China. With the failure of the Great Leap Forward officially recognized in 1961, rationalists such as liu and Deng came to the fore, and between 1961 and 1965 they introduced a more moderate programme based on efficiency and profit rather than class struggle and revolution. It was a programme similar to that introduced by Khruschev after the death of Stalin. Once the economy had been stabilized, the Third Five-Year Plan was introduced in 1966. But only to be totally undermined in its first year by Mao’s Cultural Revolution that, driven by the infamous Red Guards, raged through Chinese society between 1966 and 1970 and continued in less destructive form to 1976. The Cultural Revolution was Mao’s desperate attempt to destroy the growing power of the rationalists in the Party. It began as an attack on ‘reactionary’ intellectuals who had spoken against Mao’s concept of societal organization, but was quickly redirected to destroy the power of Mao’s enemies in the Party organization. It was used to purge more than two-thirds of the Central Committee, including the central figures of liu Shaoqi, Deng 482


Xiaoping, Peng Zhen, and Luo Ruiqing. Also, some 86 per cent of the provincial Party committees met the same fate (Cheng 1982:42–4). In the effort to regain power, therefore, Mao was prepared to dismantle his own Party machine. Nothing was more important to this autocrat than his own personal power. He is said to have modelled himself on the early Chinese emperors, just as Stalin saw Ivan the Terrible as his mentor. Both men were megalomaniacs—archetypal antistrategists. During the years of the Cultural Revolution material incentives were attacked as ‘economism’; mass participation in industrial management was reintroduced; small-scale enterprise using simple techniques was encouraged, particularly in rural areas; young ‘intellectuals’ and urban workers were directed to settle in rural areas; and the ‘closed-door’ policy of Chinese self-sufficiency was adopted. Not surprisingly the effect of these irrational policies was to put a brake on agricultural and industrial development (ibid.: 314). Once again Mao and his supporters had gone in for political overkill. The chaos and uncertainty produced by the Cultural Revolution, however, led to the growing power of the moderate Zhou Enlai who, although a former supporter of Mao, rehabilitated Deng and Liu in 1973 to help reconstruct the Party and to revive the economy at a time of growing tension with the USSR. In this way ‘economism’ was reintroduced into China. The ageing Mao, however, had no intention of seeing his enemies triumph. Not well enough to take the lead himself, Mao gave his still considerable support and prestige to the so-called Gang of Four that included his wife Jiang Qing. Owing to this final act of egoism by Mao, the politics of China between 1973 and 1976 were dominated by the ‘struggle between the two lines’. On winning this struggle the Gang of Four were able to expel Deng and to commit China once again to class struggle and irrationalism, with the usual decline in economic performance. Only the death of Mao in September 1976 enabled the re-emergence of rationality and the second coming of Deng in July 1977. This was followed by the expulsion of the ultra-left wing of the Party and the adoption of the ‘four modernizations’ programme. Sanity returned to the Party, and Mao was proved wrong: it is economics that commands politics, not the reverse. Since 1979 China has embarked upon a programme of major economic reform. This has included: the introduction of private ownership of property together with market relationships in many sectors and regions; decentralization of decision-making so that local authorities can directly deal with foreign trade, foreign investment, and capital construction; and the encouragement of a new international openness. From the late 1970s, therefore, China began moving to a socialist market economy along the lines of the former Yugoslavia. Initially this new programme involved a steep increase in agricultural 483

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procurement prices, the decollectivization of agriculture, and a shift to the household responsibility system (Garnaut and Ma 1994:1). The outcome was a very rapid increase in agricultural production by 10 per cent per annum between 1978 and 1984, and a rapid expansion of manufacturing and services in rural centres. Because of this impressive initial success, similar reforms were extended to the industrial and urban centres in 1985. But the results were less spectacular owing to the emergence of private monopolies, high rates of inflation, and bottlenecks in factor markets which were not liberated to the same degree as commodity markets (Chen 1992:1–3). Nevertheless, output per worker has increased at the relatively high rate of 6.3 per cent per annum throughout the entire period 1979 to 1994 (Borensztein and Ostry 1996:225). And the reforms have been responsible for rebuilding the mega-market that was earlier destroyed by the ‘cellularization’ created by the Party’s failure fully to apply the Soviet command system, relying instead on direction from the provincial and local levels. A major problem faced by the Chinese government in the 1980s was the absence of effective macroeconomic policy instruments, which led to a succession of boom-bust cycles. But, as Ross Garnaut and Guonan Ma (1994) argue, the closer integration of the Chinese economy into the international market has assisted in the attempt to achieve economic stability by transferring the problem to the external accounts, thereby providing more time to adjust aggregate demand. By the mid-1990s the Chinese central bank demonstrated that it was able to curb inflation without provoking a crash (Economist, 17–23 August 1996:16). Despite some continuing problems, the move towards a freely operating national market, linked to the international economy, has continued and, while the projected growth rate of 8–9 per cent in the Ninth Five-Year Plan for 1996–2000 is highly ambitious, it is expected that China will continue to advance rapidly (Borensztein and Ostry 1996:227). China has effectively resumed the stateinspired process of modernization that flourished briefly in the decade before the First World War. It is only a matter of time, therefore, before the emerging new strategists wrest political control of their sources of wealth from the remaining antistrategists. The contrast between the USSR after 1989 and China after 1978 is stark: the Gorbachev ‘reforms’ led to the complete collapse of the Soviet economic and political system, while the Deng reforms are gradually transforming China into a socialist market economy. Observers are puzzled by the USSR’s demonstrated failure and China’s apparent success. The answer is reflected inversely in the relative success of these two societies in adopting the antistrategic command system. Paradoxically, success in adopting the command system ensured failure in introducing economic reforms. As we have seen in the case of the USSR, once the antistrategic command system had been fully introduced it could not be reformed, only completely abandoned. 484


China never succeeded in adopting the command system, even during those brief periods in the 1950s when it committed itself to doing so. While the disadvantages of this failure were quite obvious at the time, it endowed an unexpected and important longrun advantage: the possibility of reforming the Chinese economic system by central decree—just as the Manchu dynasty was able to do after the Boxer Rebellion—without it collapsing around them. Hence, since 1979 it has been possible to reform the Chinese communist system from within rather than abandoning it entirely as the Soviets were forced to do and starting again from the beginning. The advantage for China is that it is not faced with the probability that everything will end in chaos, leading to the disintegration of the existing Chinese mega-state into a large number of smaller nation-states, and possibly to the acquisition of Chinese territory by its neighbours. But this advantage can only accrue to China, not to the antistrategists. With the development of the market system the old enemy of the Communists—the new strategists—has emerged and will eventually take control of the political system. As they have done throughout world history. In this event the Chinese Communist Party will lose political power and may even be totally obliterated. The question then becomes: Why did the Party under Deng deliberately introduce reforms that will lead inevitably to its loss of power? The answer is that it was the lesser of two evils. Not to introduce the post-1978 reforms, after the chaos caused by the Cultural Revolution and the Gang of Four, probably would have led to the economic collapse of China, to the total discrediting of the Party, and to a new political revolution. But, by reviving the economy, rebuilding the Party, and isolating political power from economic power, Deng and his supporters may have thought they could survive. In any case, it would almost certainly buy the Party’s old guard sufficient time to die in office. Some Western political scientists believe that the Chinese Communist Party will succeed where the Soviet Communist Party failed. We are told that ‘there are sound reasons for believing that modernization may not inevitably lead to capitalism and democracy in China’ (Goodman 1994: xii). This evaluation, however, flies in the face of the entire course of history. The emerging new strategists will continue to challenge the Party’s monopoly of power as they did at Tiananmen Square in 1989, and, ultimately, they will be successful. No group of antistrategists in any society throughout history has been able to prevent the emerging new strategists from ultimately taking political control of their sources of wealth. And when they do so the antistrategists are always swept away. The future of the Chinese mega-state The dynamic-strategy model employed in this book suggests that ‘capitalism’—rather than a socialist market system—and democracy will 485

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emerge in China as they have emerged in all technological societies. And this will happen sooner rather than later. As the economic strength of the new strategists increases there will be growing public demonstrations of their anger at being prevented from exerting political influence over the sources of their wealth. While the old guard will continue their attempt forcibly to suppress any challenge to their rent-seeking monopoly, the next generation is more likely to realize that in the longer run the net benefits of joining the strategists will be greater than those of fighting them. This could happen soon after the death of Deng Xiaoping. For the reasons discussed above, it is highly likely that this transfer of strategic control will be effected without a collapse of the Chinese megastate despite the existence of forces for fragmentation. But it is possible that a degree of regionalism may develop once the Communist Party is swept away, particularly in the early years, and the structure of the Chinese megastate may come to resemble that of the European Union. This does not mean that there will be no social conflict and violence, just that when the final push comes, the support for the antistrategists will fall away quickly as it did in the old USSR. If a relatively orderly transfer of power from the antistrategists to the new strategists can be achieved, total collapse will be avoided. And under the direction of the technological strategists the Chinese market economy would continue to develop rapidly as it completes its technological catch-up phase and reconstructs its mega-market. In all probability, by the middle of the twenty-first century China will have joined the ranks of the mega-states of the USA, Europe, and Russia. China is unlikely to become the global destabilizing force that many casual observers fear (Economist, 17– 23 August 1996). CONCLUSIONS The fifth phase of the industrial technological paradigm has seen the emergence of a number of highly competitive mega-states. This is a response to the global unfolding of the technological strategy. In the late nineteenth century the USA, the world’s first mega-state, emerged to challenge the dominance of nation-states in Western Europe; in the middle decades of the twentieth century the USSR, the world’s second mega-state, rose up to challenge America’s lead; and since the Second World War the nation-states of Western Europe have embarked on an extensive process of negotiation to transform themselves into the world’s third mega-state to compete more effectively with the USSR and the USA. Since then we have seen the fall of the USSR and the growing presence of China. In the future we can expect the reemergence of Russia, this time as a market-based mega-state, and of the appearance in this company of China, also reshaped by market forces. In the twenty-first century these four giants will generate the competition required to drive the industrial technology strategy forward towards the next 486


paradigm shift. Other trade and currency ‘blocks’—ASEAN, South Asia, South America, and Africa (SADC)—will emerge to compete with them, and they may become the basis for even larger unions arising from associations such as NAFTA, if its early problems can be resolved (IPS 1996). Despite this gathering of giants, there will always be a role for the smaller innovative nation-state that can see the chance to compete with the mega-states by employing new technologies. But while these smaller states may temporarily take the technological lead—like England during the Industrial Revolution and Japan during the 1970s and 1980s—they can never hope to be more economically and, hence, politically powerful than the mega-states.

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A prudent man must recognize how appalling it will be when all the wealth in this world stands waste—as even now randomly throughout this middle-earth walls are standing, wind-blown, time-covered, the ramparts storm-beaten. (‘The Wanderer’ (early Anglo-Saxon poem) trans. S.A.J.Bradley) The quest of all scientific enquiry, no matter how indirectly, is to gain some insight about the future. In the case of human society it is difficult enough to understand what has happened, let alone to make predictions about what will happen. But if we are to make the correct decisions in the future on the big issues, then we must be able to make predictions. The problem is that, if we fail to understand the past, or neglect even to consult it seriously, then the future will always remain a mystery. A closed door. Only by employing the forces underlying the dynamics of human society can we hope to open that door a little and catch a glimpse of what lies beyond. My task in this chapter is to suggest what new forms human society might adopt and what policies might be followed in the future. As demonstrated above, this can be done only by predicting how the current technological strategy will unfold and what any future technological paradigm shifts might bring. While we can make some sensible comments about the former, little is known about the latter. We share the same difficulty that observers in the early eighteenth century faced when looking towards the future of an unknown Industrial Revolution—the third paradigm shift. Then as now there were signs to be read, but they were and are easily misinterpreted. Possibly we are on firmer ground in making judgements about what types of institutions would be entirely unsuitable. Just as Friedrich Hayek was able to suggest in the 1920s that a command system was an entirely unsuitable, as well as an undesirable, vehicle for the technological strategy. A VEHICLE FOR THE NEW MILLENNIUM In Chapters 10 to 12 I have demonstrated how the unfolding of the 488

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technological strategy is leading to a transformation of the vehicle of the Dynamic Society from the nation-state to the mega-state. Only the megastate possesses the necessary control over markets, natural and human resources, and economic and political power to compete effectively in the late-industrial technological epoch. Hence, the twenty-first century will witness battles between giants: struggles for survival and prosperity between the mega-states of the USA, Europe, Russia, and China. While nation-states like Japan will be able to achieve high living standards, they will not possess sufficient economic and political power to compete in the longer term with the mega-states. This hard economic reality, which has been overlooked by those economic soothsayers (Thurow 1992) who do not possess a dynamic model of the transformation of human civilization, will lead to the formation of trading and currency groups that may eventually form new mega-states. New mega-states based on the remaining regions of Southeast Asia-Australia, South America, India and, finally, Africa. By the end of the twenty-first century the world will consist of a large number of highly competitive mega-states. This conclusion cuts across a number of other suggestions about the future organization of human society, ranging from cybernetic individualism to networks of transnational corporations. As these suggestions are based not on a dynamic analysis of human society but either on static neoclassical theory or on the fanciful extrapolation of ephemeral developments that capture their author’s interest, they are quickly dispensed with. First, it has been suggested that, owing to the rapid growth of microelectronics, the future will be created by the interaction of a large number of individuals working through the Internet rather than through more traditional societal organizations. What this suggestion overlooks is that the struggle for wealth and power prevents the emergence of this kind of individualism. Competition between individuals leads to the formation of organizations and institutions for mutual protection and mutual aggrandizement. These organizations have varied from epoch to epoch: in the palaeolithic era it was the tribe; in the neolithic era the kingdom and empire; and in the industrial era the nation-state and mega-state. The Internet is merely a means of communication, no different in function from sign language, smoke signals, spoken language, the printed word, or telecommunications. Like other institutions, these forms of communication are a response to changing strategic demand. Second, some neoclassical economists have made a similar, if less extreme, claim. Paul Krugman, for example, argues that countries do not compete with each other: that unlike corporations, ‘countries…do not go out of business’ (1996:6). Clearly Krugman, like many bright young neo-classical economists, has never seriously consulted a history book, even one about his own country in the mid-nineteenth century. Human history, as we have seen both in The Dynamic Society and Part II above, is all about the rise and fall 489

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of nations, empires, and civilizations that were, and are, involved in a deadly competition with their neighbours in order to survive and prosper. Going out of business has always been an ever-present danger that societies have desperately attempted to avoid. Before the Industrial Revolution economic growth was simply a zero-sum game, and even since then nations have competed intensely with each other to gain command over strategic resources such as oil (as recently as the 1991 Gulf War), to widen markets, and to acquire or control strategic territory. Even in the modern era there have been casualties in both the developed and underdeveloped worlds— countries have definitely gone out of business. We have seen the maps of Europe, Asia, and Africa redrawn repeatedly in the nineteenth and twentieth centuries because of competition between Western countries, we have seen the collapse of the USSR in the early 1990s owing to cold-war competition, and we have even seen the collapse of the Confederacy following its conflict with the North over the North American dynamic strategy. Krugman is a prisoner of neoclassical economics, which views the interaction between nations entirely through the distorting lens of static trade theory. Finally, despite claims to the contrary, transnational corporations will never become the dominant form of societal organization, as they do not possess the economic and military power of mega-states or advanced nationstates. They are merely agents of the mega-states. The role that they play is similar to the hunting or raiding band in tribal society, the advance guard of the conquest society, or the joint-stock company of the commerce society. They are, therefore, characteristic instruments of different strategic societies. If the vehicle of the Dynamic Society is in transition, from nation-state to mega-state, will the next transition be from mega-state to global-state? Some social evolutionists may answer in the affirmative. No doubt some would argue that this further step in the ‘evolution’ of societal institutions is not only logical but also desirable owing to greater efficiency and to the elimination of war between competing societies. This, however, is the evolutionary fallacy. The rise of a global-state is neither logical nor desirable. Indeed, if it could be engineered, a global-state would be an unmitigated disaster for human society. The shift from mega-state to global-state may appear logical to an evolutionist, but not to a stratologist. As the evolutionist believes that institutions are driven by their own evolutionary mechanism, such as the drive to greater efficiency, he or she will be tempted to see the sequence of nation-state→mega-state→global-state as highly probable. The stratologist, however, knows that institutional change is only a secondary dynamic mechanism that derives its energy and direction from the unfolding dynamic strategy. Hence, the only logical connection for the stratologist is between strategic demand and institutional form. And, as will be demonstrated, there can be no strategic demand for the global-state. 490

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The stratologist also rejects the notion that a shift from the mega-state to the global-state is desirable. My dynamic-strategy model suggests that the rise of the global-state would lead not to greater efficiency, peace, and happiness, but to the very reverse. In the unlikely event that the global-state could be constructed, the intense external competition that has been responsible for the emergence and progress of the technological strategy would be eliminated. With the removal of this external pressure, the incentive to innovate would evaporate, ruling elites would substitute rentseeking for profit-seeking, and the global-state would stagnate. This would not, however, lead to the stationary state, because the increasingly frustrated strategists would attempt to remove the ruling antistrategists by turning to regional warlords for assistance. The rise of the global-state, therefore, would lead inevitably to stagnation followed by a return to the ancient dynamic strategy of war and conquest. What evidence do we have to refute or establish this prediction from the dynamic-strategy model? Of the above case-studies China, Russia, and Japan appear relevant. As we saw in Chapter 12, scholars have long been puzzled by the failure of China to build on the technological achievements of the Song dynasty (AD 960–1279) to produce an industrial revolution some 500 years before it finally emerged in Western Europe. There are two issues here. The first is that an industrial revolution was not possible in the late thirteenth century because, as the economic possibilities of the neolithic technological paradigm had not been exhausted, the economic benefit—cost calculus favoured an alternative dynamic strategy (namely, that of family multiplication). Second, the Song dynasty only pursued technological change in order to generate the agricultural surplus required to finance defence against the Manchurians and Mongols, and to gain an edge in military techniques. Once this atypically intense external pressure was removed in 1279, the strategic demand for technological change evaporated and the Chinese focused solely on their traditional family-multiplication strategy that had been pursued throughout the Song period. The connection between external pressure and technological change is quite clear. But why did war and conquest not break out between regional warlords as I have suggested it would for any future global-state? The answer is that China possessed a strategic option that will not be available to any future global-state—the scope to settle an expanding population on adjoining land. This possibility provided the middle classes and peasantry with the opportunity to take up new land, and enabled the ruling elite to extend their rent-seeking to an even larger population. This was a more economical alternative to continuous regional warfare. In the twenty-first century and beyond there will be no opportunity to expand the frontier of settlement. The only alternative to technological change will be war and conquest. The two other test cases, Russia and Japan, can be dealt with only briefly here. Both support rather than refute the model’s conclusions. Russian ruling 491

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elites during the first half of the nineteenth century were able to achieve their materialistic objectives by imperial expansion at a time when Western Europe was pursuing the technological strategy. They were able to do so because of the limited resistance—the limited competition—they experienced in response to their aggressive territorial advances. This ended in 1861 when the industrialized nations of Britain and France defeated Russia in the Crimea. With the sudden increase in external competition, the Russian ruling elite embarked in the 1860s on a state-led process of industrialization. The adoption of the technological strategy was a direct response to the emergence of fierce external competition. This was true also in the case of Japan from about the same time (1868). This is sufficient to establish my argument: without intense external competition technological change will not flourish because ruling elites find it more economical to indulge in rent-seeking. And rent-seeking will give way to war and conquest. The ease with which individuals slip from profit-seeking to rent-seeking in modern society is well known. It can be seen in those Western nation-states (like Britain examined in Chapter 10) in the mid-twentieth century that nationalized large parts of their economies and introduced the welfare state. The subsequent attempt to dismantle these structures from the late 1970s was a response to the inefficiencies that arise from excessive rent-seeking. It can be seen even in the most advanced countries in the 1990s—in Japan, Europe, America, and Australia—which heavily subsidize their agricultural sectors. It can be seen especially in Third World countries which protect uneconomical manufacturing and agricultural industries. And it can be seen everywhere in command economies such as the former USSR, Eastern Europe, and China. In all these cases even the partial removal of external competition through artificial means encourages producers and workers to turn from profit-seeking to rent-seeking. Without any external competition, the global-state would turn even further from the pursuit of efficiency towards the easy gains of regulation and, ultimately, of physical force. THE COMING OF THE FIFTH PARADIGM The intense competition that exists between nation-states and mega-states in the late twentieth century will undoubtedly continue into the next century as further mega-states—or at least trade and currency blocks—emerge to replace the remaining nation-states. This competition will lead to an increasing exhaustion of the present industrial technological paradigm as its potential is fully explored in the timeless struggle to survive and prosper. And if anyone has any doubts about the importance of survival, he or she should reflect upon the fate of the former USSR in its life and death struggle with the West. Once the present paradigm has been exhausted, under conditions of intense external competition, the fourth technological paradigm shift will begin and ultimately usher in the fifth paradigm. As suggested in The Dynamic Society 492

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(1996:242), owing to the accelerating pace of these paradigm shifts throughout human history, we could expect the coming ‘Solar’ Revolution to be accomplished within a generation or so, compared with the 100 years for the Industrial Revolution (from 1760), the 4,000 years for the Neolithic Revolution (from 10,600 years ago), and the hundreds of thousands of years for the Palaeolithic Revolution (from 1.6 million years ago). There is little point speculating about what the fifth paradigm might bring. We have no way of knowing how it will unfold; certainly not in its technological details. The only issue on which it does appear to be sensible to speculate is energy use, and here I expand on what was said in The Dynamic Society. The first revolution (hunting) saw the extension of human energy with the use of more efficient tools; the second revolution (agriculture) saw the partial substitution of animal, water, and wind energy for human energy; and the third revolution (industry) saw the substitution of thermal energy based on fossil fuels for both human and animal energy. It appears highly likely that the fourth revolution (‘solar’) will involve the substitution of solar energy for fossil-fuel energy. This will resolve, for all practical purposes, the problem that increasing entropy (the result of depletion of natural resources and the generation of wastes)—based on the second law of thermodynamics—might ultimately pose for the dynamics of human society. During the fifth paradigm, physical constraints upon economic growth will be limited only by the flow of solar energy that will, somehow, be directly harnessed. What is worth speculating on are the signs of approaching paradigmatic exhaustion. This may assist us to answer a question of major importance: When will the fifth paradigm come? In Chapter 10 I drew attention to signs in the mid-eighteenth century of the growing exhaustion of the neolithic paradigm. In the case of Britain, the first nation-state to undergo the Industrial Revolution, these signs included the slow-down and stagnation of growth rates from the mid-seventeenth century; the slow-down in technological change after 1500 until by the mid-seventeenth century it amounted to little more than technological fine-tuning; the exhaustion of organic materials and fuels, leading to a marked depletion of forests, and peat bogs, from the seventeenth century; and the growing pressure of population on available land which limited not only food for humans, but also fodder for horses that provided the major source of power and transport, and the supply of natural chemicals. No doubt had environmentalists existed in the mid-eighteenth century they would have told the world it had an ecological crisis on its hands. They may even have claimed that this crisis was responsible for producing a fall in temperatures—in Britain, of between 1.3 to 2.5 degrees Celsius—from 1550 to 1800, an event that has come to be known as the ‘little ice age’ (Grove 1988:380–1). How would they have explained it? We now know that the little ice age’ was caused by solar variability (ibid.: 378), but they, more naively, might have suggested an analogy with the disrobing of the human 493

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body! On this issue, it is curious that the massive destruction of forests in Europe, China, and parts of the New World in the sixteenth to eighteenth centuries for agriculture and domestic and industrial activities led to a reduction rather than an increase in temperatures. My point is that these fictional environmentalists would have mistaken the signs of an approaching technological paradigm shift for the signs of an approaching ecological crisis. As it turned out, the third revolution released pressure on organic sources by developing a technology that could exploit underutilized inorganic resources. In a similar way we should be able to identify the signs of a growing exhaustion of the present technological paradigm as it progresses. These signs will include: • a slow-down and stagnation of longrun rates of growth of real GDP per capita and real GCI per household; • a slow-down in technological change; • an exhaustion of inorganic fuels and materials such as coal, oil, natural gas, iron ore, copper, aluminium, and other minerals, which will be reflected in rising real prices of these commodities and in the shift to alternative sources of energy such as nuclear and hydro-electric power; • and increasing environmental damage—such as depletion of natural forests and wetlands, and the degradation of natural resources (such as soil erosion, water pollution, and salination)—owing to excessive use. Of course some of the environmental damage could be due to inefficient markets for environmental services, which could be eliminated by including environmental values routinely in our economic calculus. Some of these signs of paradigmatic exhaustion may be beginning to appear. We are all aware of the evidence of environmental damage, not all of which seems to be due to inefficient markets for environmental services. The other indicators are less clear. First, although the growth rates of real GDP per capita have fallen from the levels that existed during the ‘golden age’ of the 1950s and 1960s, they have merely returned to what might be considered more normal levels. There is no reason at this stage to believe that there has been any decline in longrun rates of growth. Second, there is some suggestion of a slow-down in technological change in the world’s greatest mega-state, the USA. Between 1973 and 1992 the rate of growth of labour productivity was lower, at 1.1 per cent per annum, than it has ever been in our modern epoch, whether 2.5 to 2.7 per cent per annum between 1913 and 1973, or even 1.9 per cent per annum between 1870 and 1913 (Maddison 1995:79). Also, the rate of growth of the supply of technological ideas—the accumulated stock of patents—began to decline from the mid-1970s and stagnated during the 1980s (Andersen 1996: graphs 1–4). This might involve a short-term slow-down—some (David 1991) have argued that this has been due to a massive attempt by the USA to digest the introduction of computers 494

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which, once digested, will lead to a rapid acceleration of factor productivity—but it could be the beginning of a longer-term trend to stagnation. We will need to monitor these signs carefully over the next decade. Third, the global prices of minerals, presented in Figure 13.1, show only a few signs of resource exhaustion. Prices of metals such as copper, aluminium, and iron ore increased between 1950 and 1994 at only 17 to 48 per cent of the increase in the consumer price indexes. In other words, metal prices declined in real terms, which does not suggest a growing scarcity. On the other hand, the longrun prices of coal and oil increased at about the same rate over this period as consumer prices, but more rapidly during the 1970s and 1980s owing to the oil crisis (Figure 13.2). Hence, the only early signs of a possible paradigmatic exhaustion are to be found in the prices of fossil fuels. But this is significant, because during the mid-eighteenth century rising resource prices can be detected most unambiguously in the prices of organic fuels. Also, the relative shift in energy use away from fossil fuels to alternative sources such as nuclear and hydro-electric power, in anticipation

Figure 13.1 World mineral prices, 1955–1995 Source: Coal Manual (1996).

