The Rise of the “Original One Percent”
With the rise of more complex protostates with hereditary leaders, bureaucratic institutions and a monopoly of violence out of sedentary, kinship-based societies, inequality took a major step up. No longer did customary kinship, rights, duties, debts, obligations, affinity and social ties bind people together, but rather things like class, occupation, place of residence, assets, and so on. No longer was the extended clan (gens) the basic unit of society, but households under the organs of a state. What had started out as voluntary redistributive authority soon became compelled and confiscatory, as the newly formed managerial class asserted their rights over what once been held in common. New laws permitted this. Inheritance rights allowed wealth to be passed down through the generations. Reciprocity, redistribution and corvée labor were replaced by taxation, slavery, usury, and wages.
Protostates first formed in the great river valleys of the world where some form of domesticated grain was the primary foodstuff. This led to the “cereal hypothesis”–that cereal cultivation, especially under irrigation, was the most conductive to state formation (all quotes from the book unless noted otherwise).
A new global survey suggests that the cultivation of cereals played a critical role in the development of more complex social hierarchies. Unlike perennial roots, which are continuously available but rot quickly, grain crops are gathered en masse only at specific harvest times and are suitable for longer-term storage. Both of these features made it easier for elites to appropriate and hold on to surplus food resources. States first arose in those parts of the world that had first developed agriculture: once plants–and above all cereals–and animals had been domesticated, sooner or later humans shared their fate, and inequality escalated to previously unimaginable heights. p. 42
Not all early states were alike, and centralized polities coexisted with more “heterarchical” or corporate forms of political organization. Even so, centralized authoritarian states commonly outcompeted differently structured rivals. They appeared independently around the world wherever ecological preconditions allowed, in the Old World as well as the Americas and across a wide range of environments from the alluvial floodplains of Egypt and Mesopotamia to the highlands of the Andes. Defying this considerable diversity of context, the best-known among them developed into strikingly similar entities. All of them witnessed the expansion of hierarchies in different domains, from the political sphere to the family and religious belief systems–an autocatalytic process whereby “the hierarchical structure itself feeds back on all societal factors to make them more closely into an overall system that supports the authority structure.” Pressure in favor of increasing stratification had an enormous effect on moral values, for the residue of ancestral egalitarianism was replaced by the belief in the merits of inequality and acceptance of hierarchy as an integral element of the natural and cosmic order. p. 44
Irrigation works have also been associated with state formation, as observed long ago by Wittfogel:
During the four thousand years before Christ, in the great river valleys of Egypt, Mesopotamia, India, and China, the state took on the function of building grand hydraulic works, which in turn required centralized managerial bureaucracies to operate. Whoever controlled those means of production–in such cases it was a group of agromanagerial experts–became perforce the effective ruling class. The common techno-environmental basis in all those ancient Oriental civilizations, giving rise to similar social structures in them, was water control, mainly a program of irrigation made necessary by inadequate or unseasonal or undependable rainfall…
WigWams, Wittfogel, and Joan Didion: All in One Post (The Atlantic)
Another critical factor is writing, or at least some form of permanent recordkeeping. Ran Prieur comments: “It’s suspicious that we have no written record of a non-repressive large scale society. Did the world get fucked up by writing?” More than likely, the answer to that question is “yes”. Ownership and debt could now be preserved, far beyond the limits of human memory (where generalized reciprocity is based), and those who did the preserving–the literate cultural elite–became the rulers of society.
…it would not be too strong to assert that it is virtually impossible to conceive of even the earliest states without a systematic technology of numerical record keeping, even if it took the Inka form of strings of knots (quipu). The first condition of state appropriation (for whatever purpose) must be an inventory of available resources—population, land, crop yields, livestock, storehouse stocks… As appropriation proceeds, continuous record keeping is required—of grain deliveries, corvée labor performed, requisitions, receipts, and so on. Once a polity comprises even a few thousand subjects, some form of notation and documentation beyond memory and oral tradition is required. The earliest administrative tablets from Uruk (Level IV), circa 3,300–3,100 BCE, are lists, lists, and lists—mostly of grain, manpower, and taxes… James C. Scott; Against The Grain, pp. 121-122
In addition to the servile class at the bottom, a literate managerial class formed at the top. Everywhere slavery, laws and writing come into place, the kinship-based society is weakened in favor of the chiefdoms. Now class, occupation, and place of residence take precedence old ties of kinship. The new state coalesces under some sort of priest-king.
