Tuesday, August 30, 2011

More Graeber

In his book Debt: The First 5000 Years, David Graeber sets out shatter a bunch of the icons of classical liberal economics.  Hardly any of these is more hoary than the notion that the state and market are fundamentally at odds.  The anthropological and historical record is not very kind to this idea, says Graeber.  In fact, stateless societies almost never have markets.  Markets themselves were usually created by the state.

How does a king go about creating a market?  It might often be a byproduct of a more pressing concern: feeding a standing army.  How does one go about the logistics of supplying an army with all its manifold needs?  One clever solution was discovered in ancient times.  The king takes possession of the mines - he does have an army, after all - and mints a bunch of coins.  He pays his soldiers with them.  He also institutes a tax on the people, payable in coin.  Now they are forced to scramble for coins to pay the tax, which they can get by trading useful goods to the soldiers, who are responsible for equipping and feeding themselves from their pay.  With a bunch of coins in circulation, and a supply of all kinds of goods needed for the army, a market emerges.

In some sense the state, and its army, created the market.