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of price rises after the oil crisis of 1973 and 1979–80, probably prevented the prices of fossil fuels falling in real terms over the longer run (see Figure 13.2). Fourth, there has been a significant change in energy sources employed by the original (European) OECD countries over the past half-century. Figure 13.3 shows that the most rapid growth in energy has come from nuclear sources, rising from 0.1 to 23.8 per cent of the total between 1960 and 1993 (a 183-fold increase). By contrast fossil and organic fuels as a whole have grown slowly in absolute terms, and even declined in relative terms from 94.8 to 71.2 per cent over the same period (a 24.9 per cent decline). Within the fossil-fuel group there have been significant structural changes: the old industrial fuel, coal, has declined dramatically from 84.1 to 18.2 per cent of the total, while the second-generation fossil fuels, oil and natural gas, have increased from negligible levels to 28.1 and 20.4 per cent respectively in 1993. Interestingly, the hydro-geothermal-solar group, which has the least impact on atmospheric pollution, has remained relatively stable at 5 to 7 per cent of total energy use. And the recent energy-use pattern—with nuclear power, oil, and natural gas being of approximately equal importance—was fairly stable between 1986 and 1993. All this suggests that fossil fuels, 496

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particularly coal, are beginning to enter the cycle of exhaustion and are being replaced by the nuclear alternative, which is preventing the real price of fossil fuels from rising. But over the next generation it is expected that solar and wind energy will grow more rapidly than all other sources using existing technologies or technologies already in the pipe-line (such as solar cells, solar engines, and solar hydrogen production). By 2025 it is anticipated that solar energy will provide 60 per cent of all electricity and 40 per cent of all fuel, while wind power may provide 10 to 20 per cent of all electricity (Hoagland 1996:115,118). And by 2050 to 3000, when fossil fuels will be largely exhausted, it is likely that an unforseeable revolution in the generation of solar and solar-imitation (fusion) energy will have been engineered (Furth 1996). Quite clearly we will need to monitor these signs closely during the next decade as new mega-states like China emerge and dramatically increase their consumption of organic and inorganic materials. This will probably see the real prices of fossil fuels, and some minerals, rise quite substantially despite the substitution process. It is essential that we do not confuse the signs of the

Figure 13.2 World energy prices, 1955–1995 Source: Coal Manual (1996).

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approaching fifth paradigm with the signs of a possible ecological crisis. But that is not to say that we should be complacent about the growing deterioration of our global environment. POLICY AND THE FIFTH PARADIGM In the light of the dynamic-strategy model employed in both The Dynamic Society and this book, what longrun policies should developed societies adopt? I will consider policy in relation to three key issues that could complicate, or even compromise, the future technological revolution. The first of these concerns the failure of governments to formulate policies for longrun dynamics, the second the nuclear defence of the technological strategy, and the third the impact of economic expansion (if not growth) on the ecology. Growth or price stability? A most disturbing feature of economic policy among OECD countries during the 1980s and 1990s has been the focus on price stability at the 498

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expense of high growth and low unemployment. There is an almost fanatical belief among policy-makers, economic advisers, and economic journalists (for example, Economist, 21–27 September 1996:16) that the best of all worlds can be achieved only if the rate of inflation is reduced to very low levels, preferably zero. This is sometimes accompanied by an equally obsessive desire to achieve balance on the current account. I say ‘fanatical belief’ because there is no good theoretical or empirical reason for this singleminded policy objective, and because the outcome has been the adoption of deflationary monetary and fiscal policies—involving high interest rates and budgetary surpluses—that have ensured rates of unemployment considerably higher than the longrun rate. Every time the economy gets to its feet policy-makers kick its legs away. This approach has undermined the more positive policies of making the economy more open and competitive and making markets more flexible (by freeing the exchange rate and removing restrictive labour practices). In other words, economic policy throughout the Western world since the

Figure 13.3 European energy use, 1960–1993 Source: Drawn from data in OECD, Energy Balances of OECD Countries (various years). Note: Mtoe=millions of metric tons of oil equivalent.

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early 1980s has focused on shortrun balance rather than on longrun dynamics. This has been reinforced in Europe by the attempt to achieve stability of prices and budgetary finances as a prelude to monetary union (EMU). The intriguing question is: Why have Western governments effectively turned their backs on the fruits of economic growth that have been pursued by human society for millennia? There are a number of possible reasons. In the first place, it appears to have been a nervous response to the stagflation of the second half of the 1970s, which economists were unable to explain. When in doubt resort to policies aimed at stability! It is certainly less risky than advocating a leap forward into economic growth and structural change, particularly if you possess no useful longrun dynamic models. The adoption of this policy throughout the OECD is an interesting example of the model of imitation discussed in Chapter 2. In order to economize on the scarce resource of intelligence, there is always a temptation, particularly in uncertain circumstances, to adopt the procedures employed by ‘successful’ governments elsewhere. This was reinforced by competition between the representatives of member nations in the OECD: the greatest status and the most respect are 500

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given to the officers and leaders of those countries that conform most closely to the cannons of the ‘stability cult’. In the second place, the short periods of office held by governments and, within these governments, by treasurers always makes the pursuit of longrun objectives difficult, particularly when economic predictions are almost always wrong. Third, key government ministers with no economic training appear to feel more comfortable balancing accounts because it is less risky than taking a leading role in directing the economy on a longrun path. It is like lavishing time and money on the engine of a well-tuned automobile but never throwing it into gear. With this type of policy you cannot go far wrong. Or right! Finally, the economic bureaucracies, which can take a longer-term perspective than governments and which have considerable expertise in technical economics, have ignored the issue of longrun dynamics. Why? Largely because deductive economics is all about equilibrium solutions and shortrun marginal adjustments. Yet there is more to it than this. While economists are accustomed to thinking in terms of shortrun equilibria, there is nothing in their models to suggest that price stability and internal and external balance are the optimal economic policy (Pitchford 1995). The fascinating revelation of detailed studies of government policy-making is that technical economists participating in this process behind closed doors inevitably trade their theory for intuition (Edwards 1996). In this policymaking process, experienced non-economist ministers and economist bureaucrats are on an equal footing. They just back their intuition against each other. In the game of pulling the ‘levers and pulleys’ of the economy machine, balance and stability appear to be the triumphant intuition. The costs of this contemporary approach to economic policy are great. They can be measured in terms of the high levels of unemployment (with rates commonly in double figures in OECD countries during much of the 1980s and 1990s), high levels of unused productive capacity and income foregone as a result of slower economic growth. While this is well known, it has had little effect in modifying myopic economic policy. What has attracted less attention is the longrun damage that has been inflicted on strategic confidence and on institutions that facilitate societal dynamics. As we have seen in this book, strategic confidence is the force that binds society together by generating the conditions in which trust and cooperation can flourish. It is the product of a viable technological strategy. If the dynamic strategy is disrupted, strategic confidence will diminish and society will become less cohesive. The extended regime of deflationary policies is also beginning to take its toll on cultural organization, particularly those for higher learning and the arts. The political rationale for the decimation of these organizations is that the political fall-out will be less than that generated by attacks on the better organized rent-seekers in the heavily subsidized rural sector. But, while this focus may be politically 501

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expedient in the shortrun, it will have a major unfavourable impact in the longer term. As shown in this book, cultural organizations embody the spirit, or vital principle, of the technological strategy. To diminish these organizations in the longer term will negatively affect the dynamics of Western civilization by reducing the generation and distribution of ideas on which the modern technological strategy feeds. In some countries, particularly Britain, the Netherlands, France, Germany, Canada, and Australia, there is evidence that longrun damage has already been inflicted (see Times Higher Education Supplement, 1996). The most frustrating aspect of this contemporary fashion in economic policy is that it has been completely unnecessary. While it is true that deflationary monetary and fiscal policies can reduce inflation to very low levels, the rewards are very slow rates of economic growth. Throughout much of Western Europe in 1996, for example, inflation was generally less than 2.4 per cent, while real GDP (not corrected for population increase) was generally less than 2.0 per cent (Economist, 17–23 August 1996). What would the result have been had inflation been reduced to zero as is the objective in many countries? A further interesting question is: What would have been the impact on prices if economic policy had been concerned with promoting longrun dynamics through the technological strategy? My own research on longrun dynamics provides some interesting evidence. As shown in Figure 10.1 (p. 276), in the case of England over the past seven centuries, there has been a close relationship between prices and real GDP per capita. The only extended period of price stability experienced (during the century after 1350) coincided with a phase of externally induced (by the bubonic plague) stagnation. This suggests that price increases in the longrun are a natural outcome of the dynamic process as predicted by the dynamic-strategy model. In other words, economic change determines price change in the longrun, not the other way around. Hence, in a viable society, if we look after the dynamic process, prices will look after themselves. But, if inflation could be held at artificially low rates, then the growth process would be permanently disrupted by the necessary deflationary policy. What many neoclassical economists have failed to understand is that the central objective of human society is to prosper through economic growth, and that in viable societies rapid growth and moderate inflation are natural partners. But is it possible to achieve price stability over the longer term through economic policies that deliberately deflate the economy? The short answer is no, but there will be unfortunate complications. In this book we have seen that political leaders who refuse, or are unable, to provide strategic leadership in order to generate an acceptable rate of economic growth—like the Stuart dynasty in seventeenth-century England—ultimately will be swept away. But such a perverse leadership will inflict considerable damage on the facilitating institutions of the Dynamic Society. In seventeenth-century 502

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England this damage was the outcome of a civil war and a subsequent dictatorship. In the mid-twentieth century the antistrategic leadership in Soviet Russia and Maoist China had terrible human and economic consequences through the destruction of strategic institutions and their replacement with oppressive institutions. Certainly the severity of this problem has been far less in the late twentieth century. Offending governments can be, and are, removed in modern democracies. But the problem is that the lesson arising from political failure by one party is often lost upon the alternative party gaining power, owing to the widespread influence in ruling institutions of the ‘stability cult’. The lesson is lost because the prevailing ‘wisdom’, which is distributed by a bemused media to the uncomprehending masses, is that we can achieve our fundamental objectives (to survive and prosper) only if we achieve stability (of prices), balance (of the internal and external accounts), and equilibrium. If we all believe this, then high unemployment and low economic growth must be the fault not of the policy, but of the personalities in government. Hence, we keep changing ministers and governments but not their policies. The outcome of the stability cult will be longrun damage to our strategic institutions. This damage will be persistent, costly to repair, and it will complicate the coming of the fifth technological paradigm. A more appropriate policy for the Dynamic Society is one that encourages higher rates of longrun economic growth (that is, of real GDP per capita) and lower rates of unemployment through technological change. While this will lead to moderate rates of inflation it should be regarded as a natural outcome of the dynamic process. Hyper-inflation is a problem only for societies in crisis, not for societies successfully pursuing one of the various possible technological substrategies. While it is always difficult for any single country to break away from the stability cult, it could be achieved by vigorously pursuing a new cost-cutting technology to counter the effects of higher prices. There is nothing new in this. As we have seen in Chapters 10 and 11, the essence of the technology strategy is to achieve growth through exploiting new ideas that undercut one’s competitors. And once the innovator breaks out, the others will have to follow at a rate to be determined by the extent of damage done to their strategic institutions. Defending the technological strategy In The Dynamic Society (1996:307–14) I argued that, since the Industrial Revolution, technological change has completely displaced conquest as a rational dynamic strategy. War is no longer necessary to achieve the material objectives of the human race. Yet, we all know that this did not put an end to war. Indeed, the twentieth century has witnessed the two most devastating wars in human history. And throughout this century there has been a constant succession of small but costly wars. Is there an inconsistency here? 503

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There is no inconsistency. Since the Industrial Revolution, war has been employed to defend the dynamic strategy rather than to drive it. The technological strategy requires a very heavy investment in fixed capital that is difficult and expensive to defend. In the medieval and ancient worlds, wars raged back and forward over the countryside and, although crops would be destroyed, often by retreating armies, they could be replanted in the following season provided the army could be maintained. The army, not the land, was the source of income growth. This changed with the Industrial Revolution, as the source of economic growth was transferred from the army to capital infrastructure embodying modern technology. It became essential to defend this infrastructure because, once destroyed or plundered, it was both time-consuming and costly to rebuild—it was not just a matter of resowing arable land. To defend the technological strategy, the highly competitive European nations built up large stocks of increasingly sophisticated weapons that were only possible with this new strategy. The escalation of military power during the second half of the nineteenth century created a new problem: how to prevent an aggressive, even irrational, leader causing a major conflict that might destroy much of the new technological infrastructure. Remember that conquest in this world was irrational because the net return on investment in technological change was greater than that in conquest. The solution adopted by European statesmen was to maintain a balance of territorial power through a network of fixed alliances (to replace the earlier system of fluid alliances) in Europe, and by carving up the rest of the world between themselves. The new European imperialism from the 1870s involved an extension of the balance of territorial power in Europe to the rest of the world. European alliances and post-commercial colonies were instruments for the defence of the technological strategy. But they were imperfect instruments. They could not provide protection against ambitious but unrealistic leaders who were willing to pursue highrisk tactics. Leaders who were clinically sane but who had economically irrational goals. This problem was particularly acute in the early decades of the twentieth century because it was not generally recognized how devastating and prolonged modern war could be. It was not realized that, in a carefully balanced environment as Europe had become by the 1910s, technological warfare could continue indefinitely. The reason is that the technological strategy, unlike earlier strategies, is able continuously to generate and replace the instruments of war. It was just a matter of redirecting the technological strategy from generating growth to generating war. Only when the European territorial balance was disrupted through the mobilization of Britain’s old and new Empire could the First World War be brought to an end. Unfortunately the devastating impact of this war to end all wars, combined with the destabilizing influence of the Great Depression, unleashed in Germany the irrational forces that led to the Second World War. 504

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As discussed in The Dynamic Society, Hitler’s objective was to maximize not the material advantage of Germany, but the racial purity and power of the German people. This second technological war, like the last, could only be brought to a conclusion by changing the balance of power in Europe—by the overwhelming resources and manpower supplied by the USA. From this second technological war emerged a frightening new weapon that was radically to alter the way in which the technological strategy would be defended during the second half of the twentieth century. The atomic bomb, its nuclear siblings, together with effective means of delivering these ultimate weapons of destruction (such as nuclear submarines, intercontinental missiles, and long-range stealth bombers) across the world made the old instruments of defence completely obsolete. It was for this reason that the old European empires and the rivalries within Europe were dismantled after the Second World War. Nuclear weapons wielded by the mega-states brought European imperialism to an end and European integration to a beginning. A balance of territorial power in Europe and in the rest of the world was replaced with a balance of nuclear weapons between West and East. Around the mega-states of the USA and the USSR clustered the smaller powers seeking defence of their technological strategies. This was the underlying reality of the cold war from the Second World War to the early 1990s. While the certainty of total destruction has prevented the mega-states employing nuclear weapons in global war, it has not prevented limited regional wars using conventional weapons. This has been the outcome of the mega-states attempting to intimidate smaller nation-states that possess strategic importance (such as location, as in the wars against North Korea, Vietnam, and Afghanistan, or control of strategic materials, such as in the Gulf War) and of regional struggles between smaller nation-states. These were wars in support of the technological strategies of the mega-states, or wars that did not threaten their strategies. What does this analysis imply for future policy on nuclear weapons and nuclear testing? Clearly the bottom line is that, while mega-states are keen to sign nuclear non-proliferation treaties, they have no intention of abandoning their own nuclear capability or weapons testing when deemed necessary. No amount of signed treaties will change this reality. The mega-states are determined to defend the dynamic strategy against those who may be irrational enough to go on the offensive, as was possible before the invention of the atomic bomb in the 1940s. The difference between now and then is that global war in the future would require more than an economically irrational mega-state leader. As there are no winners in global nuclear war, it would require a leader who was clinically insane. While it is difficult to determine if a person is irrational, it is easy to see if he or she is insane. Hitler, for example, was irrational but not insane. He would not have embarked on the conquest of Europe—and certainly could not have gained the necessary 505

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support—had he known in 1939 that by 1945 he would be dead, his party obliterated, and Germany destroyed. Once Hitler and his followers finally realized this, it was too late. It is instructive to ask what would happen if all nuclear weapons miraculously disappeared. The dynamic-strategy model suggests that the old balance-of-power instruments for defending the technological strategy would re-emerge. There would be a scramble for strategically important territory. Instead of merely pursuing punitive action in the Middle East, the USA would probably feel compelled to invade this oil-rich region. The same would be true of strategically located nation-states, and even of a crippled Russia. Such a scramble would probably lead to a third global war. Hence, the alternatives to nuclear weapons may be even less palatable to the human race than the present nuclear brinkmanship. At least there has been no global war for half a century. Of course the human race must attempt to prevent the further spread of nuclear weapons, restrict their testing, and strengthen safeguards to prevent their accidental or insane use. We must also be realistic. No society will agree to leave its dynamic strategy undefended, because it is the means of satisfying the eternal desire to survive and prosper. And, as suggested above, any attempt to force nuclear bans through the development of a global-state would only be self-defeating. But, in the presence of a nuclear capability to defend the technological strategy, there is no reason to develop and maintain chemical or germ warfare facilities. Only one type of ultimate weapon is required. Easing the burden of future paradigmatic exhaustion There is no way of avoiding the consequences of paradigmatic exhaustion. Indeed, by generating changing relative prices, this process will lead the way to the fourth technological paradigm shift. It is not possible to leap over this stage because there is insufficient information about either the timing or the nature of this new revolution. Just imagine being transported back to the early eighteenth century and being asked to predict the location, nature, and timing of the Industrial Revolution. Could we have imagined the widespread use of iron machinery powered by coal-consuming steam engines, steam railways, electricity, automobiles, aeroplanes, spacecraft, electronic computers, nuclear energy, and genetic engineering? And could we have predicted when and where those remarkable changes would take place? Obviously not. The only rational response to this strategic uncertainty is to do as we have always done—to select the most efficient solution to problems that arise before us in order to maximize individual material advantage. The worst possible response would be to do as the ecological engineers of the Limits to Growth (Meadows et al. 1972) and Beyond the Limits (Meadows et al. 1992) variety have insisted we must—abandon all growth-inducing technological change and attempt to create the stationary state. As I demonstrated in The Dynamic Society, this could only be achieved if an eco-dictator of the Stalinist 506

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variety—the archetypal antistrategist—assumed control of a global-state; and, once achieved, it would lead to the emergence of regional warlords pursuing the ancient dynamic strategy of conquest. This would result in a modern Armageddon that would have a disastrous impact on both human society and the ecology. There can be no holding back. We can only continue our journey. Yet it is possible and desirable to ease the burden of paradigmatic exhaustion. Human society should, and appears to want to, devote some of its GDP to repairing the damage inflicted upon the environment by its pursuit of economic growth. This desire is reflected not only in the growing public agitation over environmental issues but also in the growing attention that orthodox economics has been devoting to this subject. While orthodox economics cannot tell us much about longrun dynamics, it can sort out the benefits and costs of restoring the environment, which is a shortrun comparative-static issue. Recently economists have addressed two major issues: the benefits and costs of maintaining or restoring natural resources; and the benefits and costs of resolving the socalled ‘greenhouse effect’. In this way they are playing an important role both in designing more cost-effective policy procedures and in selecting more efficient policy goals. This work, which can smooth the way to the fourth paradigm shift, will be briefly evaluated. Since the early 1960s, the major issues of concern among environmentalists have been the need to preserve wilderness areas, to reverse the degradation of natural resources, to preserve ‘biodiversity’, and to achieve ‘sustainable development’. Orthodox economists tackling these issues have been concerned largely with exposing and removing the inefficiencies in markets for environmental services that have been responsible for the overexploitation of natural resources. It is argued that the reason natural resources are overexploited is that environmental values—the regard people have for nature—are not taken into account when economic decisions are made to use natural resources (Kelman 1981). Some environmental economists go further than this. They argue that sustainable development cannot be achieved unless decision-makers take into account not only the environmental preferences of the existing generation but also of future generations (Howarth and Norgaard 1992:473). This requires the recognition of intergenerational equity—each generation making a commitment to transfer to the next sufficient natural resources and capital to make economic development sustainable. Two problems have been overlooked by environmental economists. By using partial and general equilibrium models and ignoring issues of longrun dynamics, they have failed to recognize the possibility that environmental damage is not just a matter of efficient markets for environmental services, but may also be the outcome of paradigmatic exhaustion. In other words, it is not possible to eliminate environmental damage by making markets more efficient. This has led to a second problem whereby environmental 507

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economists want to take account of intergenerational transfers because they sense that otherwise even efficient markets will not prevent the deterioration of natural resources. The intergenerational equity argument is, in the light of my dynamicstrategy model, highly dangerous because it supports the demands of the ecological engineers to override the objectives of present decision-makers in the name of unborn generations. This is very similar to the earlier arguments of the Bolsheviks in Russia who claimed to be making decisions on behalf of the vast unconsulted majority of the Russian people—in their words through the ‘dictatorship of the proletariat’ (actually the dictatorship of the Bolsheviks and ultimately of Stalin). It is the usual ploy of antistrategists. What must be realized is that not only are we ignorant of what future generations might choose, but we run the risk of derailing the Dynamic Society by delaying the fourth paradigm shift and setting loose the forces of war and conquest. Quite clearly this would make future generations worse off. A dynamic perspective suggests that the best outcome for present and future generations can be achieved by attempting to make markets more efficient so that the preferences of present decision-makers for material and environmental outcomes can be taken into account. Since the late 1980s a new major environmental issue has emerged. It is the so-called greenhouse effect. The pioneering economic research on this issue was undertaken by William Nordhaus (1991a, b, c) and it has since attracted growing interest from other economists (Schelling 1992; Cline 1992; Dornbusch and Poterba 1991; Manne and Richels 1992; Bagnoli et al. 1996). The problem is well known, involving the production of greenhouse gases—including carbon dioxide, methane, nitrous oxide, chlorofluorocarbons (CFCs)—through the burning of organic and fossil fuels. These gases build up in the atmosphere, absorb sunlight radiation in the red spectrum, and increasingly warm the atmosphere. It has been estimated scientifically that a doubling of carbon dioxide in the atmosphere will probably lead to an increase in temperature by approximately 3 degrees Celsius. At present the amount of carbon (which is 26.9 per cent as large as the amount of carbon dioxide) in the atmosphere is increasing at the rate of 0.5 per cent per annum, and it is thought that there is enough carbon fuel in the world to generate three doublings. This is relatively straightforward. The difficulties arise when we ask what this implies for world climates and the global economy. All we can say with certainty is that some regions will become warmer, others cooler (if warm currents are deflected), some wetter, and some drier. And it is not clear that the net effect of these complex regional changes would be unfavourable for world agriculture, particularly as an increase in carbon dioxide would enhance photosynthesis (Schelling 1992:1–4). Recently it has been suggested (WHO 1996) that changing weather patterns, particularly in tropical areas, may increase the geographical spread of certain diseases such as malaria. But nothing is 508

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known about future disease patterns with any certainty, and the gradual nature of the change would provide ample opportunity to establish remedial measures. The alarmists generally assume that human society is unable to adjust to climate change—that it is essentially static rather than dynamic. This flies in the face of our entire history. But, even if the change in global climate adversely affects agriculture, its influence on developed countries would hardly be significant. As is well known, the proportion of GDP generated by agriculture in developed countries is generally less than 5 per cent, and in some nations less than 3 per cent, and greenhouse climate change would have little effect on the other 95 to 97 per cent of the economy. Hence, in the developed world the greenhouse effect would probably not even be noticed (ibid.: 5–6). But in the Third World, where the contribution of agriculture to GDP is as high as 30 per cent and where disease control is less effective, the economic impact of climate change would be greater, but still not overwhelming. While it is irresponsible to say otherwise, it is true that this is the part of the world that could afford it least. Nordhaus (1991 a: 931) has estimated that by 2050 the impact of greenhouse climate change on GDP would be as low as 0.25 per cent per annum for the USA and no more than 2.0 per cent per annum for the entire world. This is a worst-case scenario because the net effect of greenhouse warming actually could be economically advantageous (Nordhaus 1991c). While the orthodox comparative—static approach is helpful in sorting out the main issues and providing rough orders of magnitude, it does not take into account the longrun dynamic dimension. If it takes 50 to 100 years for temperatures to increase by 3 degrees Celsius, there will be two offsetting dynamic issues to consider. First, by the second half of the twenty-first century, today’s Third World countries will be far more developed and the relative importance of their agricultural sectors will be much smaller. In addition, these countries will be wealthier and, hence, in a better position to fight off any increase in the incidence of disease. This will limit the adverse economic and health effects of climatic change. Second, as factor endowments change, so do relative factor prices which provide incentives for technological change. Human society is never static, it is always changing and responding in a positive way to its changing physical and economic environment. In this way the structure of human society will change even faster than global warming, thereby minimizing the impact of climatic change. The only persuasive argument in support of expensive attempts to stabilize the build-up of greenhouse gases is that we may be prepared to pay heavily to slow the change in our physical environment—although it must be realized that the history of the Earth is a story of continuously changing ecosystems—and that, for some totally unforeseen reason, the greenhouse effect may lead to a sudden catastrophe. We might wish to respond to the unlikely possibility of a natural catastrophe by investing in measures designed to stabilize or even to reduce the stock of greenhouse gases in the 509

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atmosphere. This would amount to ‘buying greenhouse insurance’ (Manne and Richels 1992). What should be done? Clearly no nation of its own free will is going to devote more than a nominal proportion—say 2 per cent—of its GDP on an annual basis to purchase greenhouse insurance. A reasonable insurance premium of this nature would cover the phasing out of CFCs, the transfer to lower emitting fuels, reafforestation, raising coastal infrastructure, and building new infrastructure at higher levels above the sea. This issue should be treated in a straightforward benefit—cost way with realistic environmental values factored into the decision-making calculus. And we should be sensitive to further changes in environmental conditions. Nordhaus (1991a:923), in analysing how to ‘efficiently’ slow the greenhouse effect, develops a comparative-static model involving a ‘greenhouse damage’ function (that takes account of changes in crop yields, land and capital losses to rising seas, and damage to ecosystems) and an ‘abatement cost’ function (including the cost of phasing out fossil fuels and CFCs, raising coastal structures, building dykes, planting trees). He then uses this model to calculate the size of greenhouse taxes that would need to be imposed on US citizens to achieve varying reductions in the stock of greenhouse gases. Nordhaus suggests a modest tax of $US 7.3 per ton of carbon, which would reduce greenhouse gases by 11 per cent, including a substantial reduction of CFCs, and a cut in carbon dioxide by about 2 per cent. A more radical approach aimed at substantially removing the problem involving trillions of dollars per annum would be totally unacceptable to taxpayers and their governments because, on present information, the likelihood of a sudden natural catastrophe is very low. To take the radical option would, even if it could be sold politically, be economically irrational, because at best it would amount to a massive waste of GDP that could be used for other, more immediate purposes, and at worst it could derail the Dynamic Society. Thus, by attempting to measure the static benefits and costs of environmental remedial measures, we can ease the burden of paradigmatic exhaustion without masking the signs required to lead the way to the fourth technological paradigm shift. To delay, or even derail, this technological transition will lead to adverse consequences for future generations ranging from lower-than-necessary living standards to unmitigated disaster for both the Dynamic Society and its natural environment. CONCLUSIONS What has become clear from the investigation in this book is that, while materialist man’s pursuit of the four dynamic strategies is eternal, the institutional vehicle by which human society is carried forward is constantly being transformed. Civilization is ephemeral. The nature of the 510

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economic-political-social system of any society at any point in time depends upon the particular dynamic strategy being pursued and the stage of strategic development that has been reached. And as the dynamic strategy unfolds, is exhausted, and is replaced by a new dynamic strategy, the institutional form of that society will change in predictable ways. The longrun development of a civilization, therefore, depends upon the particular strategic sequence that emerges from the interaction between materialist man and his economic and natural environment. If the strategic sequence is reversed in mid-stream—in the form conquest→commerce→ conquest—then the institutional structure of society will be reversed, although never exactly, as the underlying economic conditions are always changing. If the strategic sequence of one civilization is followed by the same sequence in a subsequent civilization, then the general pattern of history, if not the detail, will repeat itself. This is the basis of the eternal recurrence of the ancient world and the linear convergence of the modern world. It is this discovery that explodes the myth of social evolution. What marks off the modern from the ancient world is the pursuit of technological change, a dynamic strategy that has enabled human society to break through the eternal recurrence. Because of this we are no longer committed to repeating the dynamic and institutional patterns of the past. But there is nothing inevitable about this. As I demonstrated in The Dynamic Society, if we abolish growth-inducing technological change through impossibly heavy imposts, or if we cripple it in the mistaken belief that we are saving the ecology, then we will commit ourselves once more to the eternal recurrence of war and conquest and the ecology will be irreparably damaged. As the ancient Anglo-Saxon poet said, it will be appalling if ever ‘all the wealth in this world stands waste’. But if we manage to shrug off those who would hold us back, human society will continue to develop in a linear rather than a circular fashion. And the Dynamic Society will continuously transform itself and its institutional forms. This is why it is pointless to become agitated about the future of ‘capitalism’. The real issue is the future of the Dynamic Society, which is the eternal core of human society. ‘Capitalism’ is only its present ephemeral form. It is to be hoped that, in the future, human society will create new institutional patterns rather than endlessly repeating the ‘time-covered’ patterns of the past. The choice is ours.