Almost always, one member of the new elite made himself a king over all the others, but to hang onto his throne, he invariably had to form broader coalitions, turning would-be rivals into supporters. To coopt these near-peers, the ruler normally confirmed them as aristocrats with legal title to huge estates, and to make themselves indispensable to the ruler, his noblemen normally repackaged themselves as useful specialists in religion, law, letters, or war. Working together, these different kinds of elites could coordinate the larger society’s activities by raising taxes, enforcing laws, performing rituals, fighting neighbors, suppressing uprisings, and all of the other government activities that fill the annals of ancient and medieval history. Ian Morris; Foragers, Farmers and Fossil Fuels, pp. 65-66.
What is the state? Fukuyama defines it with these characteristics: (1) There is a centralized source of authority, whether in the form of a king, president or prime minister. (2) That source of authority is backed by a monopoly on the legitimate means of coercion, in the form of an army and/or police. (3) The authority of the state is territorial rather than kin-based, (4) States are more stratified and unequal than tribal societies, and (5) States are legitimized by much more elaborate forms of religious belief, with a separate priestly caste as its guardian. The form this state takes varies: “Sometimes [the] priestly caste takes power directly, in which case the state is a theocracy, sometimes it is controlled by the secular ruler, in which case it is labeled caesaropapist, and sometimes it coexists with secular rule under some form of power sharing.” (Origins of Political Order, p. 81). As Napoleon noted, “I do not see in religion the mystery of the incarnation so much as the mystery of the social order. It introduces into the thought of heaven an idea of equalization, which saves the rich from being massacred by the poor.” (i.e. Religion keeps the poor from killing the rich.)
Scheidel describes it thus:
Modern scholars have come up with a wide variety of definitions that seek to capture the quintessential features of statehood. Borrowing elements of several of them, the state can be said to represent a political organization that claims authority over a territory and its population and resources and that is endowed with a set of institutions and personnel that perform governmental functions by issuing binding orders and rules and backing them up with the threat or exercise of legitimized coercive measures, including physical violence.
There is no shortage of theories to explain the emergence of the earliest states. The putative driving forces are all in some way predicated on economic development and its social and demographic consequences: gains that the well-positioned reaped from the control of trade flows, the need to empower leaders to manage the problems arising from growing population densities and more complex relations of production and exchange, class conflict over access to the means of production, and the pressures created by military conflict over scarce resources that favored scaling up, hierarchy, and centralized command structures p. 43
Whatever the fundamental cause of state formation, everywhere it happened the effect was the same: “Premodern state formation separated a small ruling class from the mass of primary producers.” (p. 46):
Unequal access to income and wealth preceded the formation of the state and contributed to its development. Yet once established, governmental institutions in turn exacerbated existing inequalities and created new ones. Premodern states generated unprecedented opportunities for the accumulation and concentration of material resources in the hands of the few, both by providing a measure of protection for commercial activity and by opening up new sources of personal gain for those most closely associated with the exercise of political power. In the long run, political and material inequality evolved in tandem…p. 43
In principle, institutions could have flattened emerging disparities through interventions designed to rebalance the distribution of material resources and the fruits from labor, as some premodern societies are indeed reputed to have done. In practice, however, social evolution commonly had the opposite effect… p. 5… Very broadly speaking, after our species had embraced domesticated food production and its common corollaries, sedentism and state formation, and had acknowledged some form of hereditary property rights, upward pressure on material inequality became a given–a fundamental feature of human social existence…p. 10
Everywhere they occurred, centralized states led to greater and greater inequality over time. The managerial class set themselves apart and diverted large portions of their society’s surplus to themselves. If there is one overriding theme throughout the book, it is that early elites converted political power into private wealth. Very generally, in modern society, wealth leads to status, which leads to power. In ancient societies, status led to power, which led to wealth. There was no merchant or producer class that was able amass huge fortunes before mercantilism and mass-production industrialism:
In smaller and less hierarchical polities such as tribes or Big Man collectivities [sic], the status of leaders depended in no small measure on their ability and willingness to share their bounty with the entire community. The ruling classes of agrarian states and empires generally enjoyed greater autonomy.