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1 THE MYTH OF SOCIAL EVOLUTION 1 2

For a good survey of the sociology and world-systems literature on social evolution see Sanderson (1990). The new economic history includes a few innovators such as Paul David, Stanley Engerman, Charles Feinstein, Robert Fogel, Douglass North, and Jeff Williamson, and many imitators, such as N.F.R.Crafts, who take their lead from neoclassical economics. As in the rest of life, the intellectual world has its pioneers and its followers.

2 A REALIST MODEL OF HUMAN BEHAVIOUR 1 2

3

These results are from an unfinished project on medieval/early-modern taxation by G.D.Snooks and Carolyn Fenwick, Research School of Social Sciences, Australian National University. An interesting variation to the orthodox version is provided by Gary Magee (1997) who, as a result of historical research, suggests an approach to decisionmaking that is similar to the neoclassical model in its emphasis on the central role of benefit-cost information, but different in focusing upon the improving quality of that information, generated by the decision-making process itself, as an industry progresses from the innovative to the routine development phases. He views decision-making as an evolutionary process, progressing from pure instinct, which cannot be modelled, to a more rational activity that can be captured on the way by the ‘bounded’ rationality model and only later by the neoclassical model. Also for an approach that emphasizes the initial role of animal spirits see Mark Casson (1991b). Sources providing imitative information for would-be generals and strategic leaders in Rome include: Caesar, The Conquest of Gaul (Penguin, 1982) and The Civil War (Penguin, 1976); Livy, The History of Rome, 14 vols (Heinemann, 1926), The Early History of Rome (Penguin, 1960), The War with Hannibal (Penguin, 1965); Plutarch, Lives (Aemilius Paullus, Cato the Younger) (Heinemann, 1921), Makers of Rome (Fabius Maximus, Marcellus, Cato the Elder, Tiberius Gracchus, Gaius Gracchus, Sertorius, Brutus, Mark Antony) (Penguin, 1965); Tacitus, The Annals of Imperial Rome (Penguin, 1971), The Histories (Penguin, 1986), The Agricola and the Germania (Penguin, 1970); and Virgil, The Aeneid (Penguin, 1956).

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4 THE ETHEREAL WORLD OF INSTITUTIONALISM 1

An interesting variant of the institutional approach is provided by Mark Casson who regards transaction costs as a function of a lack of trust between individuals. Casson (1991a:255) claims: ‘Both markets and hierarchies incur transaction costs because people cannot trust each other.’ He further claims that the quality of a culture determines the overall ‘economic performance’ of a society in the following sequence: the moral authority of a culture influences the degree of trust in society, which influences the level of transaction costs, which in turn determines economic performance. He calls for greater moral leadership by outstanding individuals who are able to ‘manipulate’ trust in order to lower transaction costs.

5 THE ROBOTIC WORLD OF SOCIOBIOLOGY 1 2

Not only are accidental death rates much higher for males than females (Snooks 1996:186), but death by suicide in Western societies is typically two to three times higher for males than females (Economist, 5–11 October 1996:60). When I first employed the term ‘economic distance’ to measure the strength of economic relationships between the central individual and all other individuals and groups (Snooks 1994a), I was not aware of Dawkin’s (and later other sociobiologists’) use of the term ‘generation distance’ to measure the strength of the genetic relationship between an individual and his/her kin. These two models, one genetic and the other economic, should be thought of as competing explanations of family relationships. My model, however, avoids the inconsistencies of the kin-selection model and can explain relationships beyond the family.

6 ROME: SANCTUARY OF THE WOLF 1

This dynamic-strategy model contrasts with existing single-factor explanations of the rise and fall of Rome. Some scholars, for example, have argued that the military expansion of Rome was due to exogenously determined population growth of either Rome or its neighbours, which brought them into conflict over resources (Oakley 1993:12; North 1981:109–10); or that it had to do with an abundant supply of labour that guaranteed success in war (Rich 1993a:2, 7); that it was due to a desire to keep the allies busy (Momigliano 1975); that Rome had a large army that could only be justified if gainfully employed (Cornell 1993:161); that it was due to the ‘competitive ambitions of a militaristic elite’ (Hopkins 1978:35); that it arose from a fear of attack—the famous ‘defensive imperialism’ hypothesis (Mommsen 1868; Frank 1914; Holleaux 1921; Badian 1958,1968; Walbank 1963; and Errington 1971); or that it was due to glory and profit (Harris 1979; Finley 1985). None (including North 1981) provides a single and consistent model that can explain the rise and fall of Rome. The view most compatible with my own in explaining the driving force in Roman society (but not in modelling societal change) is that of William Harris. From a close reading of the qualitative evidence he claims that Romans were motivated to expand their territory, and hence their society, by fame and wealth. In doing so he is explicitly attempting to debunk the curious ‘defensive imperialism’ thesis, which claims that Rome only went to war with its neighbours to achieve secure frontiers.

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The complex set of historical facts described in this chapter can only be reduced to a simple formula at the cost of some distortion. I have attempted to show that the desire for economic gains of various kinds was throughout our period [327 to 70 BC] an important motive force in sending the Romans to war and causing them to expand their power. From a society in which war served all citizens—in varying degrees—by providing them with land and booty, there evolved a wealthier and more sophisticated one in which economic gains were sometimes held to be of secondary importance, but in which citizens of all classes still strove to exploit their economic opportunities … To suppose that because seizure and direct exploitation, rather than investment, were the prevailing modes of behaviour these Romans were not moved by greed is an error disastrous to the understanding of Roman imperialism. (Harris 1979:103–4) Harris (ibid.: 87) modifies this thesis somewhat when he claims that ‘Roman aristocrats aspired to do other things besides make money, especially they aspired to win high office, to carry out its responsibilities successfully in peace and above all in war, and to receive the fame that resulted from these achievements.’ What I disagree with in Harris’ argument is that profits were achieved through conquest without investment and that fame and political office as motivations can be distinguished from profit. My argument (see Chapter 7) is that fame is a form of human capital which requires investment, and it is undertaken because of the expectation of lucrative returns in the form of profits arising from the gift of political office or from an accelerated career path. Political office and fame were and are merely means to an end—material advantage. Most of these single-cause explanations are used only to explain the expansion phase in the fortunes of Roman society. A few, however, have been elevated to general explanations. The labour-supply argument, for example, has been used to account for the fall as well as the rise of Rome. Rich (1993a:2) argues that ‘the most fundamental reason for their success…lay in the vast resources of manpower that they could dispose of as a result of the way in which they had organized their conquests in Italy’. The trick, we are told, was to grant the Italians citizenship of Rome. He goes on to explain (ibid.: 7): The Roman Empire finally paid the price for Augustus’ dissolution of the link between citizenship and military service. That link had assured the Republic of a vast reserve of manpower, which enabled it to surmount its deepest crises … In the fifth century the Roman army disappears from view in the West… The Roman state soon followed. The argument is that institutional factors arising from the decisions made by the Senate and, later, the emperors, were mainly responsible for the rise and fall of Rome by its impact on stocks of manpower. This supply-side argument fails to recognize that labour supply was only one of a number of factors responding to the unfolding of the dynamic strategy of conquest, and that the decline was in fact a response to the exhaustion of that strategy. Another monocausal explanation is the long-running defensive imperialism argument, which asserts rather idiosyncratically that Roman expansion was not an attempt to gain materially at the expense of its neighbours but merely to secure its frontiers against aggression from others. John Rich (1993b:39) explains:

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Until recently the dominant view among scholars was that Roman imperialism was essentially defensive. The principal factor which led the Romans to undertake their wars was, it was held, the fear of powerful neighbours… It was thought that the prospect of economic gain did not play an important part in bringing about wars, and that the Romans’ territorial expansion was largely unsought. This is a very strange view. For nine centuries the Romans, who attempted merely to defend themselves from their neighbours, found themselves, no doubt to their very great surprise, masters of the world. How it is possible to win most of the known world without really trying is not explained. What is amazing is that until the work of William Harris (1979) and Keith Hopkins (1978) this view had dominated thinking for about a century. This is similar to the interpretation by medieval scholars, held during the same period, that the rise of pre-modern Europe had little to do with the desire of decision-makers for profit (Snooks 1993a). Some even give support to the ‘defensive imperialism’ thesis today (Gruen 1984; Sherwin-White 1984; Dyson 1985; Eckstein 1987). Despite the lack of either conceptual validity or empirical support for the ‘defensive imperialism’ thesis, it has been used to ‘explain’ not only the expansion of Rome but also its stagnation: once the secure frontiers of the Rhine, Danube, and Euphrates had been reached, and fear of invasion had subsided, Roman expansion was terminated. This is not a persuasive argument. As others have demonstrated, rivers are not effective lines of defence, and they have rarely been historical boundaries between ethnic, linguistic, or national groups (Cornell 1993:142; Mann 1974:513; Birley 1974:22). While the argument is logical it is not supported by the evidence. And it cannot explain why Roman society declined and collapsed rather than merely achieving a stable state. Clearly all single-factor explanations are inadequate. They cannot explain the expansion of Rome, let alone the cessation of expansion, the decline and, ultimately, the collapse. The usual response by those unhappy with ‘monocausal explanations’ is to opt for one of what I call the great shopping lists of historical explanation. These lists include all factors that appear to have some association with the event or process that requires explanation. One example of this traditional dilemma is a recent evaluation of the ‘defensive imperialism’ and the ‘profit and glory’ explanations of the expansion of Rome. John Rich (1993b:44) tells us: Whatever the differences between them Harris and North are essentially in agreement on a one-sided view of Roman warfare and imperialism, which seems to me in its way almost as misleading as the old ‘defensive imperialism’ view… Whether at the level of conscious decision-making or of underlying structures, the determining factors were many and complex and did not all pufl in the same direction. When pushed, many historians retreat into the swamps of ‘many and complex’ factors; Rich does so on this issue even though at the same time he favours a monocausal explanation involving the supply of labour. Single-factor explanations certainly are deficient, but so too are the great shopping lists of history. Complexity is not a function of the size of the list but of the nature of the process or mechanism involved. What we need is a general model that can explain not only the rise and fall of the Roman Empire, but the rise and fall of all conquest empires. This is where the complexity comes in—in the pattern of the rise and fall. We need to be able to see through this variety and

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complexity to the underlying dynamic model which, in the end, is not all that complex at all. I have attempted to show that it is possible to explain complex real-world processes with a straightforward dynamic model—the dynamicstrategy model.

7 TENOCHTITLAN: CITADEL OF THE SUN 1

As in the case of Rome, the literature on the Aztecs harbours a variety of singlefactor explanations of institutional, indeed of societal, change. These range from religion and ideology (Conrad and Demarest 1984; Clendinnen 1993), and glory and profit (Hassig 1988), to the will to power (Davies 1987). And, of course, there are those who prefer to hedge their bets by opting for the shopping-list approach. All these contrast with my dynamic-strategy model which stresses the role of strategic demand.

8 GREECE: JEWEL OF THE AEGEAN 1

In discussing the emergence of the polis from tribal society, we are told by Aristotle that all civilized men have a preference for living in city-states: ‘Man is by nature an animal intended to live in a polis’ (Politics, 1962, I, 2). Hence, as Greek society began with tribal kingdoms, it would inevitably evolve to the citystate, because that is in the nature of mankind. And, once having reached this perfect form of political organization, the force behind institutional change just evaporates. The modern interpretation has not proceeded far beyond this.

10 ENGLAND: ALBION AWAKENING 1

2 3

My reason for this judgement is that longrun price changes are driven by aggregate demand (real GDP). While prices fluctuate in parallel with fluctuations in aggregate demand (real GDP) after 1300, there is no correlation between the two variables before that year. Nevertheless, as the price change between 1086 and 1688 is exactly the same as that for the change in aggregate demand (0.49 per cent per annum), it is possible to deflate nominal GDP between those two years (Snooks 1993a:247). The reasoning is that, as prices are driven by aggregate demand in the longrun, we would expect the rate of change for prices and real GDP to be the same over very long periods of time. See previous note. That part of the Mayhew (1995) article dealing with changes in average living standards, which is based on unrestrained guesswork, is totally incorrect. It therefore has considerable potential to mislead the non-specialist reader. Mayhew’s only firm estimate of English GDP is 1688 (which he calls 1700) because it is based on Gregory King’s calculations. All the remaining random guesstimates (1300, 1470, 1526, 1546, 1561, 1600, 1643, 1670) are based on guesswork that bears little relation to reality. Despite the overwhelming historical evidence to the contrary (outlined above), Mayhew claims that there was no longrun growth between 1470 and 1700. The picture he provides for the period 1300 to 1470 is just as distorted. His guesstimates suggest that real GDP per capita actually doubled in this period which, as shown above, was badly disrupted by the combined impact of recurrent plague, an ultimately unsuccessful Hundred Years War, and the exhaustion of the English conquest strategy (yet to be replaced in 1470 by the subsequent commerce strategy).

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As in reality the positive, commerce-led growth between 1470 and 1700 was much greater (probably by a factor of seven) than the exogenously determined negative growth between 1300 and 1470, Mayhew’s guesstimate for 1300 is much higher than it should be. There is a very robust way of testing this, using the most reliable source of income prior to the income returns in the twentieth century—Domesday Book. This famous document is far more reliable than the commonly accepted Gregory King estimates for 1688 (see Snooks and McDonald 1986: Chapter 2; Snooks 1993a: Chapters 5, 7). This test is possible because Mayhew provides a guesstimate for 1086, which fortuitously bears a reasonably realistic relationship to 1300. The problem for Mayhew is that his 1086 guesstimate is more than twice as high as the existing estimate based on a serious quantitative study of Domesday Book data (Snooks 1990b; 1993a: Chapter 7; 1993b). Of course it has to be twice as high in order to fit in with his guesstimate for 1300 (otherwise the growth rate for the intervening period would be as high as that in England today). Thus, not only do the changes implied by Mayhew’s guesstimates fail to accord with historical reality between 1300 and 1700, but his 1086 GDP figure bears no relationship to the reality of Domesday Book. Both sources suggest a much lower GDP level for 1086.

517

GLOSSARY OF NEW TERMS AND CONCEPTS

As longrun dynamics is a new area of study it has been necessary to develop and employ a range of new terms and concepts. To assist the reader, these terms and concepts have been brought together and briefly defined in this Glossary. When a new term or concept is first mentioned in a chapter it has been printed in bold type. Italics in the Glossary have been used to indicate that additional concepts are also defined here. Unfamiliar terms not included here can be found in the Glossary of The Dynamic Society (Snooks 1996). Antistrategists comprise those ruling elites who assume control of societies during times of strategic crisis and engineer repressive economic and political systems. These command systems are designed to eliminate existing strategists, to prevent the re-emergence of potential strategists, and to facilitate the pursuit of rentseeking. Examples of societies dominated by antistrategists include Rome from the time of Claudius, Soviet Russia, Nazi Germany, and Maoist China. Control by antistrategists is the outcome of a military-backed takeover by a small band of professional revolutionaries who are able to exploit the chaos that emerges when the new strategists are unable to overwhelm the old strategists during the course of a difficult strategic transfer. Concentric spheres model of human behaviour. In this model the self is at the centre of a set of concentric spheres that define the varying strength of cooperative relationships between him or her and all other individuals and groups in society. The strength of the economic relationship between the self and any other individual or group—measured by the economic distance between them—will depend on how essential they are to the maximization of his or her utility. Those aspects of his or her objective function—such as the generation of love, companionship, and children— will be located on spheres with the shortest distance from the centre, with other relatives, friends, neighbours, workmates, members of various religious and social clubs, city, state, nation, group of nations, etc. occupying spheres that progressively radiate from the centre (see Figure 2.1 on p. 30). As the economic distance increases, the degree of cooperation diminishes. The force keeping the spheres apart is the incessant desire of the self to survive and prosper, and the force preventing the spheres flying into space (the model’s economic gravity) is strategic confidence generated by a successful dynamic strategy. Dynamic demand, which is a new concept in economics, is generated by the dynamic processes of the real economy. It is the outcome of the actions of economic agents

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GLOSSARY

who, in a competitive environment, attempt to maximize their objectives of survival and prosperity by pursuing one of the main dynamic strategies. Dynamic demand has both longrun—strategic demand—and shortrun—tactical demand— components. It can be contrasted with the Keynesian concept of aggregate demand, which is merely an outcome of the causal process in the dynamic strategy model. Dynamic materialism is the term coined in The Dynamic Society (Snooks 1996:169—207) to encapsulate the process by which economic decision-makers attempt to achieve their materialist objectives in a competitive environment by adopting the most cost-effective dynamic strategies and dynamic tactics. The essential components of dynamic materialism are a typically competitive environment in which mankind struggles against other species and its own kind for scarce natural resources in order to survive and prosper. Those circumstances bring out a heightened ambition, together with an aggressive and creative energy in what I have called materialist man. Dynamic strategies are those strategies employed by decision-makers attempting to maximize the probability of survival and prosperity. In the Dynamic Society these strategies include family multiplication, conquest, commerce, and technological change. The adoption of any one of these strategies will depend upon factor endowments and, hence, relative factor prices, and will require investment in specialized infrastructure. This investment generates a stream of positive net returns. Economic growth, therefore, is strategy-led. A dominant dynamic strategy will be pursued until it has been economically exhausted, which will occur when the marginal cost of investment in this strategy equals its marginal revenue. This leads not to collapse but to equilibrium. Over time any dominant strategy will consist of a sequence of substrategies by which the economic possibilities of the former are explored. For the modern era these substrategies have been called technological styles. Dynamic tactics of order and chaos are employed in the strategic struggle between various groups in society attempting to gain control of the dominant dynamic strategy and to influence the distribution of wealth. The ruling elite will employ the tactics of order to maintain compliance, and the dissenters will employ the tactics of chaos to overthrow the existing power structure. It is this struggle that leads to a change in the structure of tactical institutions and tactical organizations. See also tactical demand. Dynamic timescapes are those portraits of reality provided by a visual representation of longrun quantitative data. These portraits emerge from the statistical record of the course taken by both biological life and human society over vast expanses of time. They include the great waves of biological life and the great linear waves of economic change. They show us the nature of real-world relationships; and seeing is the beginning of understanding. They provide a glimpse of dynamic processes operating in life and in society, and they are the building blocks of existential models. See also strategic pathways. Economic distance is the measure of the strength of relationships between the self and all other individuals and groups in society. Economic distance is inversely related to the importance of other individuals and groups in maximizing the material objectives of the self. Hence family and friends occupy the spheres closest to the self and strangers are to be found on the most distant spheres (see Figure 2.1 on p. 30). It is an important component of the concentric spheres model of human behaviour.

519

GLOSSARY

Existential models are empirical models of reality—or models of existence—and can be contrasted with the logical or deductive models of physics and economics, which are merely constructs of the mind. Deductive models are powerful tools that can be used selectively in the reconstruction of dynamic processes, but they are limited by the range and complexity of issues they can examine. As existential models are based upon dynamic timescapes, they can liberate us from the limitations of deductive thought. They set free the imagination to range over the actual patterns of existence. And in these patterns we can see the dynamic processes of reality. Existential schizophrenia. The actions we are forced to take in order to survive and prosper are often so repugnant to the intellectual image we have of ourselves that we are unable to face them openly, certainly not on a daily basis. The truth could, and sometimes does, lead to self-destruction. And this frustrates the biological desire to survive and prosper. Accordingly, over millions of years we have learnt to deceive ourselves with such facility that we are usually unaware that we are doing so. We compartmentalize our lives and build barriers between what we do and what we think we should do. This is a normal rather than a pathological condition because it is required in the struggle to survive and prosper. While it is essential for the continued survival of our species, it prevents us from understanding the nature of ourselves and our society. Human society is no more complex than the physical world around us. It is our reactions to it that are complex. Gross Community Income (GCI) is a measure of total economic activity that takes place in both the household and market sectors on an annual basis. It is an extension of the concept of GDP to the Total Economy. It is a term coined in Snooks (1994a: 17). Imitative information, in contrast to the information required by the neoclassical model, is readily available and easily evaluated. It is gained from direct observation of those around us, from professional advice, from the media, and from books, magazines, and electronic sources. What we need to know is: who is successful and why, not how to calculate accurate rate of return calculations. Intellectual economizing. This is the core of my theory about the imitation mechanism in human (and animal) decision-making. It is based on the historical observation that the world’s scarcest resource is the intellect, and that decision-makers economize on this resource by making rules and by imitating the successful actions of others. This is the basis for the process of strategic imitation by which the strategic pioneers are followed by large numbers of strategic followers. Longrun dynamics involves an approach to the study of economics that focuses on the process of change over significant periods of time (generations, centuries, milennia). The benefits of this approach include the identification of some of the larger issues that emerge from dynamic change in society, and an understanding of the real-world dynamic process. Longrun dynamics is an area of economics that is largely ignored by the deductive theorist because it is too difficult to handle mathematically, but it is an area that the analytical historian can and should make his or her own. In this study, ‘longrun’ is a single word for an important concept in materialist history. Nonstrategists are those groups in society that are unable to invest freely in, or profit from, the prevailing dynamic strategy. They are controlled and manipulated by the strategists or antistrategists who exercise a monopoly over society’s resources and

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wealth. The nonstrategists are the dependent agricultural workers in medieval society, slaves in both the pre-modern and modern world, and the ‘people’ in modern command systems such as Stalin’s USSR or Mao’s China. It would be a mistake to think that the role of the nonstrategist has evolved over time. Quite the reverse. The last 12,000 years have seen the nonstrategist follow a great circle. In the palaeolithic epoch, most adults were freely involved in the dominant strategy of family multiplication; in the neolithic epoch, very small ruling elites controlled either the conquest or commerce strategies; and only during the modern epoch have these elites given way to the democratic control of the technological strategy. Primary dynamic mechanism. It is the process arising from the attempt by strategists to maximize their survival and prosperity through the pursuit of the most economical dynamic strategy. This mechanism will take one of a number of forms depending upon the type of strategy chosen. The family multiplication strategy will give rise to the great dispersion; conquest and commerce to the great wheel of civilization; and technological change to the great linear waves of economic change. These dynamic mechanisms operate within the dynamic framework of technological paradigm shifts. This was the subject of The Dynamic Society (1996). What is of interest here is that the primary dynamic mechanism generates a demand for institutional and organizational support and operates primarily through a strategic struggle between various groups in society. This dynamic demand is the driving force behind the secondary dynamic mechanism, which is the subject of this book. Real economy, the. It is the reality behind the surface of everyday life that accounts for the dynamic mechanism required to achieve the objectives of decision-makers. Hence it is an abstraction from the institutional and organizational arrangements that merely facilitate the desires and decisions of the dynamic strategists. While institutions are ephemeral, the forces underlying the real economy are eternal. Secondary dynamic mechanism. It is the process by which dynamic demand, generated by the primary dynamic mechanism, leads to a systematic change in a society’s institutional and organizational structure. Dynamic demand provides the incentives, opportunities, and imperatives for the changing structure of civilization. The unfolding of a dynamic strategy has a characteristic impact on the institutional make-up of society. Institutional change has no life of its own. While there may be some interaction between institutions and organizations it is not sufficiently important to generate the independent process of institutional change hypothesized by new institutionalists such as Douglass North (1990). Strategic confidence, which is the outcome of a successful dynamic strategy, is the force that keeps human society together. A successful dynamic strategy leads to a workable network of competitive/cooperative relationships, together with all the necessary rules and organizations. In economic transactions, individuals relate directly to the successful strategy and only indirectly to each other. It is not a matter of mutual ‘trust’ as such—of having confidence in the nature of other individuals—but, rather, having confidence in the wider dynamic strategy in which they are all involved and on which they all depend. What we know as ‘trust’ is derived from strategic confidence. Once the dynamic strategy has been exhausted and cannot be replaced, strategic confidence declines and, in extreme cases, entirely vanishes. And as strategic confidence declines, so too does ‘trust’ and cooperation. Strategic confidence is communicated directly to individuals in a society by the rise and fall in material standards of living and indirectly and less effectively through religious and secular ideology.

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GLOSSARY

Strategic costs rise as the dynamic strategy unfolds and society becomes increasingly complex. The reason is that increasing demands are made upon intellectual resources. Strategic costs have been viewed by institutionalists as transaction costs. These costs must be offset by rising benefits from the unfolding dynamic strategy. Strategic demand, which exerts a longrun influence over both the employment of resources and the institutional and organizational structure of society, is an outcome of one of the four main dynamic strategies. Shifts in strategic demand occur as the dominant dynamic strategy unfolds and as one dynamic strategy replaces another. These shifts elicit changes in society’s use of resources and its strategic institutions and organizations. Also see dynamic demand, tactical demand, and unfolding dynamic strategy. Strategic followers travel in the wake of the strategic pioneers. They seek information not about the costs and benefits of various investment alternatives, but about who and what is successful and why. When the pioneers earn extraordinary profits, they are emulated by large numbers of followers. This is the process of strategic imitation. Strategic imitation is the process by which strategic followers emulate the activities of the successful strategic pioneers. The followers attempt to imitate, not the mechanism of digital computers, but the dynamic strategies of successful pioneers. And as the followers successfully imitate the successful pioneers, a new dynamic strategy emerges to challenge the old. This concept is based on the demonstrable fact that the human species is driven not by ideas but by desires. We develop rules not to economize on information and ‘trust’ but on the world’s scarcest resource, intelligence. See also intellectual economizing. Strategic induction. This includes the ‘new deal’ that was introduced into advanced Western societies during the mid-twentieth century. It involved the forging of closer relationships between government, big business, and the community in general. The power of big business was regulated and new welfare programmes for the casualties of modern society were introduced. Some see this as the ‘ideological transformation’, but in fact it was an outcome of the unfolding technological strategy, which had been gradually drawing all sections of society into its compass. It was, in other words, an outcome not of a changing ideology, but of the increasing induction of all socio-economic groups as dynamic strategists. See also unfolding dynamic strategy. Strategic institutions are those formal and informal rules of conduct required to support the emergence and development of the various dynamic strategies. They include the economic and political system; the rules by which business is conducted; the way goods, services, and factors of production are bought and sold; the way business is financed; the way property rights are allocated; the way politics is conducted; and the way people interact at a social level. The type of dynamic strategy pursued has a characteristic and predictable impact upon all those institutions (see Table 3.1 on p. 56). The need for these rules increases as the dynamic strategy unfolds and strategic costs rise owing to increasing demands made upon scarce intellectual resources. See also unfolding dynamic strategy. Strategic leadership is closely associated with the success of the dominant dynamic strategy. It is important in generating and maintaining strategic confidence, which binds society together through a network of cooperative relationships. It is

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GLOSSARY

strategic leadership rather than ‘moral leadership’ (Casson 1991b:3) that is essential for the well-being of society. Like ‘trust’, the moral integrity of society is an outcome of a successful dynamic strategy. Strategic organizations are developed to facilitate the unfolding dynamic strategy. They emerge, in other words, in response to changes in strategic demand. For societies pursuing the family multiplication strategy these organizations involve kinship teams required for hunting and gathering; for conquest societies they include military and imperial organizations; for commerce societies they include trading and financial organizations, together with state naval and foreign service organizations; and for technological societies they involve industrial and commercial organizations together with state bureaucracies (see Table 3.2 on p. 59). See also tactical organisations and unfolding dynamic strategy. Strategic pathways are the trajectories traced out by the dynamic processes of societies pursuing one of the four dynamic strategies (or one of the more numerous substrategies). For technological societies these pathways are best measured by real GDP and real GDP per capita, while for commerce and conquest societies they are best measured by territorial size as these strategies involve imperial expansion (see Table 3.2 on p. 59). See also dynamic timescapes and unfolding dynamic strategy. Strategic pioneers are those innovators who successfully invest in aspects of a new and emerging dynamic strategy. They operate not on detailed information about benefits and costs, but on intuition about outcomes and faith in their own abilities. They embody the various available investment alternatives. They are but a small proportion of other equally optimistic risk-takers—the ones who got it right at the right time. The rest are weeded out by competitive forces. Their reward is to reap the extraordinary profits of which they dreamed. Strategic privileges. Societal values like justice, honour, and virtue should be thought of as strategic privileges produced by and distributed within any society at any point in time. They are part of the living standards of the dynamic strategists and can be thought of as ‘higher’ commodities consumed along with material goods and services. The production and distribution of strategic privileges, like that of material goods, depend on the unfolding of the dominant dynamic strategy. Strategic reversals. These occur when a traditional dynamic strategy exhausts itself and the only viable replacement strategy is one used in the past. An example is the conquest→commerce→conquest strategic sequence in ancient Greece, or the family multiplication→conquest→family multiplication sequence in China after AD 500. This leads to the reversal of the earlier victory of one group of strategists over another, such as merchants over warriors followed by warriors over merchants—as in Greece. It leads to a corresponding reversal in institutional development, which confounds the idea of social evolution. Strategic struggle. The strategic struggle is a contest between various groups in society for control of the sources of society’s resources and wealth. Although it employs political instruments it is fundamentally an economic struggle—a struggle for survival and prosperity in the face of scarce resources. This struggle involves a contest between either the new and old strategists, or between the strategists and the antistrategists. The instruments of this struggle include the dynamic tactics of order and chaos. If the transition of control between the old and new strategists does not

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GLOSSARY

occur smoothly, the strategic struggle will lead to civil wars or revolutions. And if the new strategists are not sufficiently economically powerful to overwhelm the old strategists quickly, the antistrategists may exploit the situation by hijacking the revolution through manipulation of the nonstrategists, and by creating a command system. In these strategic struggles the participants employ the dynamic tactics of order (laws, regulations, and ideology to induce compliance) and chaos (protest, rebellion, and revolution to overthrow the establishment). Strategic transfer. This is the process by which strategic control passes from the old strategists to the new strategists. This transfer may take place relatively smoothly if the new strategists are absorbed into existing institutions of power; it may take place violently through civil war and revolution if the old strategists are able to make a determined stand; and it may break down altogether and be hijacked by the antistrategists if the new strategists are not able to take control quickly. In the last two cases the strategic transfer turns into a strategic crisis. Strategic transfer is a critical phase in the history of any society, for it can lead to the continued development of more democratic institutions or to a return to more autocratic institutions. Strategists comprise the dynamic group in society which invests time and resources in pursuing and profiting from one of the four dynamic strategies (family multiplication, conquest, commerce, and technological change). The strategists are a diverse group. We must distinguish between the strategic pioneers (the more ambitious and riskaverse) and the strategic followers; and between the old strategists (supporters of the traditional strategy) and the new strategists (supporters of the emerging strategy). While there is synergy between the pioneers and the followers, the old and new strategists are generally involved in a struggle for control of society’s dominant dynamic strategy. This strategic struggle is at the core of institutional change and has been responsible for civil wars and revolutions. Also see nonstrategists and antistrategists. Tactical demand, which drives resources, institutions and organizations in the shortrun, changes with the changing balance of power between those groups in society struggling for strategic control. The strategic struggle generates a demand for tactical instruments of compliance and dissent, of order and chaos. Also see dynamic demand and strategic demand. Tactical institutions are used by ruling elites and their opponents to gain control of the dominant dynamic strategy and to effect short-term changes in the distribution of income and wealth. Just as the dynamic tactics can be divided into the categories of order and chaos, so can the institutions that are required to facilitate them. Orderly constraints used to achieve compliance include rules governing taxation; criminal and civil law; law enforcement; economic, social, and political exchange; property rights; and ideology, both religious and secular. Institutions of chaos include market deregulation, political and social reform, and radical ideology. See also strategic institutions. Tactical organizations are a response to the requirements of those employing the dynamic tactics of order and chaos. Even those wishing to break down existing power structures require organizations to do so. Tactical organizations of order are demanded by the ruling elite to force or persuade the rest of society to comply with their strategic and distributional objectives. They include state-controlled organizations: to raise revenue; to make and supervise civil and criminal law and

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GLOSSARY

enforce regulations; and to generate and disseminate the ideologies of order, both religious and secular. The tactical organizations of dissent and chaos are demanded by those who wish to change or overthrow the existing order to gain control of the dynamic strategy and to alter the distribution of wealth. They are organizations directed at issues such as: the abolition of slavery; the release of political prisoners; the promotion of environmentalism, feminism, land rights, wage justice, financial deregulation, and religious and political dissent. They are instruments in a dynamic struggle. Technological paradigm shifts. The progress of human society takes place within a dynamic structure defined by the great technological paradigm shifts in which growing resource scarcity is transcended by mankind breaking through into an entirely new technological era, thereby opening up extended possibilities for further economic growth. This involves the introduction of an entirely new set of techniques, skills, institutions, and outcomes. There have been three great technological paradigm shifts in human history: the palaeolithic paradigm shift when hunting displaced scavenging; the neolithic paradigm shift when agriculture displaced hunting; and the industrial paradigm shift when urban centres displaced rural areas as the major source of growth. Technological styles. Within the modern technological paradigm, the dynamic strategists of competing nation-states attempt to secure a comparative advantage in their pursuit of extraordinary profits by developing new technological styles. These technological styles—which historically have included: steam-powered iron machinery using coke (1780s–1830s); steel, synthetic chemicals, and complex machinery (1840s–1890s); electricity and the internal combustion engine (1900s– 1950s); automated processes, microelectronics, lasers, new construction materials, and biotechnology (since 1950s)—emerge within the existing industrial paradigm as it unfolds at the global level. They can be regarded as dynamic substrategies, which are the component parts of all dominant dynamic strategies. Unfolding dynamic strategy, the. It is important to realize that when I refer to the ‘unfolding’ of a dynamic strategy I do not mean that the strategy is tracing out some pre-ordained pattern of change like the emergence of a plant from a seed or the opening of a flower. A dynamic strategy ‘unfolds’ because economic decisionmakers, operating in a competitive environment and responding to changing relative prices, attempt to achieve their objectives of maximizing their probability of survival and prosperity by exploring all the possibilities provided by a particular dynamic strategy at a given time or place. There is nothing inevitable or unilinear about this process. See also dynamic strategy.

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546

INDEX

absolute monarchy: and Civil War and English commerce strategy 326–7 Adams, John Quincy: and westward expansion of USA 404 adaption: and strategic followers 40 Adriatic Sea: as Venetian ‘lake’ 242–3, 244 Aegean Sea: as Greek ‘lake’ 211 Africa Company: and English commerce strategy 290 Afro-Americans: and ownership of land 413; racial equality and participation of as strategists 413–14; and religion 412; social organization of 412 aggregate demand: and correlation with prices (England) 277, 516; defined 277; and dynamic demand 62; and strategic demand 277 agora: and Greek commerce strategy 221, 222, 228 Ahuitzotl (Aztec king): and Aztec expansion 182, 185 Albert, Prince: and constitutional monarchy (England) 327, 345 Alexander I (Russian tsar): and institutional reforms 448 Alexander Nevsky: and resistance against Swedes and Teutonic Knights 440 Alfred (king of Wessex): and creation of English nation-state 279 altruism: and cooperation 29, 117–18; defined 117; and motivation 28–9; see also ‘reciprocal altruism’ American Civil War: and American mega-state 365, 369, 380, 381; and American technological strategists 381; counterfactual of and

institutional change 390–2; and defence of Northern technological strategy 385; and dynamic-strategy model 381, 383; interpretations of 381–4; and slavery 379–81; as strategic struggle 379–83 American dependent-commerce strategy 392–5; and Atlantic Ocean as American ‘lake’ 392–5; and emergence of technological strategy in North 394 American family-multiplication/ westward expansion strategy 369–84; 1st substrategy (Northern states) 377; 2nd substrategy (Southern states and corn production) 377; 3rd substrategy (Southern states and cotton production) 377; and declining birth rates 409; exhaustion of 373, 385, 405; and expansion of markets 378; and franchise 404; and industrialization of Northern states 378; supernormal profits from 378– 9; and yeomen farmers 408–9 American history: reinterpretation of 13 American mega-market: emergence of 392; limits of 387, 395; and mass culture 415; and mega-corporations 385; and transport technology and infrastructure 374–5 American mega-state: and American Civil War 365, 369, 380, 381; emergence of and changing political institutions 401; and Republican Party after Civil War 405; and unfolding of dynamic strategies 366 American Revolution: counterfactual of and institutional change 390–2; and

547

INDEX

dynamic strategy of territorial expansion 297–8; interpretations of 371–2; and strategic choice 369; and strategic struggle with English commerce strategy 369, 370, 402 American technological strategy 384–90; 1st substrategy (to Great Depression) 385–8; 2nd substrategy (from Second World War) 388–90; and architecture 398; and ‘business’ class 410; and business elite 414; challenges to 389– 90; and civil rights 407; and competition with USSR 407; and declining birth rates 409; defence of and American Civil War 385; and distribution of wealth 414, 415; and dominance of Republican Party 405– 6; and economic growth 385–6, 389; and efficiency 385–6; emergence of in North 394; and expansion of domestic market 403–4; and family size 411, 418; and global market 387, 388, 406–7, 416, 416–17; and Great Depression 416; and household 411; and industrialization 384; and international competition 389–90; and investment and strategic imitation 400; and isolationism 406– 7; and limits of domestic market 386–7; and mass culture 415; and mega-buildings 398; and mega-cities 396–8, 414; and motorcar 417; and participation of working classes 403; racial equality 413–14; and religion as social control 411; and salaried middle class 415; and shift from production of goods to services 417; and shift from rural to urban activities 417; and shift of married women into paid work 417, 417–18; and standardization tactic 389–90; and strategic demand for AfroAmerican labour 414, 417; and strategic demand for women workers 417, 417–18; and strategic participation 407–8; and suburbanization 414–15, 417; and territorial expansion/imperialism 406; and transport technology and infrastructure 374–5, 384; and urbanization 414, 417; and use of science in industry 386; and welfare

407; and westward expansion 404; and women’s rights 411; and working classes 383, 410, 414, 415; and working-class market 416 ancient economy: and conquest strategy 131 Anglo-Saxon religion 335–6 animal behaviour: contrasted with human behaviour in sociobiology 109–12; and genetics 122–3; and imitation 112; new (materialist) model of 123–4; and ‘reciprocal altruism’ 117 animal life: and strategic imitation 40 animal social organization: and genetic determinism of in sociobiology 112 Anne (queen of England): and limited monarchy 332 Anthony (Marcus Antonius): and strategic struggle (Roman Republic) 157–8 antistrategic societies see Communist China; Nazi Germany; Union of Soviet Socialist Republics; Venetian static society antistrategists: Bolsheviks 450–1; and cold war 407; and command system 64, 451, 451–8; and culture 71; defined 10, 518; ecological engineers as 508; Jacobins 353; landowning aristocracy as (Roman Principate) 144, 169; and old strategists 64; and rent-seeking 10, 201, 451, 478, 478– 9; Roman emperor and landowning aristocracy as 144, 169; and rules 49; ruling elite as 10, 201; and strategic organizations 60; and strategic struggle 8, 64; and strategic and tactical organizations 60; see also Chiang Kai-shek; Gracchus, Tiberius Sempronius; Hitler, Adolf; Lenin, Vladimir Ilyich; Mao Zedong; Stalin, Joseph Aristotle: and democracy 236, 238 artificial intelligence (AI): and decisionmaking 47 artisans: Aztec 201; Greek 211, 224 Athelstan (king of England): and creation of English nation-state 279, 310 Athenian commerce strategy: and change to conquest strategy 215; and monarchy 223; and monopoly 223;

548

INDEX

and reforms of Cleisthenes 224, 233; and reforms of Solon 223; and ruling elite 225–6; and strategic struggle 223, 226 Athenian conquest strategy 214–15; failure of and democracy 233, 234; as hegemonic conquest strategy 232, 233; and Peloponnesian War 215; and Pericles 215, 234; and ruling elite 234 Atlantic Ocean: as American ‘lake’ 392–5 Augustus (Gaius Octavius/Gaius Julius Caesar Octavianus—Roman emperor): and strategic struggle 156, 157, 163;and use of dynamic tactic of order 163 Austen, Jane: and interests of commerce strategists (England) 362 Austria: and EU 437; and European FreeTrade Association 433 ‘automatons’: individuals treated as by sociobiology 101, 105–6 Axayacatl (Aztec king): and Aztec expansion 182, 184 Ayres, C.E.: and institutional change 74 Aztec conquest strategy: 1st substrategy/ long wave (1325–72) 183; 2nd substrategy/long wave(1372–1427) 183–4; 3rd substrategy/long wave and 1st wave of imperialism (1427– 79) 184; 4th substrategy/long wave (1486–1519) 184–5; and change under Moteuczomah the Younger 183; and city-state system 188, 189, 190; and class mobility 200; and early dependence on Tepanec conquest strategy 20, 180, 183; and expansion of trade 187; as hegemonic conquest strategy 148, 180–1; and hegemonic conquest strategy’s weaknesses 182, 183, 185, 189, 202; and investment in campaigning 192, 194–5; and investment in training 192–4; and landowning aristocracy 186, 189; and long-distance conquests 181–3; and looming strategic crisis 203–4; andmonarchy 163, 180, 183, 189, 192, 200; and rebellion 188–9, 189, 190, 202; and religion 195, 197; returns from 194; and ruling elite 186, 187, 188, 192, 195, 200, 202; and Spanish invasion 202–4; unfolding of 183–5

Aztec Empire: and Cortés 176; interpretations of institutional change in 515–16; structure of society in 185–202; territorial expansion of 178–85; see also Tenochtitlan Aztec history: reinterpretation of 14 Aztec pantheon 196 Aztecs: and existential schizophrenia 198 Bank of England 323 behaviour see human behaviour Belgium: and Benelux Customs Union 432; and European Coal and Steel Community 431, 433 Bellini, Gentile: and Venetian art 266 Bellini, Giovanni: and Venetian art 266 Bellini, Jacopo: and Venetian art 266 benefit—cost calculus: and strategic followers 40–1 Benelux Customs Union 432 Black Death 85; and English strategic choice 284; and Hundred Years War 284 Bo Yibo: and opposition to Mao 481 Bolsheviks: and Russian Revolution 447;and strategists 452; see also Lenin, Vladimir Ilyich; Stalin, Joseph Bonaparte, Napoleon: and administrative and legal reform (France) 353; and war with Russia 448 bounded rationality: and decisionmaking 33–5; and neoclassical economics 33–5 Boxers: and Chinese opposition to West 474–5 Brezhnev, Leonid: and reform of Soviet command system 459, 460 Britain see England; United Kingdom of Great Britain and Northern Ireland British Empire: and technological strategy 274–5 British imperialism 294–6; Cain and Hopkins thesis of 296, 297–8; dynamic-strategy model of 299–300; Edelsteinon 298–9 British Industrial Revolution see Industrial Revolution building pattern books: and imitative information 44–5 ‘business’ class: and American technological strategy 414; in Russia

549

INDEX

448; as strategists in American technological strategy 410 Byzantine Empire see Eastern Roman (Byzantine) Empire Caesar, Gaius Julius: and imitative information 43, 512; and strategic struggle (Roman Republic) 155, 157 Campbell, Colen: and imitative information 44 Canning, George: and Conservative Party (England) 352 Canute (Cnut): king of Denmark and England 281 capital market: and commerce societies (England) 322; in conquest societies (England) 307; in conquest societies (late Roman Republic) 160; and London 322; and technological societies (England) 343–4; and technological societies (USA) 400 capitalism: as economic system 308–9; rise of (England) 308; see also mercantile capitalism Carthaginian commerce society: and Greeks 213–14; see also Punic Wars Casson, Mark: and transaction costs 512–13 Catholicism: and conquest societies 327 centrifugal force: in concentric spheres model of human behaviour 31; see also self-interest centripetal force: in concentric spheres model of human behaviour 31; see also cooperation chaos, dynamic tactic of: and conquest strategy 207; institutions of 56–7; and new strategists 64; organizations of 60–1; and rules 53; and strategic exhaustion 65–6; see also dissent chaos, forces of: and barbarian invasions of Western Roman Empire 170, 171; and Christianity (late Roman Principate) 173 Charles I (king of England): and English commerce strategy 288, 329; and Parliament 328 Charles II (king of England): and English commerce strategy 331–2 Chiang Kai-shek (Jiang Jieshi): antistrategist 477; and middle-class revolution 473

children: parental investment in see parental investment China: 1st great wave of economic change (Song period c.1000–c.1300) 467, 467–9, see also Song China; 2nd great wave of economic change (1500–late 18th C.) 467, 469–71, see also Chinese family-multiplication strategy; 3rd great wave of economic change (from late 18th C.) 467, 473– 85, see also Communist China; administrative reforms in 475–6; administrative system of 471–2; as antistrategic state 478–85, see also Communist China; and Chinese Revolution and strategic struggle 9; civil war between Nationalists and Communists 473, 477, 478; and construction of mega-market 466–73, see also Song China; and economic development 476; and economic expansion 467; and economic growth 474, 475; and external competition 466–7; and family-multiplication strategy 466, 473, 474, see also Chinese family-multiplication strategy; and foreign investment 476; and industrialization 477; as mega-state 485–6; middle classes in 475–6; middle classes as strategists 476, 478; and middle-class revolution 473, 475– 6; and modernization 473, 474–6; and modified conquest strategy 472; and passive resistance to West 473, 473–4; and regulation of trade with West 473, 474; and rent-seeking 473, 474, 477; and response to West 473– 8; and scholar bureaucracy 472; and strategic choice 470, 473; and strategic demand for science and technological change 470, 471; and strategic reversal 65; and strategic struggle of old and new strategists 475–6; and territorial expansion 422, 425–7; and transition to free-market mega-state 425; and unfolding dynamic strategy and institutional change 471–2; and war with Japan 473, 477; and warlord control 476, 476–7 Chinese family-multiplication strategy: and internal trade 469; and

550

INDEX

isolationist policies 469; and local administration 469; and manufacturing industry 469; and population growth 470; and rentseeking 470; revival of 472; and technological change 469–70; and urbanization 469 Chinese history: reinterpretation of 13 choice: in animal behaviour 123–4 ‘choice’: in sociobiology 101, 105–6, 107–12 Christianity: and Anglo-Saxons 335; and English commerce strategy 359; and English technological strategy 359– 60; and forces of chaos (late Roman Principate) 173; rise of and exhaustion of Roman conquest strategy 168; role of and strategic demand (England) 359; in Roman world 166; and slaves in USA 412; and social control 336, 359–61; used by Constantine as tactic of order 174; see also Catholicism; Methodism; Protestantism; Reformation Chubais, Anatoly: and new Russian strategists 464 Ci Xi (Manchu Empress Dowager): and Boxers 474–5; and modernization reforms 475 city-state system: of Greece and commerce strategy 220–1; of Mesoamerica and conquest strategy 188, 189, 190 city-states: competitive balance of (Greece) 208, 210, 211, 215, 216, 218, 220, 227–8; see also north Italian city-states civil wars: China 473, 477, 478; and lack of strategic confidence 329; Roman 143, 155–8; see also American Civil War; English Civil War ‘class’: development of hierarchy of (late Roman Principate) 172; and Marx 9, 10–11, 201, 355, 410; and strategic groups 355 class mobility: in Aztec Empire 200; in Greece 225; see also social mobility class structure: of Aztec Empire 180, 185, 186–7, 200–2; of early Roman Republic 145, 146, 147; of Greek tribal society 219; of Sparta 217

class struggle, Marxian: and Aztec Empire 201; and strategic struggle 9 Claudius (Tiberius Claudius Nero Germanicus—Roman emperor): and shift to rent-seeking (Roman Principate) 169 Cleisthenes: reforms of in Athens 224, 233 cliometric history see new economic history coal prices: England 276, 277; world 497, 498 cold war: and defence of technological strategy 505; as struggle between strategists and antistrategists 407 colonization: and defence of technological strategy 294–5; and English commerce strategy 290, 320, 321–2; and English technological strategy 294; and Greek commerce strategy 212– 13, 220; of North America by jointstock companies 367; Spartan 216; and Venetian commerce strategy 247; see also imperialism command system: and antistrategists 64; and conquest strategy 339–40; and market system 459–60, 462–3; see also Communist China; rent-seeking; Soviet command system commerce: before and after Industrial Revolution 296–7 commerce empire: and correlation of territory and GDP 208–9 commerce societies: and agriculture (England) 317; and agriculture (Greece) 226, 226–7, 229; and agriculture (Venice) 260; and artisans (Greece) 223–4; and banking (Venice) 261–2; and bureaucracy (Venice) 258; and capital market (England) 322; and city-state 421; and city-state system (Greece) 220–1; commerce and industry (Greece) 221, 225, 229; commodities of (Greece) 211; and culture 207, 265, 361, 361–2; and culture (England) 361–2; and culture (Greece) 219, 236; and culture and strategic change (Greece) 235–6; and culture (Venice) 265–7; and decentralized decision-making 221, 222; and decentralized decisionmaking (Greece) 221, 222; and