Notwithstanding occasional and well-publicized displays of largess, the flow of redistribution tended to be reversed, further enriching the few at the expense of the many. The elite’s collective capacity to extract surplus from primary producers determined the proportion of overall resources that was available for appropriation, and the balance of power between state rulers and various elite groups decided how these gains were apportioned among state coffers, the private accounts of state agents, and the estates of the landed and commercial wealth elite. p. 49-50
For a book that has often been touted by right-wingers, Scheidel is not sympathetic at all to the original one percent, portraying them as rank opportunists misusing their power to fleece society through means such as rent-seeking, graft and corruption. At times his analysis is almost Marxist in tone. In some of the more memorable passages of chapter one, he writes:
Reduced to essentials, history has known only two ideal typical modes of wealth acquisition: making and taking…The advent of surplus-production, domestication, and hereditary property rights paved the way for the creation and preservation of personal fortunes… p. 48
Political integration not only helped expand markets and lowered at least some transaction and information costs: the pervasive power asymmetries that commonly characterized premodern polities all but ensured an uneven playing field for economic actors. Fragile property rights, inadequate rule enforcement, arbitrary exercise of justice, the venality of state agents, and the paramount importance of personal relationships and proximity to sources of coercive power were among the factors likely to skew outcomes in favor of those in the upper reaches of the status pyramid and those profitably connected to them. This would have been true in even greater measure of various forms of “taking” that were available to members of the ruling class and their associates. p 48
Rents from access to political power are not exclusive to low levels of development. A recent study of dozens of super-rich entrepreneurs in Western countries shows how they benefited from political connections, exploited loopholes in regulation, and took advantage of market imperfections. In this respect, the difference between advanced democratic market economies and other types of states is a matter of degree…In the most general terms, there can be little doubt that personalized political connections and favors made a much larger contribution to elite wealth than they do in developed countries today…Russian credit card tycoon Oleg Tinkov’s description of his peers–“temporary managers of their assets–they are not real owners”–applies in equal measure to the precarious standing of many of their predecessors from ancient Rome and China to the monarchies of early modern Europe . p. 51
With the rise of the managerial state, Schiedel determines one critical source of income inequality: Rents from access to political power. Wikipedia describes rent-seeking activities this way:
…Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity. The classic example of rent-seeking…is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee (or rent of the section of the river for a few minutes) to lower the chain. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is not adding value in any way, directly or indirectly, except for himself. All he is doing is finding a way to make money from something that used to be free.
In agrarian societies a pattern emerges. Asymmetries in wealth and property become institutionalized. This goes hand-in-hand with political office. Based on Schiedel’s account, those who ascended to positions of political power and influence were able to appropriate the society’s productive surplus. That is, elites were able to use their authority and rule-making powers to allocate wealth and property to themselves. Most of this was not due to inventiveness or increased productivity, or even through “hard work” (that was done by the farmers), but through some form of rent-seeking activity. As he notes:
The more that personal fortunes depended on access to political rents, the more income from labor–at least if we can define corruption, embezzlement, extortion, military plunder, vying for benefactions, and taking over the assets of rivals as forms of labor–would have mattered than it did for entrepreneurial or renter investors of capital in more orderly and pacified societies …income of this nature could be a major, and at times perhaps even the principal, determinant of elite standing. This was true in particular of early, archaic states whose upper classes relied more on state-sponsored claims to rents in goods and labor services than on returns on private assets. These entitlements qualify the conventional distinction between income from capital and income from labor and once again underline the critical importance of political power relations in creating the original “1 percent.” p. 52-53
Based on Scheidel’s descriptions throughout the book, I would categorize the the major means by which “the original one percent” was created this way:
1. Privatization, Appropriation/Expropriation and Enclosure/Dispossession: As Emil de Laveleye expressed, “There is no doubt that, in primitive societies, the soil was regarded as the collective property of the tribe.” As kinship societies became class-based, however, land gradually became privatized. This was accomplished by a number of ways: seizing common land, acquisition by debt and foreclosure, privatization of ownership rights, or simply taking over rival territories and parceling out the land to politically connected insiders or military veterans. Creeping normality would do the rest.