551

INDEX

democracy (Athens) 224, 233–4; and democracy (Greece) 221; economic system of (England) 318–25; economic system of (Greece) 228–30; and education (England) 334–5; and education (Venice) 263–4; and entrepreneurial institutions 322; and factor markets 225, 228–9; and factor markets (England) 322–4; and factor markets (Venice) 260; and financial institutions (England) 322– 3; financial institutions of (Greece)228–9; financial institutions of (Venice) 261–2; and guilds (Venice) 263; and institutional change and strategic change (Athens) 234, 235; and institutional change and strategic change (Venice) 235; and judicial institutions (Venice) 257; and labour market (England) 318, 324; and labour market (Greece) 229; and labour market (Venice) 262; and land (Venice) 260; and land market 323–4; legal institutions of (England) 332; legal institutions of (Greece) 223; and local government (England) 332–3; and manufacturing industry 252; and manufacturing industry (England) 317; and manufacturing industry (Venice) 262–3; and market (Greece) 228; and merchants (Greece) 223–4; military defence of (Greece) 211, 213; and military organization (England) 330; military system of (Greece) 225–6, 226, 227; military system of and strategic change (Athens) 235; and mining and industry (Greece) 226–7, 229; and monarchy (Greece) 221; and monetary system (England) 323; monetary system of (Greece) 228; monetary system of (Venice) 260; and navy (Venice) 243–5, 246, 247–8; and order and balance 207, 231, 232, 236, 265; and Parliament (England) 326–32; and philosophy and science 232; political system of (Athens) 223, 224, 234; political system of (England) 325–33; political system of (Greece) 221–2; political system of (Spartan) 217; political system of (Venice) 254, 256–9; and

popular entertainment (England) 361–2, 362; and property rights (England) 325; and protection (England) 318–19; and Protestantism 327–8; and public games (Greece) 231; and rationality (Greece) 232; and reforms of Cleisthenes (Athens) 224, 233; and reforms of Solon (Athens) 223; and religion 230; and religion (England) 335–7; and religion (Greece) 230–1, 236; and religion (Venice) 264–5; and Renaissance (north Italian city-states) 265–6; social system of (England) 333–7; socioeconomic structure of (Greece) 225–7; strategic institutions in 54–5, 56, 57; strategic organizations of 58, 59; and territorial expansion (Venetian) 240, 242; and trade (England) 317, 319– 21; and trade (Greece) 211–13, 213, 219, 223; and trade (Venice) 240, 242, 243–6, 248, 254; and trading companies (England) 319–20; and trading empire 421; and transformation of monarchy (England) 327, 332, 333; and transport (Greece) 211; and usury (Venice) 261; Venetian 254–71; Venice as ‘pure’ example of 254, 260; see also American dependentcommerce strategy; Athenian commerce strategy; Carthaginian commerce society; English commerce strategy; Greek commerce strategy; Russian commerce strategy; Spartan commerce strategy; Venetian commerce strategy commerce strategy 6, 206; and 15thcentury break-out of Western Europe 287; and the city 316; and collective/ decentralized decision-making 256; and colonial empire/ imperialism 326; and culture 266, see also Renaissance; and defensive nature of military system 214, 215, 227, 235; and democracy 221–2; difference from trade 213, 245; facilitation of and ‘lake’ 211, 394, see also Adriatic Sea; Aegean Sea; Atlantic Ocean; North Sea; and Greek city-state 220– 1; and manufacturing (England) 287;

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and mercenaries 235; and monopoly 213, 341–2; and nation-state (Western Europe) 325–6; and religion 220, 236, 264–5; shift to by Eastern Roman (Byzantine) Empire 170; and slavery 229; and supernormal profits through monopoly 316; and technology 293; see also commerce societies commercial expansion: and Industrial Revolution 293–4; and technological strategy 293–4 ‘commercial industrialization’: and Industrial Revolution 292–3 commodity market: and conquest societies (England) 306–7; and industrialization of North (USA) 404; and technological societies (England) 342 commodity markets: emergence of in Western Europe and strategic sequence 339–40 Common Market see European Economic Community commoners (Aztec Empire) 201 Commons, John R.: and distinction between institutions and organizations 78, 85–6; and influence on North 85, 87; and new institutionalism 81; and transaction costs and property rights 77–8 Communist China: and antistrategists and rent-seeking 478, 478–9; and collectivization 481; comparison of reforms in with Russia 484–5; and Cultural Revolution 482–3; and development of market system 484, 485; and economic reforms 483–5; economic reforms and mega-market 484; and fragmentation of megamarket 482; and Great Leap Forward 482; and peasants 479, 480; and reemergence of strategists 485; social structure of 478; and Soviet command system model 480, 481–2, 484–5; and strategists 478, 479, 481 competition: among Greek city-states 208, 210, 211, 215, 216, 218, 220, 227–8; between England and France over territory 280–1; between kingdoms of Western Europe and agriculture 280–1; between kingdoms

of Western Europe for commercial dominance 291; between kingdoms of Western Europe and trade 280–1; between mega-states 407, 421; between mega-states and cold war 407; between mega-states and exhaustion of industrial paradigm 486, 492; between mega-states and fifth technological paradigm 492–3; between mega-states and fourth technological paradigm shift 421; between nation-state and mega-states 489; and economic distance 30–1, 126; environment of in Western Europe 274; external and China 466–7; external and English conquest strategy 281–2; external and Japanese technological strategy 492; external and Russian technological strategy 491–2; international and American technological strategy 389– 90; international and English technological strategy 344–5; in late industrial technological epoch and mega-states 489–90; with mega-states (England) 433; and rent-seeking 492; revival of and Venetian commerce strategy 251–2; and strategicimitation model 49–50; and strategic pioneers 39; see also monopoly; selfinterest concentric spheres model of human behaviour 126; defined 518; and motivation 29–31; and strategic confidence 31–2; see also competition; cooperation; economic distance; self-interest condottieri see mercenaries conformism: and imitation 45 conquest economy: and strategic demand 131 conquest empire: and correlation of territory and real GDP 208 conquest societies 131–2, 206, 207; administration of (England) 310–11; and administration of Tenochtitlan (Aztec Empire) 191–2; and agriculture (Anglo-Saxon England) 279; and agriculture (Aztec Empire) 185, 186, 303–4; and agriculture (England) 280–1, 281, 282; and agriculture (Roman Empire) 141,

553

INDEX

144, 148–9, 160–1; and barter system (Aztec Empire) 186; bureaucracy in (England) 283; bureaucracy in (middle Roman Republic) 147, 148; bureaucracy and rent-seeking in (late Roman Principate) 171; bureaucracy in (Roman Principate) 164, 169; bureaucracy in (Venice) 269; calendar (Aztec Empire) 198–9; capital markets in (England) 307; capital markets in (late Roman Republic) 160; and Catholicism 327; and centralized government (Anglo-Saxon England) 279; class structure of (Aztec Empire) 180, 185, 186–7, 200–2; class structure of (early Roman Republic) 145, 146, 147; class structure of (Spartan) 217; and coercive empire 421; and colonization (Sparta) 216; and commodity market (England) 306–7; and craft manufacture (Aztec Empire) 186, 188, 201; and culture (Aztec Empire) 199–200; and culture (England) 361; and culture (Greece) 219, 236; and culture (Roman) 207– 8; and democracy (Spartan) 224–5; economic resilience of (Spartan) 218; economic system of (England) 303–9; economy of (Aztec Empire) 185–8; economy of (early Roman Republic) 145; economy of (middle Roman Republic) 148–9; economy of (late Roman Republic) 153–4, 158–62, 203; and economy and feudal state (England) 304; education in (Aztec Empire) 192–4; education in (middle Roman Republic) 149–50; and factor markets (England) 307–9; and feudal system (England) 304–6; and financial administration (England) 312–13; financial institutions in (England) 307–8; financial institutions in (late Roman Republic) 160; and franchise (Russia) 448, 449; and imperial administration (Athens) 233; and imperial administration (Aztec Empire) 189–90; and imperial administration (Sparta) 233; and imperial administration (Thebes) 233; and institutional reforms

554

(Russia) 448; institutions of public violence (human sacrifice) (Aztec Empire) 196–7, 198; institutions of public violence (war—and gladiatorial games) in (middle Roman Republic) 151–2; institutions of public violence (war—and gladiatorial games) in (Roman Principate) 152–3; judicial institutions of (England) 310–11; labour force of (England) 304; labour market in (England) 307; labour market in (late Roman Republic) 160–2; labour organization in (Russia) 441–2; land market in (England) 307; land market in (late Roman Republic) 162; legal education in (late Roman Republic) 154; legal institutions of (middle Roman Republic) 150–1; and manorial system (England) 304–7; and manufacturing industry (England) 281; and manufacturing industry (Russia) 448; and market economy (England) 304; markets in (late Roman Republic) 158–62; military system of (Athens) 235; military system of (Aztec Empire) 192–5, 203–4; military system of (Greece) 227; military system of (early Roman Republic) 147; military system of (middle Roman Republic) 149; military system of (late Roman Republic) 155; military system of (Roman Principate) 164, 165; military system of (late Roman Principate) 171–2; military system of (Russia) 441; military system of (Venice) 249; and monarchy (Aztec Empire) 163, 180, 183; and monarchy (Roman Empire) 134, 167–8; monetary system of (late Roman Principate) 170; monetary system of (late Roman Republic) 158–60; monetary system of (Roman Principate) 164; New World 178, see also Aztec Empire; Olmec Empire; Teotihuacan Empire; Tepanec Empire; Toltec Empire; and overseas colonies (late Roman Republic) 154; political structure of (England) 309– 17; political structure of (Venice)

INDEX

267–9; political system of (Aztec Empire) 180, 188–92; political system of (early Roman Republic) 146–7; political system of (middle Roman Republic) 149; political system of (late Roman Republic) 203; political system of (Roman Principate) 163–4; political system of (England) 309–16; political system of 224, 303; political system of (Russia) 448–50; and popular entertainment (England) 361; and popular entertainment (Rome 361; and population (late Roman Principate) 170; and religion 230, 231; religion in (Aztec Empire) 195–200; religion in (early Roman Republic) 147–8; religion in (Roman Principate) 165– 8; and slavery (Aztec Empire) 201, 203, 204; and slavery (late Roman Republic) 153, 161–2; and slavery/ serfdom (Sparta) 216, 216–17; social structure of (England) 304; social structure of (Venice) 269; social system of (Russia) 440–2; sociopolitical structure of (early Roman Republic) 145–6; and strategic struggle (late Roman Republic) 154–8; and taxation (England) 280–1, 282; and technological change 340; and territorial expansion (Greece/Athens) 215; and territorial expansion (Venice) 240, 242; and trade (AngloSaxon England) 279–80; and trade (Aztec Empire) 186–8; and trade (England) 281; and trade (Greece) 232; and transport (Aztec Empire) 185; and tribute 232, 233; and tribute (Aztec Empire) 186, 189, 190–1, 195, 200; and tribute (Greek/ Athenian) 215; and tribute (Spartan) 216, 218, 233; urbanization in (Aztec Empire) 176–7; Venetian 267–9; see also Athenian conquest strategy; Aztec conquest strategy; English conquest strategy; Greek conquest strategy; Macedonian conquest strategy; Roman conquest strategy; Russian conquest strategy; Spartan conquest strategy; Venetian conquest strategy

conquest society: strategic institutions in 54, 56, 57; strategic organizations of 58, 59 conquest strategy 6, 206; adopted by English (Anglo-Saxons) 279; and ancient economy 131; and centralization of decision-making/ control 256, 268; and command system 339–40; and dissent 268; and dynamic tactic of chaos 207; and economic growth 503; and first great wave of GDP (England 1000–1300 AD) 275, 275–6; and ‘great wheel of civilization’ 198; Greek 214–18; and Greek city-states 214; and institutions of pre-modern societies 131; and monarchy 267–8; and nation-state 309; and offensive nature of military system 214, 215, 227, 235; and religion 220, 236; and slavery 229; and strategists 36; territorial and hegemonic 148, 181, see also hegemonic conquest strategy; territorial conquest strategy; and war 503; see also conquest societies; territorial expansion Conservative Party (England) 352 Constantine I (Flavius Valerius Constantinus—Roman emperor): conservative policies of 171–2; and end of emperor worship 168 constitutional monarchy: and English commerce strategy 327 consumer demand: and cultural change 68–9 cooperation: and altruism 29, 117–18; and economic distance 30; and selfinterest 29, 31 Corn Laws (England): interpretations of 347–8; and strategic struggle 347–8 Cortés, Hernán (Hernando): and Aztec Empire 176, 183, 185 craftsmen: as nonstrategists in English commerce strategy 346; see also artisans Crassus, Marcus Licinius: and strategic struggle in late Roman Republican period 157 Cromwell, Oliver: and English commerce strategy 331 Crusades see First Crusade; Fourth Crusade

555

INDEX

cultural change: and consumer demand 68–9; defined 68; and dynamic strategies 70; general model of 68– 71; and institutional and organizational change 68 cultural evolution: and Hayek 81–4; and sociobiology 119, 120 culture: and antistrategists 71; and commerce societies 207; and dominant dynamic strategy 70–1; and the Dynamic Society 70–1; and strategic demand 70; and strategists 70–1; see also cultural change; cultural evolution Dandolo, Enrico (doge of Venice): and Fourth Crusade 246, 257; and Venetian monetary system 260 Darwin, Charles: as dissenter 45; and natural selection 4, 5, 75–6, 98, 99, 100; and ‘sexual selection’ 99–100, 100–1; and sociobiology 2, 98, 99, 102, 121; and ‘struggle for existence’ 4, 76, 98, 99, 100, 101 de Gaulle, Charles: and French nationalism 435 decision-making: and artificial intelligence (AI) 47; and bounded rationality 33– 5; and deskes 26; and imitation 36–7, see also strategic imitation ; and imitative information 40–5; and information 36; and intellectual economizing 46–9, 112; and intelligence 47–8; and intuition 36, 37, 48; Keynes on 32; and modern evolutionary institutional economics 78–80; and new institutionalism 35–6; pioneering mechanism of 39–40; the process of 32–46; realist model of 36– 46; and routine 48; and rules 26–7; Simon on 33–5; and strategic followers 40; and strategic imitation 11–12; and strategic pioneers 37–40; Veblen on 74–5, 77; see also ‘choice’; genetic determinism; imitation; strategic-imitation model deflationary policies: of EU 437; and policy-making in late 20th century 499, 501, 502–3; and strategic confidence 32; see also inflation; price stability Delian League: and Athenian conquest strategy 214–15

demand see aggregate demand; consumer demand; dynamic demand; strategic demand; tactical demand democracy: and Aristotle 236, 238; and commerce societies (Athens) 224, 233–4; and conquest strategy (Athens) 233, 234; and failure of Athenian conquest strategy 233, 234; and landowning aristocracy (Athens) 234; and Plato 238; and rent-seeking (Athens) 234; and Roman conquest strategy 221–2; and Spartan commerce strategy 225; and Venetian commerce strategy 259 Democratic Party (USA): as new strategists 407–8; and rural interests 405; and strategic interests of the South 404–5 Deng Xiaoping: and Cultural Revolution 483; and economic reforms 483, 484, 485; and opposition to Mao 479–80, 481, 482; and Tiananmen massacre 480 Denmark: and European Community 432, 437; and European Free Trade Association 433 dependent-commerce societies: and export markets (USA) 392–5; see also American dependent-commerce strategy dependent-commerce strategy: and Southern states (USA) 379; and USA 367–9 desires: and decision-making 26; and human behaviour 25; and ideas 38, 46; and intellectuals 28; and motivation 28; and strategic pioneers 38 differential gender mortality: and sociobiology 106–7 Diocletian (Gaius Aurelius Valerius Diocletianus—Roman emperor): conservative policies of 171 Disraeli, Benjamin: and Conservative Party (England) 352 dissent: and conquest strategy 268; and Euripides 236; and imitation 45; and Plato 236; and Socrates 236; and sophists 236; and static societies (Venice) 270; see also chaos, dynamic tactic of Domesday Book: and English feudal economy 304, 306; and financial administration (England) 312

556

INDEX

domestic market: expansion of and American technological strategy 403– 4; limits of and American technological strategy 386–7; and North American colonies 394–5; and transport technology and infrastructure (USA) 394–5; and westward expansion (USA) 394 Donne, John: and interests of commerce strategists (England) 362 Douglas, Stephen: and Missouri Compromise 380 Duma: and Russian strategic struggle 448–50 dynamic demand: and aggregate demand 62; defined 518–19; and institutional change 61, 62, 62–6, 68; and institutional supply 66–7; see also strategic demand; tactical demand dynamic materialism: defined 519; and technological paradigm shifts 6–7 dynamic pathways: of eternal recurrence of ancient world/war and conquest 273; linear 273; see also strategic pathways dynamic strategies 207; choice of see strategic choice; comparison of strategic choices of Greeks and Anglo-Saxons 280; and cultural change 70; defined 519; and differences in social systems of North and South (USA) 409–10; and factor endowments 324; and ‘free soil’ and ‘slave’ states in USA 379, 380; and institutional change 510–11; and political power 270; and strategic confidence 31–2; and strategic institutions 54–5; strategic organizations and changing of 58; and strategic-type institutions 222; and strategists 346; see also commerce strategy; conquest strategy; family-multiplication strategy; static strategies; technological strategy; unfolding dynamic strategy dynamic strategists see strategists dynamic-strategy model: of American Civil War 381, 383; of British imperialism 299–300; of collapse of Soviet command system 462, 462–3; of English Civil War 330; and eternal recurrence of ancient world/war and

conquest 175; and future of China as mega-state 485–6; and future research 15; and global-state 490; and inefficient institutions 66–7, 96; and institutional change 5–15; and policymaking 18, 19, 498–510, see also under policy-making; and prediction 12, 19, 488; of property rights 325; and reinterpretation 12–14; and Roman history 513–15; of shift from feudalism to mercantile capitalism 324–5; and Song China 470 dynamic strategy of territorial expansion: and American Revolution 297–8 dynamic tactics of order and chaos: defined 519; in establishment of Roman Principate 155–6, 163; and exhaustion of Roman conquest strategy 169; and unfolding dynamic strategy 65–6; see also chaos, dynamic tactic of; forces of order and chaos; order, dynamic tactic of; strategic struggle; tactical demand; tactical institutions; tactical organizations dynamic timescapes: defined 519; see also strategic pathways dynamics of human society: and economics 2–4; and existential schizophrenia 1–2; and sociobiology 2, 4–5 East India Company: and English commerce strategy 290; joint-stock company 320, 322 Eastern Europe: and EU 438, 439 Eastern Roman (Byzantine) Empire: and commerce strategy 170; and influence on Venetian art 266; and naval assistance from Venice 243–5; and trade with Venice 243–6; and Venice 239–40, 254 ecological engineers: as antistrategists 508; and growth-inducing technological change 506–7, 508, 511 economic distance: and competition 30– 1, 126; and cooperation 30, 126; defined 29–30, 519; and ‘genetic distance’ 513; see also concentric spheres model of human behaviour economic expansion: and economic growth 466; and family-

557

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multiplication strategy 466; and technological change 466 economic growth: of China 426, 427, 428; and conquest strategy 503; dynamic-strategy policies for 503; and economic expansion 466; and English commerce strategy 317, 516–17; and family-multiplication strategy 466; and Gross Community Income 466; of Japan 426, 427, 428; rates of and comparison of Palaeolithic, Neolithic, and Industrial Revolutions 293; rates of and unfolding dynamic strategies 300–1; rates of and unfolding technological strategy 301–2; slowdown in and technological paradigm shifts 493, 494; of technological mega-states 425–8; and technological strategy 504; undermining of and policy-making in late 20th century 498–503; of USA 366, 385, 426, 427, 428; of USSR 426, 427, 428; and Victorian/Edwardian entrepreneurial ‘failure’ 300–1, 302; of Western Europe 426, 427, 428 economic man (neoclassical): and materialist man 27–8 economic resilience: of Spartan society 218 economics: crisis in 81; and dynamics of human society 2–4; and evolutionary model 3; lack of theory of in GrecoRoman world 44; and societal dynamics 73; see also evolutionary institutional economics, modern; historical schools of economics; institutional economics; neoclassical economics; new institutionalism Edward I (king of England): and tax rebellion 284 Edward III (king of England): and Hundred Years War 284–5, 315 Edward (king of Wessex): and creation of English nation-state 279 EEC see European Economic Community efficiency: and American technological strategy 385–6; real GDP/GDP per capita as measure of 275; and technological strategy 275 elite planter class: and rent-seeking (USA) 413; in Southern states (USA) 409, 411–12

Elizabeth I (queen of England): and English commerce strategy 288; and governing through gentry 327–8; and intervention in economy 318; and strategic struggle with middle classes 328 energy: sources of 494, 496–7; and technological paradigms 493; see also fuel energy prices 495–6, 497, 498 energy use: Europe 499, 500 England: 1 st great wave of economic change and conquest strategy (1000– 1300) 275, 275–6, 280–7; 2nd great wave of economic change (1480– 1750) 275, 276, 287–91; 3rd great wave of economic change and technological strategy (1760s–2000) 275, 276–7, 292–302; and competition with mega-states 433; emergence of nation-state of 277–80; and EU mega-state 302; and global technological strategy 422; great waves of economic change 275–7; and imperialism 425; and joining EU 433; motivation and 11th-century economy of 27; and opium trade to China 473; pattern of prices 277; strategic pathway 275–7; and strategic sequence 8, 338–40; see also British Empire; United Kingdom of Great Britain and Northern Ireland English Civil War: and English commerce strategy 288, 329–32; Marxist interpretation of 330; and middle classes 329–30; and monarchy 326; and strategic confidence 329; and strategic struggle 9 English commerce strategy 287–91; 1st substrategy (late 15th–16th C.) 287– 90, 316; 2nd substrategy (17th C) 289–91; 3rd substrategy (18th C.) 291; and absolute monarchy and Civil War 326–7; and American Revolution 369; Charles I and 329; Charles II and 331–2; and Christianity 359; and Civil War 288, 329–32; and colonization of North America 367; and colonization/ imperialism 290, 291, 320, 321–2; and constitutional monarchy 327; craftsmen and labourers as

558

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nonstrategists in 346; and economic growth 317, 516–17; and enclosures 318; and environment of emergence of 287, 288–9; exhaustion of 292; and gentry 288, 333; and great wave of economic change (1480–1750) 275, 276; and intervention of monarch 318–19, 320; and landowning aristocracy 288, 333; and limited monarchy 332; and London 316–17; and lower classes 334; and manufacturing 287; and market mechanism 318; and middle classes 318; and monarchy 333; and monopoly 291, 318–19, 341; and Parliament 326–32; participation of North American colonies in 367; and protection 318; and Protestantism 327–8; and Reformation 337; and religion 327–8; returns from 296; and slavery 321–2; and social mobility 333; and strategists 355; and struggle with Dutch for dominance 291; and Stuart dynasty 328–32; and westward expansion of North American colonies 370; William of Orange and 288, 291, 332; and wool trade 289; and yeoman farmer 334 English conquest strategy 280–7; 1st substrategy (to 1066) 280–2; 2nd substrategy (1066–14th C) 282–4; 3rd substrategy (14th–15th C.) 284– 7; and agricultural and commercial prosperity 285; anglicization of 284; and centralized government 279; and Christianity 336; and competition for territory with France 280; and Exchequer 312; exhaustion of 285–7, 286–7, 316; and external competition 281–2; financing of 309; funding of and feudal economy 306; and great wave of economic change (1000–1300) 275, 275–6; and investment of profits of 281; and king 310; and Magna Carta 314; and middle-class commercial interests 314, 315; and monarchy 310; and Parliament 309, 313, 326; and popular culture 361, 362–3; returns from 285; revival of and Henry V 285–6; and ruling elite 284, 318; and

slavery 304; and strategic choice 280; strategists 309, 355; and tax rebellion (Edward I) 284; and tax rebellion (Peasants’ Revolt) 285; and taxation 280–1, 282, 285, 309, 311, 312, 314, 315; and technological change 281; and warrior aristocracy 281; and warrior-landlords 282; and warrior-peasants 303–4 English history: reinterpretation of 13 English technological strategy 292–302; 1 st substrategy (1760s-early 20th C.) 301; 2nd substrategy (since interwar period) 301, 301–2; and abolition of slavery 322; and Christianity as social control 359–61; and colonialism/ imperialism 294, 344–5; and commerce empire 294; and common law 352; and company law 352–3; and costs of colonial empire 295–6; and cotton growing in USA 377; and European mega-state 345; and franchise 354–5, 355; and great wave of economic change (1760s–2000) 275, 276–7; and human capital 356; imperialism as defence of 294–5, 298, 300; and independence for colonial empire 295, 296; and international competition 344–5; and laissez-faire economy 341–2; and land 354, 355; and landowning aristocracy 354–5; and monarchy 345; and Parliament 345, 346; and political parties 351–2; and popular culture 361, 362, 363; and religious freedom 359; returns from 296; and ruling elite 358; and social mobility 354; and sport 362; and state intervention 342; and strategic struggle 346–8; and strategists 355; and supernormal profits 354; and territorial expansion 294–5, 296, see also imperialism; and universal suffrage 345; and Victorian/ Edwardian entrepreneurial ‘failure’ 300–1; and welfare and working classes 352; and westward expansion of USA 373; and working classes 348–51; see also Industrial Revolution entrepreneurs: as strategists of technological strategy (England) 301

559

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entropy: and human society 493 environmental degradation: and paradigmatic exhaustion 507; and technological paradigm shifts 493–4, 494 environmental dynamic change (EDC): defined 466; and familymultiplication strategy 369, 466 environmentalism: as secular religion 361 environmentalists see ecological engineers equites (equestrian class): as Roman ‘middle class’ 136, 149, 151, 169 eternal recurrence of ancient world/war and conquest: and dynamic pathways 273; and dynamic-strategy model 175; and linear convergence of modern society 511; and societal transformation 7; and technological strategy 273, 338, 356, 511 EU see European Union Euripides: and dissent 236 European Atomic Energy Community 432 European Coal and Steel Community (ECSC): and European union 431; key institutions of 434–5 European Community (EC) 432 European Economic Community (EEC) 431, 432; and common market 435; institutions of 435 European Free Trade Association (EFTA) 433 European Monetary Union (EMU) 437 European Union (EU): and collapse of USSR 438–9; development path of 431–40; and Eastern Europe 438, 439; and English technological strategy 345; and European Monetary Union 437; expansion of 439–40; institutions of 437–8; interpretations of 433–4; and megamarket 439; mega-state of and England 302; reinterpretation of 13; and Russia 440; and technological strategy 439; and Treaty of European Union 432 evolution of human society see social evolution evolutionary institutional economics, modern 78–81; and decision-making 78–80; and stability of institutions

78–9; and Veblen 78, 79, 80; see also new institutionalism evolutionary models: and economics 3; and institutional change 5, 61–2; see also Charles Darwin; evolutionary institutional economics, modern; neoDarwinism; new institutionalism; sociobiology; Thorstein B.Veblen; Exchequer 312–13 existential model: defined 26, 520; see also dynamic-strategy model; realist model existential schizophrenia: and Aztecs 198; defined 520; and dynamics of human society 1–2 existential theory of human behaviour: defined 52–3; see also human behaviour; realist model; strategicimitation model export markets: and dependentcommerce societies (USA) 392–5 extraordinary profits see supernormal profits factor endowments: and dynamic strategies 324; and strategic demand (England) 308; and strategic sequence of England/Western Europe 338; and technological paradigm shifts 292; and Venetian strategic choice 251 factor markets: and commerce societies 225, 228–9; and commerce societies (England) 322–4; and commerce societies (Venice) 260; and conquest societies (England) 307–9; and decline of feudalism (England) 308; emergence of in Western Europe and strategic sequence 339–40; and feudalism (England) 318; and mercantile capitalism (England) 318; and technological societies (England) 342 family: materialist explanation of 124–6; see also concentric spheres model of human behaviour; economic distance; kinship; married women; sexual partners family-multiplication strategy 6, 369–70; defined 466; and economic expansion 466; and economic growth 466; and environmental dynamic change 369; and migration 466;

560

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strategic institutions of societies pursuing 56, 57; strategic organizations of societies pursuing 58, 59; see also American familymultiplication/westward expansion strategy; Chinese familymultiplication strategy; Russian family-multiplication strategy fashions see imitation Federalist Party (USA): and policy of self-sufficiency 403 Fedorov, Boris: and new Russian strategists 464 Ferguson, Adam: and order in capitalist societies 82 feudalism: decline of (England) 308; development of and exhaustion of Roman conquest strategy 143–5; dynamic-strategy model of shift from to mercantile capitalism 324–5; economic organization of (England) 304–6; as economic system 308; and factor markets (England) 318; and Normans (England) 304; and Russia 441 fifth technological paradigm: and competition between mega-states 492–3 financiers: as strategists in English technological strategy 355 Finland: and EU 437 First Crusade: and Venice 247 First Industrial Revolution see Industrial Revolution First World War: and defence of technological strategy 430 Fitzherbert, Sir Anthony: and imitative information 44 FitzNigel, Richard: and Exchequer 313 Fogel, Robert: and American Civil War and slavery 382–4 forces of order and chaos: conflict of in Aztec Empire 201–2; conflict of in late Roman Principate 172; see also dynamic tactics of order and chaos Ford, Henry: and standardization tactic 423 Foscari, Francesco (doge): and land warfare 249–50 fossil fuel: exhaustion of 496–7 Fourth Crusade: and Venice 245–7, 257 fourth technological paradigm shift 19;

and mega-state competition 421; see also ‘Solar’ Revolution France: and European Coal and Steel Community 431, 433; and global technological strategy 422, 423; legal system of and Industrial Revolution 353; nationalism of and European union 435, 436–7; and Schuman Plan 432–3; and territorial competition with England 280–1 French Revolution: and strategic struggle 9, 353; see also Napoleon Bonaparte; Jacobins fuel: depletion of and technological paradigm shifts 292, 493, 494, 495 fuel prices see energy prices Gaidar, Yegor: and new Russian strategists 464 Galileo Galilei: as dissenter 4 games: and Greek commerce strategy 231; modern Olympic Games and technological strategy 231; and Roman conquest strategy 151–2, 152–3; and strategic confidence (Rome) 152, 153 gender see differential gender mortality; male investment in offspring; married women; see under parental investment ‘generation distance’ 113, 115; and economic distance 513; see also ‘genetic relatedness’ genetic determinism 122; and animal social organization in sociobiology 112; and sociobiology 101, 102–3, 103, 107–12, 119–20; see also genetics ‘genetic relatedness’: and sociobiology 113–16, 126 genetics: and animal behaviour 122–3; and ‘struggle for existence’ 122; see also genetic determinism Genoa: and First Crusade 247; and rivalry with Venice 248–9 gentry: and English commerce strategy 288, 333; and governing with Elizabeth I (England) 327–8; and strategic struggle with industrialists (England) 346–8; as strategists (England) 326 George I (king of England): and limited monarchy 332

561

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Germany: and global technological strategy 422, 423, 424; reunification of 439; see also West Germany Giorgione (Giorgio Barbarelli): and Venetian art 266 gladiatorial games (Roman): and strategic confidence 152, 153 Gladstone, William: and Liberal Party (England) 352 global market: and American technological strategy 387, 388, 406– 7, 416, 416–17; instability of and Great Depression 387 global technological strategy: 1st substrategy (England 1780s–1830s) 422; 2nd substrategy (Western Europe 1830s–1870s) 422–3; 3rd substrategy (USA from 1870s) 423; 4th substrategy (nation-state competitors of USA since Second World War) 423– 4; 5th substrategy (mega-states into the future) 424–5, 486; and megastates 423, 486; see also unfolding global technological strategy global war 505, 506 global-state: and dynamic-strategy model 490; and strategic demand 490; and strategic options 491 ‘Glorious Revolution’: and English middle-class commerce strategy 332 Gorbachev, Mikhail: and reform of Soviet command system 460–1 Gracchus, Tiberius Sempronius: as antistrategist 154 Great Council (Venetian): and commerce strategy 257, 259, 260; conquest strategy 268; in isolationist period 271 Great Depression: and instability of global market 387; and limits of American mega-market 387, 416; and reduction in strategic demand 388; transmission of from USA 388 ‘great dispersion’: and paradigmatic exhaustion 7 ‘great linear waves of economic change’: and paradigmatic exhaustion 7 great waves of economic change: China (Song period c.1000–c.1300) 467, 467–9, see also Song China; China (1500–late 18th C.) 467, 469–71, see also Chinese family-multiplication strategy; China (from late 18th C.)

467, 473–85, see also Communist China; England 275–7; and English conquest strategy (1000–1300) 275, 275–6, 281–7, 303–16; and English commerce strategy (1480–1750) 275, 276, 287– 91, 316–37; and English technological strategy (1760s–2000) 275, 276–7, 292–302, 338–63; first, in Western Europe (11th–14th C.) 248 great waves of expansion: and Maya civilization 183 great waves of territorial expansion: Greek 209–10; Venetian 240 ‘great wheel of civilization’: and conquest strategy 198; and paradigmatic exhaustion 7 Greece (modern): and European Community 432, 437 For ‘Greece’/‘Greek’ wherever occurring (except for ‘Greece (modern) : read ‘ancient Greece’/ ‘ancient Greek’ Greek city-state (polis) 220–32; and the agora 221, 222, 228 Greek city-states: and commerce strategy 220–1, 223; competitive balance of 208, 210, 211, 215, 216, 218, 220; and conquest strategy 214; Greek conquest strategy and decline of 233; rise of 220, 516 Greek commerce strategy 208, 210–14; 1st substrategy (to mid-8th C. BC) 209, 211, 236; 2nd substrategycolonization (mid-8th–5th C. BC) 209, 210–11, 212–13, 220, 236–7; 3rd substrategy (5th C. BC) 209, 213–14, 237; and Aegean Sea as Greek ‘lake’ 211; and the agora 221, 222; and class mobility 225; and distribution of wealth 225; exhaustion of 214, 232; exhaustion of and domination by Macedonia 218–19; and land 225, 230; military defence of 211, 213; and monopoly power 213; and order and balance 207; and ruling elite 221, 225; and slavery 226, 229–30; strategic choice and competitive environment 210, 220; and strategic struggle with conquest and other commerce strategies 213–14; strategic struggle on exhaustion of 226; supernormal

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profits from 213; and territorial expansion 209, 210; and transition to conquest strategy 214–15; see also Athenian commerce strategy ; Spartan commerce strategy Greek conquest strategy 208, 209, 214– 18, 237–8; and Athens-Sparta rivalry 214; and decline of city-states 233; failure of 233; and land 229; and mercenaries 234–5; and monetization 228; and territorial expansion 209– 10; and transition from commerce strategy 214–15; see also Athenian conquest strategy; Macedonian conquest strategy; Spartan conquest strategy Greek history: reinterpretation of 14 Greek pottery: and commerce strategy 219; and trade 210–11, 211–12, 219, 223 Greek society 208–19; city-states period 220–32; and commerce strategy 210– 14; and commerce—commerce struggle with Carthage 213–14; and commerce—conquest struggle with Persia 213–14; and competitive balance of city-states 210, 215, 216, 218, 220; and conquest strategy 214– 18; and great waves of territorial expansion 209–10; imperial period 232–6; and strategic exhaustion 218– 19; and strategic reversal 65; and strategic sequence 8; tribal period 208, 219–20 Greek tribal society: and agriculture 219; class structure of 219; and culture 219–20; political system of 219; and religion 220 ‘greenhouse effect’: and policy-making in late 20th century 507, 508–10 Gross Community Income (GCI): defined 520; and economic growth 466 gross domestic product see real gross domestic product guilds: England 348–9 Halfpenny, William: and imitative information 44 Hamilton, Alexander: and self-sufficient USA 403 Handel, George: and interests of commerce strategists (England) 362

Hanoverian dynasty (England): and monarchy 345 Harold Godwinson (king of England): defeated by Normans 282 Harold Hardrada (king of Norway): and invasion of England 281–2 Hayek, Friedrich A.: anti-empirical 83; and cultural evolution 81–4; on economic agents 83, 84; and institutions as constraints 82, 83; and neo-Darwinism 81, 82, 83; and order in capitalist societies 81–2; and rules 82–3, 84; on socialism 81–2 hegemonic conquest strategy 148, 180– 1; and Athens 232, 233; defined 181; Venetian 267; weaknesses of 182, 183, 185, 189, 202 helots (Spartan) 216, 217–17 Henry I (king of England): and common law 311; and financial administration 312; and wars in France 283 Henry II (king of England): and retention of European empire 283 Henry III (king of England): and loss of French territories 284; and strategic struggle with warrior aristocracy 314–15 Henry IV (king of England): and palace revolt 285 Henry V (king of England): and revival of English conquest strategy 285–6 Henry VI (king of England): and exhaustion of English conquest strategy 286 Henry VII (king of England): and English commerce strategy 287–8, 327 Henry VIII (king of England): and confiscation of monastic property 323, 327, 333; and English commerce strategy 287–8, 288, 327 Herbert, George: and interests of commerce strategists (England) 362 historical inevitability 95, 101 historical schools of economics 73, 74; and Veblen 76 Hitler, Adolf: as irrational antistrategist 463, 504, 505 Hudson’s Bay Company: joint-stock company 320 human behaviour: and desires 25; existential theory of see existential

563

INDEX

theory of human behaviour; and ideal society 15–18; and ideas 25; neoclassical economic model of 25, 32–3; and new institutionalism 25; realist model of 25–51; and rules 46– 9; and sociobiology 25, 101–12; see also concentric spheres model of human behaviour; decision-making; motivation human capital: and strategic demand 356; see also education human sacrifice 196–7, 198 human society: dynamics of see dynamics of human society; evolution of see social evolution; predictions of future organization of 489–90 Hume, David: and order in capitalist societies 82 Hundred Years War: and Black Death 284; and English conquest strategy 284–5, 315 ideal society: and human behaviour 15– 18; and Lenin and the Bolsheviks 16; and Plato 17–18 ideas: and artificial intelligence (AI) 47; and desires 38, 46; and human behaviour 25; and motivation 28; and thinking 46–7; see also imaginative ideas; intellectual economizing ideology: as dynamic tactic of order 60; and strategic control 383; see also religion imaginative ideas: and strategic pioneers 39 imitation 124; and animal behaviour 112, 124; and conformism 45; and decision-making 36–7; and dissent 45; see also strategic imitation imitative information: defined 520; and strategic imitation 40–5 imperialism: abandonment of in defence of technological strategy 425; and American technological strategy 406; and commerce strategy 326; as defence of English technological strategy 294–5, 298, 300; and defence of technological strategy 294–5, 298, 300, 504, 505; and defence of technological strategy (Western Europe) 423; and England

425; and English commerce strategy 291, 320, 321–2; and English technological strategy 294, 344–5; and Portugal 425; and rise of megastates 295; Roman and theories of motivation for 513–15; and Spain 425; see also British imperialism Industrial Revolution: commerce before and after 296–7; and commercial expansion 293–4; and ‘commercial industrialization’ 292–3; and cotton growing in USA 377–8; defined 6; and inorganic fuel 292; institutional path to 341; institutionalist interpretation of 325; and legal system in France 353; nature of 292– 3, 293–4; new institutionalist interpretation of 341; and rate of economic growth 293; and technological paradigm shift 292; and technology strategy 292; and westward expansion of USA 373; and working classes 349, 356 industrial technological paradigm see modern technological paradigm industrialists: as co-strategists with working classes in technological strategy 350; and strategic struggle 350; and strategic struggle (England) 346–8; as strategists 354; as strategists in English technological strategy 355 industrialization see ‘commercial industrialization’; Industrial Revolution inefficient institutions: and dynamicstrategy model 66–7, 96; North on 66–7, 85, 86, 93, 94, 96 inflation: and policy-making in late 20th century 499, 502–3; see also deflationary policies; price stability; prices information: and decision-making 36; see also imitative information innovation: and strategic pioneers 37–8; and supernormal profits 340; and technological strategy 296, 342 innovators see strategic pioneers inorganic fuel: and Industrial Revolution 292 institutional change: Aztec Empire 185– 202; and C.E.Ayres 74; and

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INDEX

conformity to strategic type 221–1; and counterfactual of American Civil War 390–2; and cultural change 68; and dynamic demand 61, 62, 62–6, 68; and dynamic strategies 510–11; dynamic-strategy model of 5–15, 52– 71, 95–6; England 303–63; in English feudal economy 306–9; evolutionary models of 5, 61–2; Greece 219–36; Hayek on 81–4; interpretation of in Aztec Empire 515–16; and materialist man 69–70; and neo-Darwinism 61; neoclassical model of 61, 61–2; North on 84–93; and political power 62–3; and primary dynamic mechanism 67– 8; and relative institutional prices 61, 66; Rome 145–74; in Russia since 1991 464; and strategic change (Athens) 234, 235; and strategic change (Venice) 235; and strategic demand 62–5, 315–16; and strategic exhaustion 65–6; and strategic sequence 511; and strategic sequence (USA) 390, 408; and strategic struggle 63–5; and tactical demand 65–6; and unfolding dynamic strategy (China) 471–2; Veblen on 74–7; and Venetian commerce strategy 254–67; and Venetian conquest strategy 267–9; in Venetian period of stagnation 269–71; Venice 254–71; and W.C.Mitchell 74; see also cultural change; secondary dynamic mechanism institutional economics 73–96; American 73, 74; see also Commons, John R.; evolutionary institutional economics, modern; new institutionalism; old institutional economics; Veblen, Thorstein B. institutional evolution: North on 86, 90–3; Veblen on 74–7 institutional structure: and strategic demand (Rome) 251; and strategic demand (Venice) 251 institutional supply: and dynamic demand 66–7 institutional transformation: and technological strategy (Western civilization) 273 institutionalism see institutional economics institutionalism: and interpretation of

Industrial Revolution 325; and interpretation of parliamentary government (England/Western Europe) 339; and interpretation of strategic sequence (England/Western Europe) 338–9; and model of shift from feudalism to mercantile capitalism 325 institutions: and conformity to strategic type 221–2; as constraints 74, 79, 82, 83, 86–7, 87, 89–90, 91; contrasted with organizations by Commons 78, 85–6; contrasted with organizations by North 86–7; development of as response to Roman strategic demand 140, 141, 142; and intellectual economizing 50; North on 86–90; of pre-modern societies and conquest strategy 131; and rent-seeking 67; reshaping of 15–18; stability of 61; and strategic demand 7–8; and strategic imitation 53; see also inefficient institutions; political institutions; rules; strategic institutions; tactical institutions intellect see intelligence intellectual economizing: and decisionmaking 46–9, 112; defined 520; and institutions 50; and rules 46–7, 53; and strategic imitation 46 intellectuals: and desires 28; and intelligence 47–8 intelligence: and decision-making 47–8; and intellectuals 47–8; see also ideas; intellectual economizing intergenerational equity: and natural resources 507, 508 intuition: and decision-making 36, 37; and decision-making 48 investment strategy: and strategic followers 40; and strategic pioneers 37–8 Irish Republic: and European Community 347, 432 irrational societies see Nazi Germany; Union of Soviet Socialist Republics isolationism: and American technological strategy 406–7; and Chinese family-multiplication strategy 469; and static societies (Venice) 269–71 Italy: and European Coal and Steel

565

INDEX

Community 431, 433; see also north Italian city-states ; Itzcoatl (Aztec king): and overthrow of Tepanec dominance 180; and warrior aristocracy 180 Ivan III: first ‘Tsar of all the Russias’ 440 Jackson, Andrew: and Democratic Party (USA) 404 Jacobins: as middle-class antistrategists (France) 353 James I (king of England): and Parliament 328 Japan: economic growth of 426, 427, 428; and external competition and technological strategy 492; and global technological strategy 422, 423, 424; and invasion of China 473, 477 Jefferson, Thomas: and franchise in USA 404; and westward expansion of USA 403 Jiang Qing: and Gang of Four 483 John (king of England): and loss of French territories 284; and strategic struggle 313–14 joint-stock companies 320, 322; and colonization of North America 367; and New World colonies 321 Keynes, John Maynard: on decisionmaking 32 Khanate of the Golden Horde: and Russian eastward expansion 440 Khrushchev, Nikita: and reform of Soviet command system 458–9 king: and Roman conquest strategy 134; as strategist (English conquest strategy) 309, 310, 355; see also monarchy kinship: and sociobiology 112, 113–16, 119, 122 Kosygin, Aleksei: and reform of Soviet command system 459, 460 labour see serfs; slavery; working classes labour market: and commerce societies (England) 318, 324; and commerce societies (Greece) 229; and commerce societies (Venice) 262; and conquest societies (England) 307; in conquest societies (late Roman Republic) 160– 2; and technological societies (USA) 407–8, 415

Labour Party (England) 352 ‘lake’: and facilitation of commerce strategy 211; see also Adriatic Sea; Aegean Sea; Atlantic Ocean; North Sea land market: and commerce societies 323–4; in conquest societies (England) 307; in conquest societies (late Roman Republic) 162 landowning aristocracy: as antistrategists (Roman Principate) 144, 169; Athenian 223, 225–6, 226; Aztec 186; and cooperation with Roman emperors 164, 166; and democracy (Athens) 234; and education (England) 357–8; elite planters in Southern states (USA) as 409, 411–12; and English commerce strategy 288, 333; and English technological strategy 354–5; Greek 223, 225–6, 226; and Greek city-states 221; and land (Venice) 252; and rent-seeking (Greek) 226; and rent-seeking (Venice) 253; and social mobility (England) 354; Spartan 217, 224; and strategic struggle with industrialists (England) 346–8; as strategists (Aztec Empire) 189, 200–1; as strategists (Roman Republic) 134, 136, 139–40, 142; and struggle for strategic leadership (England) 286–7; see also patricians (Roman); ruling elite; Senate (Roman) latifundia (Roman): development of and strategic demand 148–9, 153–4, 161; see also under slavery League of Cambrai: and Venetian conquest strategy 250 Lenin, Vladimir Ilyich: as antistrategist 453; and command system 451; and the ideal society 16; and Russian strategists 453; and Soviet command system 452, 453 Levant Company: and English commerce strategy 290; joint-stock company 320 Liberal Party (England) 352 Liberman, E.: and article on reform of Soviet command system 458–9 limited monarchy: basically economic, not social 38, 98; see also animal life life: and English commerce strategy 326, 332 Lincoln, Abraham: and American

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strategic struggle 380; and slavery 381 linear convergence of modern society: and eternal recurrence of ancient world/war and conquest 511 Liu Shaoqi: and Cultural Revolution 483; and opposition to Mao 479–80, 481, 482 Livy (Titus Livius): and imitative information 43, 512 Lloyd George, David: and Liberal Party (England) 352 Locke, John: and order in capitalist societies 82 London: and capital market 322; and English commerce strategy 316–17, 326; and markets 320, 321 long waves of expansion: and Aztec Empire 183–5; and Maya civilization 183 longrun dynamics: defined 520; and policy-making 498–510; see also dynamic-strategy model; see also under policy-making Luo Ruiqing: and Cultural Revolution 483 Luxembourg: and Benelux Customs Union 432; and European Coal and Steel Community 431, 433 Macedonian conquest strategy 209, 209–10 Macedonian Empire 218–19 McKinley, William: and Republican dominance of American technological strategy 406 Macmillan, Harold: and British membership of EEC 436 Madison, James: and westward expansion of USA 403 Magee, Gary: and decision-making 512 Magna Carta: and John’s loss of French territories 284; and strategic struggle of warrior aristocracy with king (England) 311, 314 male investment in offspring: and sociobiology 104–5 Mandeville, Bernard: and order in capitalist societies 82 manorial economy: England 304–7 manorialism: and Song China 471 Mantegna, Andrea: and Venetian art 266

Mao Zedong: and ‘communist man’ 479; and continuous revolution 479, 480; and Cultural Revolution 482–3; and Great Leap Forward 482; and Marx 479; on ‘masses’ 478; and political opposition to 480, 481; and strategists 478 Marius, Gaius: and strategic struggle (Roman Republic) 156 market employment: motivation for shift to of married women in West 27, 92 market system: and command system 459–60, 462–3; and Communist China and development of 484, 485; transition from command system to (Russia) 463–5 markets: and commerce societies (Greece) 228; in conquest societies (late Roman Republic) 158–62; expansion of and American familymultiplication/westward expansion strategy 378; expansion of USA 378; and London 320, 321; as response to Roman conquest strategy 158; and Song China 468; see also capital market; commodity market; domestic market; export markets; factor markets; global market; labour market; land markets; mega-market married women: motivation for shift of to market employment in West 27, 92, 125; and shift to market employment in USA 417, 417–18 Marshall Plan: and European cooperation 432 Marvell, Andrew: and interests of commerce strategists (England) 362 Marx, Karl H.: and American Civil War 381–2; and ‘class’ and class struggle 9, 10–11, 201, 355, 410; ideas of and Soviet command system 456–7; and interpretation of English Civil War 330; and interpretation of strategic sequence (England/Western Europe) 338; Mao Zedong and 479; on working class and middle class 350 Marxism: as secular religion 361 material advantage see maximization of material advantage material standards of living: and strategic confidence 32 materialist man: and institutional change

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INDEX

69–70; and motivation 27–8; and neoclassical economic man 27–8; and religion 360 Matilda (empress Maud): and struggle for English succession with Stephen 283 maximization of material advantage: and motivation 27; see also selfinterest Maya civilization: and great and long waves of expansion 183 mega-city: and American technological strategy 414; defined 392; and technological strategy of mega-state 396 mega-corporations: and American megamarket 385, 396 mega-market: China and construction of 466–73; and economic reforms in Communist China 484; and EU 439; fragmentation of in Communist China 482; see also American megamarket mega-states: competition between 407, 421; competition between and cold war between USA and USSR 407; competition between and exhaustion of industrial paradigm 486, 492; and competition in late industrial technological epoch 489–90; and global technological strategy 423; key institutions of (EU) 434–5; and nation-state 365, 421; and nuclear weapons 423, 505, 506; rise of and imperialism 295; strategic pathways of 425–9; and territorial expansion 421–2; and unfolding technological strategy 422–5, 434; see also China; European Union; Russia; Union of Soviet Socialist Republics; United States of America megalopolis see mega-city Megalopolis: and Thebes 233 mercantile capitalism: dynamic-strategy model of shift to from feudalism 324–5; and factor markets (England) 318 mercantile handbooks: and imitative information 44 mercenaries: and commerce strategy 235; and Greek conquest strategy 234–5; and Spartan conquest strategy

235; and Venetian commerce strategy 248, 250, 250–1 Merchant Adventurers 319–20; and English commerce strategy 289 merchant aristocracy/nobility (Venice) see merchant oligarchy merchant oligarchy: as strategists (Venice) 256; and Venetian commerce strategy 256–7, 257 merchants: Athenian 226; Aztec 186–7, 201; and class mobility (Greece) 225; and commerce societies (Greece) 223–4; and demand for art (Venice) 266; Greek 211, 212, 213, 220, 223, 226; and Russian conquest strategy 447; and strategic struggle (Athens) 223, 226; and strategic struggle (Sparta) 217; and strategic struggle with warrior aristocracy (Sparta) 217; Venetian 245; see also merchant oligarchy; and Venetian commerce strategy 245 Merger Treaty: and European Community 432 Mesoamerica: city-state system of 188, 189, 190 Mesoamerican conquest empires see Aztec Empire; Olmec Empire; Teotihuacan Empire; Tepanec Empire; Toltec Empire Messenia: and Spartan conquest of 216, 217, 218 Methodism: and social control of working classes 359 metics (foreign residents of Greek citystates): and commerce and industry 221, 225, 229 Mexica see Aztec Empire Middle Atlantic colonies (North America): comparative advantage of and English commerce strategy 367– 8 middle classes: and American technological strategy 415; in China 475–6; commercial interests of and English conquest strategy 314, 315; and English Civil War 329–30; and English commerce strategy 318; and English conquest strategy 314, 315; and Parliament (England) 315, 327; and Republican Party (USA) 405; and Russian conquest strategy 449–50;