The terms are quite similar, but there are a few distinctions. Appropriation means to set aside something for a specific use, such as an appropriations bill, which sets aside money for a specific purpose. Temple lands in ancient Sumeria, for example, were appropriated, as was corvée labor. However, appropriation does not necessarily mean changing ownership. For example, I can appropriate someone else’s writing style, but that does not mean the original owner cannot use it anymore.
Expropriation does mean depriving someone of possession of an asset. For example, a government expropriating land to build an airport. Often appropriation is a preliminary step to expropriation.
Privatization is the transfer in ownership of an asset that was formerly publicly held and commonly managed to being owned by a specific individual, family, or corporation. This can be done by expropriation, or through agreement or legislation. Enclosure can be thought of as a specific type of privatization. It is the closing off of formerly public lands by the assertion of individual ownership rights. This process is described in Marxism as “primitive accumulation.” Michael Hudson notes in Urbanization and Land Ownership in the Ancient World:
The irony is that the most archaic urban areas evolved out of gathering sites, which were the prototypical public spaces–public in the sense of not being controlled by any individual, family, or clan (or even “the state” ). Yet by the end of antiquity, urban real estate was well on its way co the modern situation in which it has become the largest privately owned economic asset. pp. 64-65
Growing expropriation is already observed as far back as ancient Sumeria, where the management of temples estates soon led the way to using religious office as a way to accumulate wealth and trap people in debt repayments. Priests ran temples as their personal estates along with their extended family. This transfer of land from public to private is summarized by Scheidel:
Fairly egalitarian modes of land ownership were once common in many of the regions that later came to host large empires. Among the Sumerians in southern Mesopotamia, one of the earliest civilizations known from written sources that date back more than 5,000 years, much farmland used to be controlled by extended patrilineal families of commoners who worked it as communal holdings. This type of ownership was also typical in early China, in the Shang and Western Zhou periods in the second millennium BCE, at a time when private land sales were supposedly inadmissible.
In the Valley of Mexico in the Aztec period, most land was held and cultivated by calpotin, corporate groups whose holdings combined family fields with common land. The former were sometimes periodically reconfigured to take account of changes in family size. The same was true of the ayllukuna in the Peruvian highlands of the Inca period, endogamous groups that assigned parcels at different altitudes to individual member families and regularly adjusted them to ensure an equitable distribution. Arrangements such as these imposed a powerful constraint on the concentration and commercial exploitation of land.
Over time, however, inequality grew as capitalholders acquired land and political leaders superimposed tributary structures on existing holdings. By the time Sumerian documentation expanded in the course of the third millennium BCE, we already encounter temples that held large amounts of land and worked it with their own institutional labor force, and we see nobles who had somehow amassed larger holdings as well.
Privatization of lineage land was possible as long as other group members agreed to it. Debt served as a potent instrument of converting surplus income into additional land: high annual interest rates of up to a third frequently compelled customary owners who had taken out loans to cede their holdings to creditors and might even condemn them to servitude if they had pledged themselves as collateral. This process created both large estates and a landless workforce to cultivate them...Privatization, in turn, reduced traditional social obligations to clients and supporters: the fewer costly social responsibilities were attached to private property, the more attractive it would have become to investors.
A variety of social statuses developed to cater to the labor needs of capital owners, such as sharecroppers and debt bondsmen, with slavery, a more primordial type of subordination, added to the mix. Analogous processes could be observed 4,000 years later, but at a comparable level of socioeconomic development, among the Aztecs, where rural debt and recourse to landless serfs and slaves sustained growing inequality.
The practices of state rulers provided both a model for, and also often the means or, encroachment. Sumerian kings sought to obtain land for themselves and their associates and insinuated themselves into the operation of temple estates to gain control over their assets…p. 54
Land was commonly parceled out by victorious leaders and warlords to their followers as a reward for service (see also, booty capitalism, below), as Schiedel notes:
…Considered the first “true” empire in history if we define empire in terms not merely of size but also of multiethnic heterogeneity, asymmetric core-periphery relations, and abiding local traditions of distinction and hierarchy, [the Akkadian kingdom] exercised power over diverse societies from northern Syria into western Iran… Local citystate kings were replaced by Akkadian governors, and large amounts of land ended up in the hands of the new rulers and their senior agents. Because much of the most productive farmland was held by temples, rulers either had it confiscated or appointed relatives and officials as priests to assume control of these resources. A new imperial ruling class that transcended the internal divisions of this far·flung realm accumulated large estates. Appropriated land, handed over to officials, was used to support them and to reward their own clients and subordinates, some of whom were known as “the select.” Later tradition expressed loathing for “the scribes who parceled out farmland in the steppe,” The beneficiaries of state grants further added to their holdings by purchasing private land…
…State-directed allocation of material resources to members of the political elite and administrative personnel converted political inequality into income and wealth inequality. It directly and immediately reproduced power asymmetries in the economic sphere.
The delegational nature of rule in premodern stares required rulers to share gains with their agents and supporters as well as with preexisting elites…Land grants were an almost universal means of rewarding key associates, being handed out by the chiefs of Hawai’i and the god-kings of Akkad and Cuzco, by Egyptian Pharaohs and Zhou emperors, by the kings of medieval Europe and by Charles V in the New World. Attempts to make these prebendal estates hereditary within the families of the initial beneficiaries and eventually tum them into private property were an almost inevitable consequence. p. 57
On that note, it’s not just land, but labor, too, that was commonly appropriated by various local elites, as Michael Hudson describes:
Throughout history local authorities have sought to divert labor for their own purposes. Sometimes the central authority deters this power grabbing, as in England’s Star Chamber in the 16th and 17th centuries against aggressive local nobility. But the Bronze Age “Intermediate Period” saw central power wane vis-a-vis that of local clan heads, cheiftains and “big-men” …Palaces remained dependent on local officials or contractors to supply labor, resulting in a political tug of war. Assyriologists have found a similar reliance of Ur III and Babylonian rulers on local clan heads or lu-gal “big-men” acting as contractors to supply labor and military support, especially in Mesopotamian “intermediate periods.” Labor in the Ancient World PP. 654-655
The land ownership pattern in England today dates back to patterns laid down during the Norman conquest:
…when confronted with years of rebellion after his initial victory at Hastings, William the Conqueror switched to a policy of systematic expropriation.The ensuing massive transfers greatly increased the crown’s share of all land and placed fully half of all land in the hands of some 200 nobles, half of it held by ten close associates of the new king. Despite their privileged position, the latter ended up somewhat less extravagantly rich than the previous earls had been, whereas the other barons were on average much better off than most of the previous thanes had been. This violent redistribution reached deep into the ranks of the English elite: by the time of the Domesday Book survey of 1086, landowners who can unambiguously be identified as English held only 6 percent of the land by surface or 4 percent by value, and although their actual share may well have been greater, there is no doubt that Norman nobles had largely taken over…pp. 200-201
2. Graft, bribes, corruption, extortion, and political favors from holding high office: In ancient times, positions were based on one’s personal relationship to the ruler; there was no distinct “office” apart from the individual who held it. Your position in the hierarchy determined how much you could exploit those beneath you:
Participation in governance opened up access to income from formal compensation , benefactions of rulers and other superiors, and the solicitation of bribes, embezzlement, and extortion, and it often also provided shelter from taxation and other obligations. Senior military positions might be rewarded with a share of war booty. What is more, direct service for the state was not even a necessary prerequisite. Ties of kinship, intermarriage, and other alliances with officeholders could yield commensurate benefits. Moreover, considering the often rather limited infrastructural power of the state, personal wealth and local influence made it easier to shield not only one’s own assets from state or community demands but also those of friends and clients–in exchange for other benefits. If necessary, tax quotas could be met by shifting additional burdens onto the powerless. p. 49
Religion has been used as a means to wealth from ancient times. From the money changers of the Hebrew temple, to the indulgences of the Catholic Church to today’s “prosperity gospel” televangelists in the U.S., religion has always been a money-making enterprise. Corruption was endemic in ancient Sumeria, the very first extensively recorded civilization:
Temple administrators intermingled management of institutional assets with their own. Graft, corruption and force were already well-established means of appropriation. Sumerian cuneiform records from the city of Lagash in the twenty-fourth century BCE show that the local kings and queens took over temple land and the workers attached to it; that aristocrats acquired land by foreclosing on high-interest loans; that officials misused state assets such as boats and fishing grounds, overcharged for basic services such as funerals and sheep shearing, withheld wages from workers, and generally filled their pockets through corruption; and that the wealthy stole fish from poor men’s ponds. Whatever the merits of some of these allegations, the overall impression is that of a particular type of governance that encouraged encroachment aided by the exercise of power for personal benefit. p. 54
Similarly, in the Roman Empire:
The richest provincials joined the central imperial ruling class, eager to claim rank and attendant privilege and capitalize on the opportunities for further enrichment they offered. A survey of Roman literature has found that epithets of wealth were almost exclusively applied to senators of consular rank, who enjoyed the most favor and the best access to additional riches. Formal status ordering was grounded in financial capacity, and membership in the three orders of the state class-senators, knights, and decurions-was tied to staggered census thresholds. pp. 75-77
And in Han Dynasty China:
Great wealth accrued from favoritism and corruption: several imperial chancellors and other very senior officials were said to have accumulated wealth on par with the largest recorded fortunes overall. In the later stages of the Eastern Han Dynasty, the lucrative nature of top offices came to be reflected in the prices at which they could be purchased. Legal privilege shielded corrupt officials with growing generosity. Officials above a certain pay grade were not to be arrested without prior approval of the emperor, and similar protections extended to sentencing and punishment. p. 65
3. Military conquest and war profiteering: War for private profit has a long pedigree. Ancient Near Eastern rulers conquered new lands and enslaved the populations. Alexander the Great claimed he invaded Persia for revenge, but in reality, it’s likely he needed the money. Julius Caesar, too, needed to pay off his debts. James Scott desrcibes Max Weber’s theory of “booty capitalism”:
“Booty capitalism” simply means, in the case of war, a military campaign the purpose of which is profit. In one form, a group of warlords might hatch a plan to invade another small realm, with both eyes fixed on the loot in, say, gold, silver, livestock, and prisoners to be seized. It was a “joint-stock company,” the business of which was plunder. Depending on the soldiers, horses, and arms that each of the conspirators contributes to the enterprise, the prospective proceeds might be divided proportionally to each participant’s investment. The enterprise is, of course, fraught, inasmuch as the plotters (unless they are merely financial backers) potentially risk their lives…In many cases—in early Southeast Asia and in imperial Rome—war was seen as a route to wealth and comfort. Everyone from the commanders down to the individual soldier expected to be rewarded with his share of the plunder…James C. Scott; Against the Grain, p. 144
Similarly, in ancient Greece and Rome, conquering foreign lands was a route to wealth:
…Warfare was a similarly, if not more, important source of elite income. Roman commanders enjoyed complete authority over war booty and decided how to divide it among their soldiers, their officers and aides who had been drawn from the elite class, the state treasury, and themselves. Based on the number of military theaters and wars, it has been estimated that in the years between 200 and 30 BCE. at least a third of the 3,000- odd senators who lived in this period had a chance to enrich themselves in this fashion. p. 73
4. Usury, foreclosure and loan-sharking: David Graeber’s Debt: The First 5,000 Years is the definitive book on this topic. In it he wonders how something as amoral as enslaving people with debt is commonly seen by most people as moral—“surely one must pay one’s debts,” after all. Perhaps it comes from the hijacking of our innate notions of reciprocity and fairness by elites through a twisting of moral logic. In any case, Graeber writes of the origin of debt:
We don’t know precisely when and how interest-bearing loans originated, since they appear to predate writing. Most likely, Temple administrators invented the idea as a way of financing the caravan trade. This trade was crucial because while the river valley of ancient Mesopotamia was extraordinarily fertile and produced huge surpluses of grain and other foodstuffs, and supported enormous numbers of livestock, which in turn supported a vast wool and leather industry, it was almost completely lacking in anything else. Stone, wood, metal, even the silver used as money, all had to be imported. From quite early times, then, Temple administrators developed the habit of advancing goods to local merchants-some of them private, others themselves Temple functionaries-who would then go off and sell it overseas. Interest was just a way for the Temples to take their share of the resulting profits. However, once established, the principle seems to have quickly spread.
Before long, we find not only commercial loans, but also consumer loans-usury in the classical sense of the term. By c. 2400 BC it already appears to have been common practice on the part of local officials, or wealthy merchants, to advance loans to peasants who were in financial trouble on collateral and begin to appropriate their possessions if they were unable to pay. It usually started with grain, sheep, goats, and furniture, then moved on to fields and houses, or, alternately or ultimately, family members. Servants, if any, went quickly, followed by children, wives, and in some extreme occasions, even the borrower himself. These would be reduced to debt-peons: not quite slaves, but very close to that, forced into perpetual service in the lender’s household-or, sometimes, in the Temples or Palaces themselves. In theory, of course, any of them could be redeemed whenever the borrower repaid the money, but for obvious reasons, the more a peasant’s resources were stripped away from him, the harder that became.