568

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and Russian technological strategy 450; and Soviet command system 451; strategic interests of and warrior/ landowning aristocracy and Parliament (England) 315; and strategic struggle with Elizabeth I (England) 328; and strategic struggle for English technological strategy 298; and strategic struggle (Russia) 448, 449–50; and strategic struggle with Stuart dynasty (England) 328– 32; and strategic struggle (Venice) 258–9; and strategic struggle with warrior aristocracy (England) 309; as strategists in China 476, 478; as strategists of English technological strategy 297, 298, 299; and use of religion to control working classes 359–60; and Venetian commerce strategy 258–9; see also ‘business’ class; equites; merchants migration: and family-multiplication strategy 466 Milton, John: and interests of commerce strategists (England) 362 mimicry see imitation; strategic imitation mineral prices 495, 496 minerals: depletion of and technological paradigm shifts 494 Mitchell, W.C.: and institutional change 74 Mocenigo, Tommaso (doge of Venice): and change to land warfare 249 models: see concentric spheres model of human behaviour; cultural change, general model of; dynamic-strategy model; evolutionary model; realist model; strategic-imitation model modern evolutionary economics see new institutionalism modern technological paradigm (fourth): exhaustion of and competition between mega-states 486, 492; and signs of exhaustion of 492, 493, 494; and technological styles 6–7 monarchy: and Aztec Empire 180, 183, 200; and English conquest strategy 310; and English technological strategy 345; and Roman Empire 134, 167–8; transformation of (England) 327, 332, 333; and Venetian conquest strategy 267–8; see

also absolute monarchy; constitutional monarchy; limited monarchy monopoly: and Athenian commerce strategy 223; and commerce strategy 213; and English commerce strategy 291, 341; and supernormal profits of commerce strategy 316; and Venetian commerce strategy 242, 243, 245–6, 247, 249 ‘moral man’: and Veblen 76 moral values: and strategic privileges 15– 16 morality: and strategic control 383 Morgan, J.P.: and strategic imitation 400 mortality see differential gender mortality; ‘mortality selection’ ‘mortality selection’: and sociobiology 98, 100 Moslem conquests: and Venetian commerce strategy 248 Moteuczomah the Elder (Aztec king): and long-distance conquests 181–2, 184 Moteuczomah the Younger (Aztec king): and Aztec expansion 182–3, 185; and reform of imperial administration 190 motivation: and altruism 28–9; and concentric spheres model of human behaviour 29–31; and desires 28; and economy of 11th-century England 27; and ideas 28; and materialist man 27–8; and maximization of material advantage 27; realist model of 27–32; and shift to market employment of married women in West 27; and sociobiology 29, 101–7; and strategic confidence 31–2; theories of for Roman imperialism 513–15 Muscovy Company 444; and English commerce strategy 290 nation-state: and commerce strategy (Western Europe) 325–6; and competition with mega-states 489; and conquest strategy 309; emergence of (England) 309–10; foundation of English 277–80; as vehicle of change in Western Europe 309 Nationalist Party (Chinese): civil war with Communists 473, 477, 478; see also Chiang Kai-shek

569

INDEX

natural selection: and Darwin, Charles 4, 5; and neo -Darwinism 4; and social evolution 5 Navigation Acts (England): and protection 319, 320 Nazi Germany 463; and defeat by USSR 457 neo-Darwinism: and Hayek 81, 82, 83; and institutional change 61; and natural selection 4, 76, 97, 98; and‘reproductive success’ 76; and sociobiologists 3 neoclassical economics: and bounded rationality 33–5; and human behaviour 25, 32–3; and new institutionalism 35–6, 93;and North 84–5, 87–8, 93–5; and Veblen 76; see also economic man; Walrasian general equilibrium model neoclassical model: of American Civil War and slavery 382–4; of institutional change 61 Neolithic Revolution: defined 6; and rate of economic growth 293 neolithic technological paradigm: exhaustion of 292 the Netherlands: and Benelux Customs Union 432; and European Coal and Steel Community 431, 433; and trade 289 ‘New deal’: and strategic induction 406, 416 new economic history: and dynamic issues 3 New England colonies (North America): comparative advantage of and English commerce strategy 368; and manufacturing 368 New Fire ceremony (Aztec) 198, 199 new institutional economics see new institutionalism new institutionalism 81–96; and decision-making 35–6; and dynamic issues 3–4; and human behaviour 25; interpretation of Industrial Revolution 341; and neoclassical economics 35–6, 93; and social evolution 5; and strategic-imitation model 50–1; see also Hayek, Friedrich A.; North, Douglass C. new strategists: defined 9, 355, 524; Democratic Party as (USA) 407–8;

and dynamic tactic of chaos 64; and revolution 447; in Russia 461, 464, 465; and strategic demand 63; and strategic transfer 10; struggle with old strategists see strategic struggle New World conquest societies 178; see also Aztec Empire; Olmec Empire; Teotihuacan Empire; Tepanec Empire; Toltec Empire nonstrategists: defined 9–10, 355, 520– 1; in modern world 356; and strategic struggle 8; and technological strategy 360–1 the North see Northern states (USA) North America: colonization of by jointstock companies 367 North American colonies (English): and demand for local autonomy from England 401; and domestic market 394–5; local government of 401; and participation in English commerce strategy 367; and strategic struggle with England and taxation 371; and taxation 401; and westward expansion 370–1; see also Middle Atlantic colonies; New England colonies; Northern colonies; Southern colonies North, Douglass C.: and ‘adaptive efficiency’ model 5, 86, 91, 92; and cultural preferences 89, 91–2; and distinction between institutions and organizations 86–7; and ideology 89, 92, 94; and inefficient institutions 66–7, 85, 86, 93, 94, 96; and influence of Commons 85, 87; on institutional evolution 84, 86, 89, 90–3, 95; on institutions 86–90; and institutions as constraints 74, 82, 83, 86–7, 87, 89–90, 91, 94; and models of institutional change 85; and neoclassical economics 84–5, 87–8, 93–5; and path-dependence 85–6, 92–3, 94, 95; and population 84, 85; and relative prices 84, 91; and transaction costs 85, 88–90, 91, 92, 94; and Walrasian general equilibrium model 88, 93 north Italian city-states: commerce strategy of and Renaissance 239 North Sea: as Anglo-Dutch ‘lake’ 288–9, 290

570

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north-west Europe: and trade 289 Northern colonies (North America): comparison of strategic orientation with Southern colonies 369; and strategic struggle with England and westward expansion 371 Northern states (USA): education system of 410; and family size 408–9; and mega-state 379, 383; political structure of 379; social structure of 408–10; technological strategy of 379, 383; and yeoman farmers 408 Norway: and EEC 437; and EU 437; and European Free Trade Association 433 nuclear war 505 nuclear weapons: and defence of technological strategy 423, 505, 506; and mega-states 423, 505, 506; and policy-making in late 20th century 505–6 Octavian see Augustus Octavius see Augustus Octobrists: party of middle-class new strategists (Russia) 449 old institutional economics 74–8, 78; see also Commons, John R.; Veblen, Thorstein B. old strategists: and antistrategists 64; defined 9, 355, 524; and dynamic tactic of order 64; Republican Party as (USA) 408; and revolution 447; Russian 448; and strategic struggle (Venice) 259; and strategic transfer 10; struggle with new strategists see strategic struggle oligarchy: inadequacy of as strategists (late Roman Republic) 154–5, 163, 165, 192, 203; as strategists (Roman Republic) 134, 149, 168, see also merchant oligarchy; ruling elite Olmec Empire 178 order, dynamic tactic of: Christianity used as by Constantine 174; and commerce strategy 207; and hierarchical classes (late Roman Principate) 172; and ideology 60; institutions of 55–6; and old strategists 64; organizations of 60; and religion 60; religion as (Roman Principate) 166; and rules 49; and strategic exhaustion 65–6; and

strategic followers 53; used by Augustus 163; used by Diocletian and Constantine (late Roman Principate) 171–2 Organisation for Economic Cooperation and Development (OECD) 432 Organisation for European Economic Cooperation (OEEC) 432 organizations:contrasted with institutions by Commons 78, 85–6; contrasted with institutions by North 86–7; see also strategic organizations; tactical organizations Ottoman Empire: and peace with Venice 253; and Venetian commerce strategy 249; and Venetian conquest strategy 250–1 Palaeolithic Revolution: defined 6; and rate of economic growth 293 Palladio, Andrea: and imitative information 44 paradigmatic exhaustion: conditions for and Song China 467; and environmental degradation 507; and ‘great dispersion’ 7; and ‘great linear waves of economic change’ 7; and ‘great wheel of civilization’ 7; and policy-making 506–10; signs of (modern technological paradigm) 492, 493, 494; signs of (neolithic technological paradigm) 493–4; and strategic sequence (England/Western Europe) 338; and strategic/ paradigmatic struggle 65 parent-offspring conflict: and sociobiology 103–4 parental investment: gender differences in 125; and sociobiology 104–5; and substitution of material goods and services for children in West 125 Parliament (England): and Charles I (king of England) 328; and control of English technological strategy 355; emergence of and English commerce strategy 339; and English commerce strategy 326–32; and English conquest strategy 309, 313, 326; and English technological strategy 345, 346; and James I (king of England) 328; and middle classes 327; and monarchy 345; and strategic interests of middle classes and warrior/

571

INDEX

landowning aristocracy 315; and strategic struggle 309; and working classes 339 Parsons, Talcott: and sociology 2 path-dependence 95; North on 85–6, 92–3, 94, 95 patricians (Roman) 146, 147; and Roman conquest strategy 134 peasants: Aztec 185, 186; and Communist China 479, 480; Greek 226; Russian 441–2, 444, 445, 451; see also serfs; unfree peasants; warrior-peasants Peasants’ Revolt: and English conquest strategy 285 Pegolotti, F.B.: and imitative information 44 Peloponnesian War: and change of Athenian strategy to conquest 215; and Spartan conquest strategy 218 Peng Zhen: and Cultural Revolution 483 Pericles: and Athenian conquest strategy 215, 234 Persian Empire: and conflict with Greece 213–14 ‘Peterloo’: and strategic struggle 348 Petty, William: and order in capitalist societies 82 Pisa: and First Crusade 247 Pitt, William (the Elder): and English commercial imperialism 291 Plato: and democracy 238; and dissent 236; and the ideal society 17–18 Plutarch: and imitative information 43, 512 policy-making: and dynamic-strategy model 18, 19, 498–510; and dynamic-strategy policies for defence of technological strategy 506; and dynamic-strategy policies for economic growth 503; and dynamicstrategy policies on ‘greenhouse effect’ 510; and dynamic-strategy policies on maintenance/restoration of natural resources 508 policy-making in late 20th century: deflationary policies 499, 501, 502– 3; and ‘greenhouse effect’ 507, 508– 10; and inflation 499, 502–3; and maintenance/restoration of natural resources 507–8; and nuclear

weapons 505–6; and paradigmatic exhaustion 506–10; and price stability 498–500, 502–3; and undermining of economic growth 498–503; and undermining of strategic confidence 501–2; and unemployment 499, 501, 503 polis see Greek city-state political power: and dynamic strategies 270; and institutional change 62–3 Pompey (Gnaeus Pompeius Magnus): and strategic struggle in late Roman Republican period 155, 156–7 Portugal: and European Community 432, 437; and European Free Trade Association 433; and imperialism 425 pottery see Greek pottery price stability: and policy-making in late 20th century 498–500, 502–3; see also deflationary policies; inflation prices: and correlation with aggregate demand/real GDP/GDP per capita (England) 277, 516; England 281; and ‘revolution’ of 16th century (England) 277; see also coal prices; energy prices; inflation; mineral prices; wheat prices primary dynamic mechanism 6–8, 51, 52, 95, 120; defined 521; and secondary dynamic mechanism 67–8 profits see supernormal profits Protestantism: and commerce societies 327–8; and social control (England) 337 Punic Wars: and Roman conquest strategy 134, 136, 141 racial equality: and participation of Afro-Americans as strategists 413–14 the real economy: defined 521; and rules 53 real gross domestic product (GDP) and GDP per capita: and correlation with prices (England) 277, 516; and correlation with territorial expansion (England) 275–6; as measure of efficiency 275; and strategic demand (England) 277; and territorial expansion 208 real gross domestic product (GDP)/ GDP per capita: as measure of economic

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growth of technological mega-states 425–8 realist model: of decision-making 36–46; of human behaviour 25–51; of motivation 27–32 ‘reciprocal altruism’: in animal world 117; and sociobiology 112, 116–19 recurrence see eternal recurrence Reformation: and English commerce strategy 337, 359; and strategic struggle (England) 336–7 reinterpretation: and dynamic-strategy model 12–14 relative factor prices: and institutional change in English feudal economy 306–9; and strategic demand (England) 308 relative institutional prices: defined 61; and institutional change 61, 66; and strategic demand 66 relative prices: and technological paradigm shifts 292 religion: as antistrategic (Roman Principate) 167; as dynamic tactic of order 60; as dynamic tactic of order (Roman Principate) 166; and English commerce strategy 327–8; and exhaustion of strategy 173; and Roman conquest strategy 148, 165– 8; see also Christianity Renaissance: and commerce strategies of north Italian city-states 265–6; and commerce strategy of north Italian city-states 239 rent-seeking: and antistrategists 10, 201, 451, 478, 478–9; and Chinese family-multiplication strategy 470; and Communist China 478, 478–9; and competition 492; and conservative policies of Diocletian and Constantine 171–2; defined 66– 7; and democracy (Athens) 234; and elite planter class (USA) 413; of elite in Southern states after American Civil War 405; and exhaustion of Roman conquest strategy 143–4; and Greek landowning aristocracy 226; and inefficient institutions 66–7; institutions for 67; and landowning aristocracy (Venice) 253; in modern society 492; shift to from time of Claudius (Roman Principate) 169,

171; and Spain 67; and Spartan ruling elite 217, 218, 226; and strategic bankruptcy (Venetian) 270; and war and conquest 492; see also command system ‘reproductive success’: and sociobiology 98–9, 100, 101, 101–3, 104, 106, 107, 121–2; and ‘struggle for existence’ 4, 76, 98, 99, 121 Republican Party [1] (USA): and westward expansion policy 403 Republican Party [2] (USA): and American mega-state 405; and industrial interests 405–6; as old strategists 408; and strategic interests of the North 405 revolution: and strategic struggle 353, 447; see also American Revolution; Chinese Revolution; French Revolution; ‘Glorious Revolution’; Russian Revolution Richard I (king of England): and foreign military expeditions 283 Richard II (king of England): and Peasants Revolt 285 Robert Guiscard of Hauteville: and defeat by Venetian navy 243 robots see ‘automatons’ Roger of Salisbury: and Exchequer 312– 13 Roman conquest strategy 136, 174; 1st substrategy (to 264 BC) 141; 2nd substrategy (Punic Wars 264–201 BC) 141; 3rd substrategy (1st C. BC– 2nd C. AD) 142–3; 4th substrategy (2nd–5th C AD) 143–45; and continuous nature of warfare in Republican period 140–1; and demand for monarchy 134; demands of and education 150; demands of and rise of ‘super-generals’ of late Republic 155; and democracy 221–2; and development of latifundia 148–9; emperor worship and 167–8; exhaustion of 135–6, 143–5, 163, 169, 174,see also feudalism; exhaustion of and dynamic tactics of order and chaos 169; exhaustion of and fall of Western Empire 169–70; exhaustion of and pax Romana 169; exhaustion of and religion 173; exhaustion of and rise of Christianity

573

INDEX

168; exhaustion of and shift to commerce strategy by Eastern Empire 170; function of institutionalized public violence (war and gladiatorial games) in 151–3; and institutional responses to strategic demand 140, 141, 142, 143, 144, see also feudalism; Roman strategic struggle; investment of profits of in land 142; and land 162; and landowning aristocracy 134, 136, 139–40, 142, 144, 164, 166, 169; markets as response to 158; and Principate as resolution of strategic struggle 156, 163; and protection of by legal system 151; and religion 148, 165–8; and rent-seeking and bureaucracy 171; and rent-seeking on exhaustion of 143–4; returns from in early Republic 147; returns from in Republican period 135; returns from under Principate 136; and ruling elite 134, 136, 146, 147, 148, 150, 151, 153, 154, 163, 166, 169; and slavery 161–2; and strategic investment in Republican period 136–7; and strategic struggle 134, 143, 154–8, 163; strategists in Republican period see Senate (Roman); as territorial conquest strategy 148–9, 181; and territorial expansion 134–5, 137–40; see also Roman strategic struggles Roman history: and dynamic-strategy model 133–75, 513, 515; reinterpretation of 13–14, 133–75; and theories of motivation for imperialism in 513–15 Romania see Eastern Roman (Byzantine) Empire Rome: early political institutions 134; and institutional change in early Republic 145–8; and institutional change in middle Republic 148–53; and institutional change in late Republic 153–62; and institutional change in Principate 162–9; and institutional change in late Principate 169–74; see also under conquest societies; unfolding conquest strategy 133–45; see also patricians (Roman); Roman conquest strategy; Senate (Roman)

Roosevelt, Franklin D.: and ‘New Deal’ 406, 416 routine: and decision-making 48 Royal African Company: joint-stock company 320 rule-breakers see chaos, dynamic tactic of; strategic pioneers rule-makers see order, dynamic tactic of; strategic followers rules: and antistrategists 49; and decision-making 26–7; and dynamic tactic of chaos 53; and dynamic tactic of order 49, 53; Hayek on 82–3, 84; and human behaviour 46–9; and intellectual economizing 46–7, 53; and the real economy 53; stability of 61; and strategic costs 54; and strategic followers 53; and strategic imitators 49; and strategic pioneers 49; and strategists 49; see also institutions ruling elite: as antistrategists 10, 201; Athenian 225–6, 234; Aztec 186, 187, 188, 192, 195, 200, 202; and education (England) 358; and education (Rome) 358; and English conquest strategy 284, 318; and English technological strategy 358; Greek 225; and rent-seeking (Spartan) 217, 218, 226; and rentseeking (Venetian) 270; Roman 134, 136, 146, 147, 148, 150, 151, 153, 154, 163, 166, 169; Spartan 217, 218, 224; and strategic bankruptcy (Venetian) 270; and strategic change (Venetian) 269; as strategists 9; Venetian 240, 249–50; and Venetian commerce strategy 240, 262, 263; and Venetian conquest strategy 268; see also landowning aristocracy; merchant oligarchy; oligarchy; patricians (Roman); Senate (Roman); warrior aristocracy Russia: commerce-led territorial expansion of 442, 444–5; comparison of reforms in and in Communist China 484–5; consolidation of 440; and EU 440; and external competition and technological strategy 491–2; future of as mega-state 463–5; institutional change in since 1991 464; new

574

INDEX

strategists in 461, 464, 465; territorial expansion of 422, 425–7, 442; and transition from command system to market system 463–5; and war with Napoleon 448; see also Russian Revolution; Siberia; Soviet command system; Union of Soviet Socialist Republics Russia Company: joint-stock company 322 Russian commerce strategy: and eastward expansion 442, 444–5; exhaustion of 445; military defence of 444 Russian conquest strategy 440, 447–50; and business class 448; and commerce-led expansion into Siberia 447; exhaustion of 448; and merchants 447; and middle classes 449–50; and monarchy 450; and serfdom 441–2, 448; and slavery 441; and strategic struggle on exhaustion of 448, 449–50; and territorial expansion 442; and Western European technological strategy 447, 448 Russian family-multiplication strategy: and migration to Siberia 445, 446 Russian history: reinterpretation of 13 Russian Revolution 450–1; and strategic struggle 9, 447 Russian technological strategy: and Bolsheviks 450–1; and middle classes 450 ‘satisfying’ 33–5 Schuman Plan: and Franco-German cooperation 432–3 Schumpeter, J.A.: and strategic-imitation model 46 Second World War: and defence of technological strategy 430 secondary dynamic mechanism 8–12, 52, 95, 120; defined 8, 51, 521; and primary dynamic mechanism 67–8; and strategic struggle 8; see also institutional change self-interest: and cooperation 29, 31; see also competition; maximization of material advantage Senate (Roman) 134, 146; in late Principate 170–1; and Roman conquest strategy 134; and strategic

struggle with generals (1st C. BC) 143, 154–8; as strategists in Republican period 136, 139–40, 147, 148, 149, 156; under Principate 164 Senate (Venetian): as conquest strategists 268; and conquest strategy 267; and isolationist policy 270; and Venetian commerce strategy 258, 259; and Venetian conquest strategy 259 serfs: Russian 441–2, 444; and Song China 471; see also helots; unfree peasants sexual partners: choice of 113–14, 124– 5; ‘choice’ of and sociobiology 105–6 ‘sexual selection’: Darwin on 99–100, 100–1; and sociobiology 98, 99 Shakespeare, William: and interests of old and new strategists (England) 361–2 Siberia: agricultural development of 446; great migration to 445–6; industrial development of 447; and Russian commerce-led expansion 442, 444–5; and transport infrastructure 445–6, 447; urbanization of 446–7 Signoria: and Venetian commerce strategy 258; and Venetian conquest strategy 268–9 Simon de Montfort: and strategic struggle with Henry III (England) 314–15 Simon, Herbert: and ‘satisficing’ 33–5 Sino-British (Opium) War: First 473 slave labour see slavery slavery: abolition of and English technological strategy 321–2; and American Civil War 379–81 ;Aztec 201; and commerce strategy 229; and conquest strategy 229; and English commerce strategy 321–2; and English conquest strategy 304; Fogel’s neoclassical model of 382–4; and Greek commerce strategy 226, 229–30; in late Roman Republic 153, 161–2; and mining and industry (Greece) 226–7, 229; and Roman conquest strategy 161–2; and Russian conquest strategy 441; social structure of in USA 412; and Southern states (USA) 379–81, 409, 410; and Spartan society 216–17, 229; and technological strategy 380; and Venetian commerce strategy 262

575

INDEX

Smith, Adam: and order in capitalist societies 82 social evolution 1–19, 96; Hayek on 81– 4; and natural selection 5; and new institutionalism 5; North on 84, 86, 89, 90–3, 95; and sociobiology 97, 119–21; Veblen on 74–7; see also evolutionary institutional economics, modern; evolutionary models; new institutionalism social mobility: and English commerce strategy 333; and English technological strategy 354; and exhaustion of Venetian commerce strategy 259; and landowning aristocracy (England) 354; and Venetian commerce strategy 258–9; see also class mobility social organization: and sociobiology 112–19 socialism: Hayek on 81–2 societal rules see rules societal transformation: and eternal recurrence of ancient world/war and conquest 7; and strategic exhaustion 7; and technological paradigm shifts 6–7; and technological strategy 7 sociobiology 97–127; and animal social organization 112; and ‘choice’ 101, 105–6, 107–12; and choice of sexual partners 105–6, 113–14; and contrast between human and animal behaviour 109–12; and cultural evolution 119, 120; and Darwin 2, 98, 99, 102, 121; and Darwinian natural selection 98, 121; and differential gender mortality 106–7; and dynamics of human society 2, 4– 5; and ‘generation distance’ 113, 115, 513; and genetic determinism 101, 102–3, 103, 107–12, 119–20; and ‘genetic relatedness’ 113–16, 126; and group selection 116, 117; and human behaviour 25, 101–12; and individuals as ‘automatons’ 101, 105–6; and kinship 112, 113–16, 119, 122; and lack of historical focus 121; and male investment in offspring 104–5; and ‘mortality selection’ 98, 100; and motivation 29, 101–7; and neo-Darwinism 3; and parent-offspring conflict 103–4;

and parental investment 104–5; and ‘reciprocal altruism’ 112, 116–19; and ‘reproductive success’ 98–9, 100, 101, 101–3, 104, 106, 107, 121–2; and ‘sexual selection’ 98, 99, 100; and social evolution 97, 119–21, 121; and social organization 112–19, 124–6 Socrates: and dissent 236; as dissenter 45 solar energy 493, 495, 496, 497 ‘Solar’ Revolution 493; see also fourth technological paradigm shift Solon: reforms of in Athens 223 Song China 467–9; comparison with Western Europe 470–1; and conditions for paradigmatic exhaustion 467; and dynamicstrategy model 470; and external threat 466, 467; and industrial revolution 467, 469, 491; interpretations of 470; and manorialism 471; and manufacturing 468–9; and markets 468; and megamarket 468; and scholar-landowner 471, 472; and serfs 471; and strategic demand for technological change 469; and technological change 467; and technological change in agriculture 468; and urbanization 468; and water transport infrastructure 468 sophists: and dissent 236 the South see Southern states (USA) Southern colonies (North America): comparative advantage of and English commerce strategy 368; comparison of strategic orientation with Northern colonies 369; and strategic struggle with England 371 Southern states (USA): and Church of England and social control 409; and dependent-commerce strategy 379; education system of 410; and nationstate 379, 381; political structure of 379; and rent-seeking after Civil War 405; and reorganization of social structure after Civil War 412–13; and share-cropping system 413; and slavery 379–81, 411–12; social structure of 408–10; and white supremacist ideology and strategic control 413

576

INDEX

Soviet command system 451–63; and agriculture 452; centralized planning and control organizations of 452, 453, 454–6; collapse of 461, 462; and Communist China 480, 481–2, 484–5; and competition with West 457; and creation of mega-market 457–8; and creation of mega-state 457; and defeat of Nazi Germany 457; and economic growth 449, 458; and First Five-Year Plan 452; and ideas of Marx 456–7; and imitation of West 458; and incentives 456; and industrialization 452, 457; and industrialization 451; and middle classes 451; and New Economic Policy (NEP) 452; and perestroika (restructuring) 460; political system of 454–5; reform of 458–62; and rent-seeking 452, 456, 458, 462, 465; and terror 456; and War Communism 452 Spain: and European Community 432, 437; and imperialism 425; and rentseeking institutions 67, 96 Spanish Empire: and Venetian commerce strategy 249 Spartan commerce strategy 216, 217, 224, 225; and democracy 225 Spartan conquest strategy 216, 216–17; and commercial expansion 216, 217; and conquest of Messenia 216, 217, 218; failure of 218; and Greek commerce strategy 217–18; and mercenaries 235; and monarchy 224; and Peloponnesian War 218; and rebellion 216–17, 217; and rentseeking 217–18; and ruling elite 217, 218, 224; and slavery 229; stagnation of 225; and strategic struggle 217; stultifying of 217; as territorial conquest strategy 233 Speer, Albert: and organization of economy of Nazi Germany 457 Spencer, Herbert: and sociology 2 Speransky, Michael: and Russian Duma 448 Stalin command system see Soviet command system Stalin, Joseph: and command system 10, 16, 451, see also Soviet command system; and peasants 450–1; and

potential strategists 451; and Russian strategists 451, 453; and terror 456 static strategies: Venice (after 1529) 252–3 Stephen (king of England): and struggle for succession with Matilda 283 Stolypin, Peter: and franchise 449; reforms of 450 strategic bankruptcy: Venetian 269, 270 strategic change: and culture (Greece) 235–6; and institutional change (Athens) 234, 235; and institutional change (Venice) 235; and military system (Athens) 235; and military system (Venice) 249; and ruling elite (Venetian) 269 strategic choice 6; and American Revolution 369; and Black Death (England) 284; China and 470, 473; comparison of Greeks and AngloSaxons 280; and competitive environment (Greek) 210; and factor endowments (Venice) 251; and modernization of China 473 strategic confidence: and concentric spheres model of human behaviour 31–2; and cultural/higher learning organizations 501–2; defined 31, 501, 521–2; and dynamic strategies 31–2; lack of and civil war 329; and material standards of living 32; and motivation 31–2; and popular culture 361; and religion (Aztec Empire) 195; and Roman institutionalized public violence (war and gladiatorial games) 152, 153; and strategic exhaustion 54; and strategic leadership 54; undermining of and policy-making in late 20th century 501–2; and Western economic-rationalist deflationary policies 32 strategic control: and ideology 383; and morality 383 strategic costs: defined 522; and rules 54 strategic crisis: and Aztec Empire 203; see also strategic struggle strategic demand 67; for Afro-American labour 417; for Afro-American labour and racial equality 414; and aggregate demand 277; and conquest economy 131; and culture 70; defined 62, 522; and development of

577

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Roman latifundia 148–9; and education (England) 358–9; and factor endowments (England) 308; and global-state 490; and human capital 356; and institutional change 62–5, 315–16; and institutional structure (Rome) 251; and institutional structure (Venice) 251; and institutions 7–8; and new strategists 63; and real GDP/ GDP per capita (England) 277; and relative factor prices (England) 308; and relative institutional prices 66; and role of Christianity (England) 359; for science and technological change and China 470, 471; for technological change and Song China 469; and transition of Russia from command system to market system 463–5; for women workers (USA) 417; see also dynamic demand; tactical demand; unfolding dynamic strategy strategic exhaustion: and chaos, dynamic tactic of 65–6; Greek 218–19; and institutional change 65–6; and order, dynamic tactic of 65–6; and strategic confidence 54; and strategic revenue gap 7; and strategic struggle 64, 201; and struggle between old and new strategists 64 strategic followers: and adaption 40; and benefit—cost calculus 40–1; and decision-making 40–6; defined 11, 522; and dynamic tactic of order 53; investment strategy of 40, see also strategic imitation; and rules 53; and strategic imitation 11, 40–6 strategic groups: defined 355 strategic imitation: and animal life 40; and decision-making 11–12, see also strategic-imitation model; defined 11, 522; and imitative information 40–5; and institutions 53; and intellectual economizing 46; and investment strategies 400; and mass culture 415– 16; and religion (Aztec Empire) 197; and strategic followers 11, 40; and strategic pioneers 11 strategic-imitation model: and competition 49–50; and decisionmaking 37–46, 49–50; and new

institutionalism 50–1; pioneering phase of 37–40, 49, 50; routine phase of 40–6, 49, 50; and Schumpeter 46; and strategic investment 49–50 strategic imitators: and rules 49 strategic induction 356; defined 522; and USA 406, 416; see also unfolding dynamic strategy strategic institutions 54–5, 56–7; in commerce society 54–5, 56, 57; in conquest society 54, 56, 57; defined 54, 522; and dynamic strategies 54–5; in modern industrial society 55, 56, 57; of societies pursuing the familymultiplication strategy 56, 57; of societies pursuing the technological strategy 58, 59; types of 54–5, 56–7 strategic investment: in campaigning (Aztec Empire) 192, 194–5; in Roman Republican period 136–7; and strategic-imitation model 49–50; and territorial and hegemonic conquest strategies 181; in training (Aztec Empire) 192–4 strategic leadership: defined 523; and strategic confidence 54; struggle for and English conquest strategy 286–7 strategic options: and global-state 491; see also strategic choice strategic organizations: and antistrategists 60; and changing of dynamic strategies 58; of commerce society 58, 59; of conquest society 58, 59; defined 523; major, defined 58; of societies pursuing familymultiplication strategy 58, 59; of societies pursuing the technological strategy 58, 59; support 58, 59; and tactical organizations 60; types of 58–9; see also tactical organizations; unfolding dynamic strategy strategic participation: and American technology strategy 407–8 strategic pathways: defined 523; England 275–7; Greek 208–10; of mega-states 425–9; Roman 137–40; and strategic struggle 63; of USA 366; Venetian 240–53; see also unfolding dynamic strategy strategic pioneers: and competition 39; and decision-making 37–40; defined

578

INDEX

11, 38, 523; and desires 38; and imaginative ideas 39; and innovation 37–8; and intuition 37; and investment strategy 37–8; and rules 49; and strategic imitation 11; and technological styles 38; and unfolding dynamic strategy 38 strategic privileges: defined 16, 523; and moral values 15–16 strategic revenue gap: and strategic exhaustion 7 strategic reversals: and China 65; defined 523; and Greek society 65; and unfolding technological paradigm 65 strategic sequence: and emergence of commodity and factor markets in Western Europe 339–40; and England 8; in England/Western Europe and paradigmatic exhaustion 338; and factor endowments (England/Western Europe) 338; and Greek society 8; and institutional change 511; and institutional change (USA) 390, 408; interpretations of (England/Western Europe) 338–40; and Western Europe 8 strategic struggle: and American Revolution 369, 402; and antistrategists 8, 64, between North and South of USA, see also American Civil War between North and South of USA 379–83; and Chinese Revolution 9; and Corn Laws (England) 347–8; defined 523–4; and education in middle Roman Republic 150; of Elizabeth I and middle classes (England) 328; and English Civil War 9; and French Revolution 9, 353; in Greece 226; of Greek commerce strategy with conquest and other commerce strategies 213–14; of industrialists with commercial gentry and landowning aristocracy and English technological strategy 346–8; of industrialists/working classes with commercial gentry 350; and institutional change 63–5; of landowning aristocracy with merchants (Athens) 223, 226; of landowning aristocracy and middle classes (Russia) 448, 449–50; in late

Roman Republic 154–8, 203; and Marxian class struggle 9, 201; of merchant oligarchy and doge (Venice) 256; of middle class with merchant oligarchy (Venice) 258–9; of middle classes for English technological strategy 298; of middle classes with Stuart dynasty (England) 328–32; and nonstrategists 8; of North American colonies with England and taxation 371; of Northern colonies with England and westward expansion 371; of old conquest strategists and new commerce strategists (England) 326; of old and new strategists (Venice) 259; of old and new strategists (China) 475–6; and Parliament (England) 309; and ‘Peterloo’ 348; and Reformation (England) 336–7; and revolution 353, 447; Roman (1st C. BC) 143, 154–8; Roman Principate as resolution of 156, 163; in Russia 463–4, 464–5; and Russian Revolution 9; and secondary dynamic mechanism 8; of Southern colonies with England (North America) 371; and strategic exhaustion 64, 201; and strategic pathways 63; and strategists 8; and tactical demand 65–6; and tactical institutions and organizations 61; and technological paradigms 63, 64–5; of warrior aristocracy with king (England) 311, 313–15; of warrior aristocracy and merchants/ artisans (Sparta) 217; of warrior aristocracy and middles classes (England) 309; and working-class organizations 348–51; see also new strategists; old strategists; strategic crisis strategic transfer: conquest to commerce (England) 326; defined 524; England 355; and new strategists 10; and old strategists 10 strategic/paradigmatic struggle: and paradigmatic exhaustion 65 strategists: of American technological strategy and American Civil War 381; Aztec king as 182, 189; Aztec warrioraristocracy as 189, 192; ‘business’ class as in American technological

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strategy 410; and culture 70–1; defined 9–10, 10–11, 136, 355, 524; and dynamic strategies 346; economic objectives of and political instruments 434; and English commerce strategy 355; of English conquest strategy 309; English conquest strategy 355; and English technological strategy 355; entrepreneurs as of technological strategy (England) 301; inadequacy of oligarchy as (late Roman Republic) 154–5, 163, 165, 192, 203; industrialists as 354; industrialists and working classes as co-strategists 350; landowning aristocracy as (Roman Republic) 136, 149; merchant oligarchy as (Venice) 256, 258; middle classes as of English technological strategy 297, 298, 299; political empowerment of working classes as 354–5; Roman emperor as 137, 152, 163–4; Roman Senate as 136, 137, 148; and rules 49; ruling elite as 10, see also ruling elite; and strategic choice 6; and strategic struggle 8; struggle of with antistrategists and cold war 407; warrior aristocracy as (England) 309;working classes as of English technological strategy 297; and worship of Roman emperors as 167–8; see also antistrategists; new strategists; nonstrategists; old strategists strategists: oligarchy as (Roman Republic) 134, 149, 168 ‘struggle for existence’: Darwin on 4, 76, 98, 99, 100, 101; and genetics 122; and ‘reproductive success’ 4, 76 Stuart dynasty: and English commerce strategy 328–32; see also Charles I; Charles II; James I substrategies: of Roman conquest strategy 136; see also technological styles Sulla, Lucius Cornelius: and strategic struggle in late Roman Republican period 156 supernormal profits: and American family-multiplication/westward expansion strategy 378–9; from commerce strategy (Greece) 213; from commerce strategy (Venice)

245, 249; from conquest strategy (Roman Republic) 136; from English commerce strategy 296; and English technological strategy 354; through monopoly and commerce strategy 316; and monopoly and technological strategy 340; and technological strategy 275; and technological strategy and innovation 340 Sweden: and EU 437; and European Free Trade Association 433 Switzerland: and EU 437; and European Free Trade Association 433 Tacitus, Cornelius: and imitative information 43, 512 tactical demand 67–8; and balance of dynamic tactics 62; defined 524; and institutional change 65–6; and strategic struggle 65–6; see also dynamic demand; strategic demand tactical institutions 55–8; of chaos 56–7; defined 524; of order 55–6; purpose of 55; and strategic struggle 61; types of 55–8; see also strategic institutions tactical organizations: and antistrategists 60; of chaos 60–1; defined 60, 524– 5; of order 60; and strategic organizations 60; and strategic struggle 61; types of 60–1 Tacuba see Triple Alliance Tarascans: and opposition to Aztec expansion 184, 185 Taylor, Frederick: and ‘scientific management’ 396 technological change: and Chinese family-multiplication strategy 469– 70; and conquest societies 340; and economic expansion 466; and English conquest strategy 281; slowdown in and technological paradigm shift 292; and Song China 467 technological paradigm shifts 6–7; and competition between mega-states 486; defined 338, 525; and depletion of fuel 292, 493, 494, 495; and depletion of minerals 494, 495; and dynamic materialism 6–7; and environmental degradation 493–4, 494; and factor endowments 292; and relative prices 292; and

580

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slow-down in economic growth 493, 494; and slow-down in technological change 292, 493, 494, 494–5; see also fourth technological paradigm shift; Industrial Revolution; Neolithic Revolution; Palaeolithic Revolution; paradigmatic exhaustion; ‘Solar’ Revolution technological paradigms: and energy 493; exhaustion of 7; and strategic struggle 63, 64–5; see also fifth technological paradigm; modern technological paradigm; neolithic technological paradigm; unfolding technological paradigm technological societies: and agriculture (England) 347; and agriculture (USA) 385; and banking (England) 343–4; and banking (USA) 400; and capital markets (England) 343–4; and capital markets (USA) 400; and commodity markets (England) 342; and company law 352–3; and credit institutions (USA) 416; and decentralized decision-making 222; economic system of (England) 340–4; and education (England) 356–9; and factor markets (England) 342; financial institutions of (USA) 398– 400; and franchise (England) 345, 348, 350–1, 354–5, 355; and franchise (USA) 403; and government regulation of mega-corporations (USA) 406; and government regulation (USA) 400–1; and incorporation of all classes (USA) 406; and institutions of first global substrategy 422; and institutions of fourth global substrategy 424; and institutions of second global substrategy 422–3; and institutions of third global substrategy 423; and labour market (USA) 407–8, 415; and laissez-faire economy (England) 341–2; legal institutions of (England) 342, 352–3; and legal institutions (France) 353; and manufacturing (USA) 385, 386; and mass culture (USA) 415; and mega-state 421; and nation-state 421; and political party system (England) 351–2; and political party system (USA) 406–8; political

system of (England) 344–53; and popular entertainment 361, 362, 362–3; and racial equality and participation as strategists (USA) 413–14; and real GDP as measure of economic growth 425–8; and religion (England) 359–61; and religion (USA) 411, 412; social structure of (USA) 410–18; social system of (England) 354–63; and strategic participation (USA) 407; and transport and communications (England) 342; and transport and communications (USA) 374–5, 384, 417; and urban planning (USA) 414– 15, 417; and urbanization (USA) 385; and welfare (USA) 406, 407, 416; and working-class organizations (England) 348–51; see also American technological strategy; English technological strategy; Russian technological strategy technological strategy 6; and abandonment of imperialism in defence of 425; and British Empire 274–5; and commercial expansion 293–4; and conquest 430; defence of 503–6; defence of by mega-states with nuclear weapons 423, 505, 506; defence of and imperialism 294–5, 298, 300, 504, 505; dynamic-strategy policies for defence of 506; and economic growth 504; and efficiency 275, 339, 340–1, 341–2; and eternal recurrence of ancient world/war and conquest 273, 338, 356; and EU 439; and Industrial Revolution 292; and innovation 296, 342; and innovation and supernormal profits 340; and institutional transformation (Western civilization) 273; and mega-state 421–2; and monopoly and supernormal profits 340; and nonstrategists 360–1; of Northern states (USA) 379; and religion 359– 60; and scientific knowledge 360; and secular religions 361; and slavery 380; and societal transformation 7; strategic institutions of societies pursuing 55, 56, 57; strategic organizations of societies pursuing 58, 59; and supernormal profits 275;

581

INDEX

and technological styles 342–3; and territorial expansion 294; and urbanization 396; and war 503–6; see also global technological strategy technological styles: defined 525; and modern technological paradigm 6–7; and strategic pioneers 38; and technological strategy 342–3; see also substrategies technology: and commerce strategy 293 Temple, William: and imitative information 44 Tenochtitlan 176–8; administration of 191–2; see also Aztec Empire Teotihuacan Empire 178 Tepanec Empire 178; and dependent role of Aztecs in 180, 183, 202; dominance of overthrown by Triple Alliance 180–1, 183–4, 202 territorial conquest strategy 148–9, 181 territorial expansion: Aztec Empire 178– 85; China 422, 425–7; and conquest and commerce strategies 275–6; and correlation with real GDP/ GDP per capita (England) 275–6; great waves of (Greek) 209–10; and mega-state 421–2; and real GDP/ GDP per capita 208; and Roman conquest strategy 134–5, 137–40; Russia 422, 425–6; and Spartan conquest strategy as 233; and technological strategy 275–6; and technology strategy 294; USA 366, 422, 425–6, see also American family-multiplication/ westward expansion strategy; and Venetian commerce strategy 240; and Venetian conquest strategy 240; Venice 242; Western Europe 425–7 Tetzcoco see Triple Alliance Thebes: and conquest strategy 233; and Megalopolis 233 Thirty Years War: and strategic struggle of Stuart dynasty and middle classes (England) 329 time: Aztec 198–9; linear and cyclical 198–9 Tintoretto (Jacopo Robusti): and Venetian art 266 Titian (Tiziano Vecellio): and Venetian art 266 Tizoc (Aztec king): and Aztec expansion 182, 184

Toltec Empire 178 trade unions: development of (England) 349–50 traders see merchants Trans-Siberian Railway: and economic development of Siberia 445–6 transport technology and infrastructure: and American mega-market 374–5 Treaty of European Union 432, 437 Treaty of Paris: and Western European economic cooperation 431, 433, 435 Treaty of Rome: and European Economic Community 432, 435 tribute: Aztec Empire 186, 189, 190–1, 195, 200 Triple Alliance (Tenochtitlan, Tetzcoco: Tacuba), and overthrow of Tepanec dominance 180–1, 183–4, 202 Tull, Jethro: and imitative information 44 unemployment: and policy-making in late 20th century 499, 501, 503 unfolding commerce strategy: England 326 unfolding dynamic strategy: and American mega-state 366, 367–418, 418; Aztec (conquest) 183–5, 204–5; defined 12, 525; and dynamic tactics of order and chaos 65–6; of England 275–302, 363–4; of Greece 208–19, 236–8; and institutional change (China) 471–2; of mega-states 425–9; and rates of economic growth 300–1; of Rome 133–45, 174–5; and strategic pioneers 38; of Venice 239– 53, 271–2; see also dynamic strategies; strategic pathways unfolding global technological strategy 486–7; and role of trading/currency blocks and nation-states 486–7 unfolding technological paradigm: and strategic reversals 65 unfolding technological strategy: global 422–5; and mega-state 422–5; and rates of economic growth 301–2 unfree peasants: English 304, 305, 306; and market participation (England) 306–7 Union of Soviet Socialist Republics (USSR): as antistrategist state 407; collapse of 424, 430; collapse of and

582

INDEX

EU 438–9; economic growth of 426, 427, 428; and transition to freemarket mega-state 424–5, 430; see also Russia; Soviet command system United Kingdom of Great Britain and Northern Ireland: and European Community 432, 436, 437; and European Economic Community 436; and European Free Trade Association 433; see also England United States of America (USA); and changes in business and trading institutions 395–6; cotton growing and English technological strategy 377–8; and dependent-commerce strategy 367–9; differences in social systems of North and South and dynamic strategies 409–10; and divergent social structures in North and South 408–10; domestic market and transport technology and infrastructure 394–5; domestic market and westward expansion 394; economic growth of 385–6, 389, 426, 427, 428; and extension of franchise 404; and familymultiplication/ westward expansion strategy 369–84, 404; ‘free soil’ and ‘slave’ states and dynamic strategies 379, 380; and global technological strategy 423; and government regulation of economy 400–1; growing commodity market and industrialization of North 404; industrialization of 378; and judicial rule-making and the economy 401; and market expansion 378; and mega-market 392; and political institutions reflecting divergence of strategic interests of North and South 404–5; political institutions of and regional dynamic demand 402–4; and political institutions and strategic choice 403–4; and powers of central (federal) government and competing economic interests 402–3; social structure of 408–18; social structure and strategic demand 408; and strategic choice and American Revolution 369; strategic pathway of 366; strategic sequence and institutional change 408; and

strategic struggle between North and South 379–83, see also American Civil War; strategies of westward expansion and industrialization after Civil War 405; and technological strategy 384–90; and territorial expansion 422; territorial expansion of 425–6; and urbanization 396–8, 409, see also mega-city; westward expansion of and Industrial Revolution 373; westward expansion of and industrialization of Northern states 378; and westward expansion international conflict 403; westward expansion of and transport technology and infrastructure 373–7; see also American Civil War; American dependent-commerce strategy; American familymultiplication/ westward expansion strategy; American history; American mega-market; American Revolution; American technological strategy; North American colonies (English); Northern states; slavery; Southern states urbanization:and technological strategy 396 USA see United States of America USSR see Union of Soviet Socialist Republics Veblen, Thorstein B.: and Darwinism 75–6, 83; and ‘habits of thought’ 5, 74–6, 77, 78, 87; and institutional evolution 74–7; and modern evolutionary institutional economics 78, 79, 80; and new institutionalism 81, 82, 83 Venetian commerce strategy 240–9; 1st substrategy (to 900) 240, 242; 2nd substrategy (10th–11 th C.) 242–3; 3rd substrategy (11th-mid–14th C.) 243–8; 4th substrategy (mid-14th– 15th C.) 248–9; and Adriatic Sea as Venetian ‘lake’ 242–3, 244; and colonization 247; and competitors 247; and conflict with conquest societies (Spain and Ottoman Empire) 249; and craftsmen 262–3; and democracy 259; and doge 256, 257; and economic institutions 260–3;

583

INDEX

exhaustion of 248, 259; exhaustion of and social mobility 259; extraordinary returns from 245, 248, 249; extraordinary returns from and naval power 247; and factor endowments 251; and First Crusade 247; and first great wave of territorial expansion (1050–1350) 240; and Fourth Crusade 245–7, 257; and Great Council 257, 259, 260; and lower middle class 263; and mercenaries 248, 250, 250–1; and merchant oligarchy 256–7, 258, 260; and merchants 245; and middle class 258– 9, 260; military defence of 240, 242, 243, 247–8; and monarchy 256; and monopoly 242, 243, 245–6, 247, 249; and Moslem conquests 248; and naval assistance to Eastern Roman (Byzantine) Empire 243–5; and returns from Fourth Crusade 247; revival of and competition 251–2; and rivalry with Genoa 247, 248–9; and ruling elite 240, 262, 263; and Senate 258, 259; and Signoria 258; and slavery 262; and social mobility 258– 9; socioeconomic structure of 259–63; and strategic struggle 258–9, 259–60; and strategic struggle 256, 259; and trade with Eastern Roman (Byzantine) Empire 243–6; and transition to conquest strategy 249–50 Venetian conquest strategy 249–51; abandonment of in West 250; and defeat by League of Cambrai 250; exhaustion of 251–3; and factor endowments 251; failure of 251; and Great Council 268; and hegemonic empire 267; and monarchy 267–8; and offensive in East (Ottoman Empire) 250–1; returns from 267; and ruling elite 268; and ruling elite and land warfare 249–50; and ruling elite and strategic change 269; and second great wave of territorial expansion (1350–1650) 240; and Senate 259; and Senate as strategists 268; and Signoria 268–9; and tribute 267 Venetian history: reinterpretation of 14 Venetian static society: and abandonment of all dynamic strategies 252, 253; and

administrative structure of 271; and bureaucracy 271; and dissent 270; during period of stagnation 240, 269–71; middle classes in 253; and policy of isolationism 269–71; and rent-seeking 270; ruling elite of 270; sociopolitical structure of 270; and stagnation of economy 253; stagnation of political system in 270; strategic bankruptcy of 269, 270; territorial contraction of 253 Venice 239–40, 241, 254, 255, 256; and Eastern Roman (Byzantine) Empire 239–40, 243–7, 254; and peace with Ottoman Empire 253; see also Venetian commerce strategy; Venetian conquest strategy Veronese, Paolo: and Venetian art 266 Victoria (queen of England): and constitutional monarchy 327, 345 Victorian/Edwardian entrepreneurial ‘failure’: and comparative economic growth 300–1, 302 violence, institutionalized (Roman war and gladiatorial games): and strategic confidence 152, 153 Virgil (Publius Vergilius Maro): and imitative information 43, 512 Virginia Company: and colonization of North America 367 Volsky, Arkady: and Civic Union Party and new Russian strategists 465 Walrasian general equilibrium model: and North 88, 93 Walter of Henley: and imitative information 44 war: and conquest strategy 503; and technological strategy 503–6 warrior aristocracy: Aztec 180, 186; English 281; Roman 134, 141, 154; Spartan 217, 224; strategic interests of and middle classes and Parliament (England) 315; and strategic struggle with king (England) 311; and strategic struggle with merchants/ artisans (Sparta) 217; and strategic struggle with middle classes (England) 309; as strategists (Aztec Empire) 189, 200–1; as strategists (England) 309; as strategists in English conquest strategy 355

584

INDEX

warrior-landlords: and English conquest strategy 282 warrior-peasants: English 303–4; Greek 219; Roman 145, 147, 149, 160 Washington, Booker T.: on racial prejudice 414 wealth: distribution of and American technological strategy 414, 415; distribution of (England) 355–6 Wesley, John: and Methodism 359 West Germany: and European Coal and Steel Community 431, 433; and Schuman Plan 432–3 Western Europe: 15th-century break-out and commerce strategy 287; and collapse of USSR 430–1; competitive environment of 274, 429–30; competitive environment of and agriculture 280–1; competitive environment of and trade 280–1; and defence of technological strategy 430; economic growth of 426, 427, 428; emergence of mega-state of 424, 431–40, see also European Union; and imperialism 423; kingdoms of and competition for commercial dominance 291; and post-Second World War cooperation 432; and strategic sequence 8, 338–40; and technological strategy 422–3; territorial expansion of 425–7 Weston, Sir Richard: and imitative information 44 wheat prices: England 276, 277 Whig Party (USA): and strategic interests of the North 404–5 Wilberforce, William: and slavery 321 William the Conqueror (duke of Normandy and king of England): and invasion of England 282 William of Orange (king of England): and English commerce strategy 288, 291, 332 Wilson, Edward: and sociobiology 4

Wilson, Harold: and British membership of European Community 436 Witte, Sergei: and franchise in Russia 449; and Trans-Siberian Railway 445, 452 wool trade: English 289, 306, 320–1; and London 317 working classes: and American technological strategy 383, 410; as co-strategists with industrialists in technological strategy 350; and education (England) 356–7; and English technological strategy 348– 51; and Industrial Revolution 349, 356; influence of and provision of welfare 352; as market for American technological strategy 416; Marx on 350; as nonstrategists in English commerce strategy 346; organizations of (England) 348–51; and Parliament (England) 339; participation of in American technological strategy 403; political empowerment of as strategists 354–5; and strategic struggle with industrialists against commercial gentry 350; as strategists in American technological society 414, 415; as strategists in English technological society 297, 350, 355, 357; and use of religion for control of 359–60 Yeltsin, Boris: and transformation of Russia 461, 464 yeomen farmers: and American familymultiplication/westward expansion strategy 408–9; and English commerce strategy 334; in Southern states (USA) 409 Young, Arthur: and imitative information 44 Yuan Shikai: and Republic of China 476 Zhou Enlai: and Cultural Revolution 483

585

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