David Graeber; Debt, the first 5,000 Years, pp. 64-65
In fact, the earliest texts make no distinction between servants (who work for pay), bonded labor (who work to pay off a debt, real or imagined), and chattel slaves (who are owned outright). Perhaps there really was no distinction to be made.
5. Tax farming and the holding of high political office: Tax farming was the practice of privatized tax collection in the ancient world that persisted until relatively modern times. This “entrepreneurial” approach to collecting taxes was rife with corruption and entitlement. Scheidel describes the role this played in elite wealth accumulation:
In addition to grants of land and labor, participation in the collection of state revenue was another important pathway to power-based elite enrichment. This process is so well attested that a long book could, and indeed should, be devoted to it. To name just one lesser-known example, in the Oyo empire, a large Yoruba state in West Africa in the early modern period, petty kings and subordinate chiefs gathered at local tribute-taking centers before they converged on an annual festival at the capital. Tribute in the form of cowrie shells, livestock, meat, flour, and construction materials was presented to the king through the intermediation of officials who had been appointed to act as patrons for particular groups of tribute-bearers and who were entitled to a share of the proceeds in exchange for their troubles. Needless to say, formal entitlements frequently accounted for only a modest portion of the personal income that fiscal agents derived from their service. p. 58
Governance was a key route to riches in the highly privatized Roman Empire:
Great wealth accrued from state administration outside Italy, and Roman-style governance was highly conducive to exploitation. Provincial administration was highly lucrative, and rent-seeking behavior was only weakly constrained by laws and courts set up to prosecute extortion: alliance-building and rent-sharing among the powerful provided insurance against indictment.
Moreover, at a time when annual interest rates of 6 percent were common in Rome itself, wealthy Romans imposed rates of up to 48 percent on provincial cities, which were in desperate need of money to satisfy the demands of their governors. Members of the equestrian order benefited from the widespread practice of tax farming, as the right to collect certain taxes in a particular province were auctioned off to consortia that then proceeded to do what they could to turn a profit.
This intimate association of personal wealth and political power was faithfully replicated at the local level. The mature Roman empire consisted of some 2,000 largely self-governing urban or differently organized communities that were loosely overseen–and opportunistically fleeced–by itinerant governors and small cares of elite officials and imperial freedmen and slaves who were mostly concerned wiht fiscal matters. Each city was normally run by a council that represented the local wealth [sic] elite. These bodies, whose members were formally constituted as decurions, were in charge not only of local taxation and expenditure but also of assessing their communities’ wealth for Roman state taxation, and they were responsible for raising funds that were to be handed over to collectors and tax farmers…The net result was an intensely stratified society in which the richest 1 percent or 2 percent absorbed much of the surplus beyond bare subsistence…pp. 75-77
7. Government-awarded monopolies and the sale of offices: Schiedel does not mention this, but I should note that one common form of rent-seeking for archaic governments were national monopolies. The most famous of these was probably to Royal salt monopoly in France, and the Gabelle tax it created:
Government monopolies, such as salt (which was part of the general farms) and recently introduced tobacco, were…farmed out…Indeed, the ability to create monopolies was one of the king’s resources; one of the more outlandish examples being the exclusive right to sell snow and ice in the district of Paris, sold for 10,000L per year in 1701. Francois R. Velde; Government Equity and Money: John Law’s System in 1720 France, p. 4
Another common method used throughout the Middle Ages was the creation and auctioning off of high political offices to aristocrats. They could then use their position to charge fees and nickel-and-dime the populace (the sale of religious offices was called Simony).
An officer was someone who held a government position not on commission or at the king’s leave, but as of right, and enjoyed various privileges attached to the position (in particular the collection of fees related to his activities). Offices were sold, and the king paid interest on the original sale price, which was called the wages of the office (gages). A wage increase was really a forced loan, requiring the oﬃcer to put up the additional capital. Officers could not be removed except for misconduct; however, the office itself could be abolished, as long as the king repaid the original sum….From 1689 to 1712 over 3,000 offices were created to supervise the markets of Paris in the minutest details, including “inspectors-gourmets of wines”, inspectors of pig’s tongues, and distinct officers in charge of respectively loading, unloading, and rolling barrels. Francois R. Velde; Government Equity and Money: John Law’s System in 1720 France, p. 6
Another factor not mentioned by Schiedel was seignorage, or profits derived from the government monopoly over the issuance of valid currency.
Medieval sovereigns had few ways of raising revenue apart from the proceeds of their personal domains: levying direct or indirect taxes was far beyond most feudal administrative capabilities. Seigniorage was therefore a uniquely attractive and uniquely feasible source of income-and medieval sovereigns happily indulged in it. Under normal circumstances, when seigniorage’ was levied only on the gradual increase in the coinage supply demanded by a growing monetary economy the revenues were relatively modest. But when the need arose, a sovereign could raise enormous sums by crying down or even demonetising altogether the current issue of the coinage and calling it in for re-minting off a debased footing. In 1299, for example, the total revenues of the French crown amounted to just under £2. million: of this, fully one half had come from the seigniorage profits of the Mint following a debasement and general recoining. Two generations later, the recoinage of 1349 generated nearly three-quarters of all revenues collected that year by the king. When such large sums could be raised, it is hardly surprising that there were no fewer than 123 debasements in France alone between 1285 and 1490. Felix Martin; Money: The Unauthorized Biography, pp. 88-89
9. Offhshore tax havens, tax avoidance and regressive taxation: This is only obliquely referred to by Scheidel, but is deserves more attention. Throughout history there is a pattern of the wealthiest individuals being able to hide their income form the state and avoid paying taxes—something that is usually considered to be a modern phenomenon. Because the wealthy had political power due to their status, they frequently exempted themselves from taxes and shifted the burdens of paying for the state to those less politically powerful. Not only has the so-called “Tytler calumny” promoted by libertarians never happened (where the rich allegedly have their assets confiscated via democratic popular vote), but in fact the exact opposite has been the trend throughout recorded history!
Primarily associated with modern times, Michael Hudson has documented how even in antiquity certain favored “tax havens” and “duty-free zones” existed outside of government juristdiction which allowed for elite accumulation of assets free from paying duties and obligations to the state, a method smaller and more local producers could not take advantage of. He makes an analogy between the Panama Canal Zone and the Greek island of Delos during Roman times:
The last thing the Delian merchant class wanted was a public authority to regulate its entrepot trade in captured cargoes, slaves or, for that matter, honest goods….Delos was for them not their home but their business residence. What they cared for most was not the city or the temple but the harbors, the famous sacred harbor, and especially the three adjoining so‑called basins with their large and spacious storehouses. It is striking that while these storehouses are open to the sea there is almost no access to them from the city. ..This characteristic of Delos’s warehouses being only open outwards, not inland, finds a parallel in modern Panama’s Canal Zone, whose warehouses likewise are bonded and set aside from the local economy (save for the National Guard’s pilfering and shakedowns). Panama’s imports from Asia are destined for other Western Hemisphere countries rather than for local consumption. Drug and arms shipments provide another analogue to Delian contraband. Finally, Panama’s sizeable Oriental and European population working as brokers and bankers recalls the adventurers who made their way to Delos. Both that island and Panama became what are now called “dual economies”: The Delian export trade involved the native population only minimally, much as is the case in Panama and other modern enclaves.
From Sacred Enclave to Temple City (Michael Hudson)
Similarly, it appears that the rich and powerful were disproportionately able to shelter their income and assets from taxation, while shifting the burden onto the debt donkeys of the middle classes and the poor.
It is striking that the wealthiest members of the [Roman] citizenry were not taxed proportionate to the size of their fortunes, let alone in a straightforwardly progressive manner. The scheme placed the heaviest burden on the upper reached on the commoner population instead of on the wealth elite. Even in an acute emergency, Rome’s oligarchic ruling class made as few concessions as it could get away with, in marked contrast to a democratic political system such as that of classical Athens, which…heavily taxed the rich to cover war expenditures. p. 187
Meanwhile, in Imperial China:
State capture of private resources was unlikely to contain a rise in private wealth inequality in the face of intensifying military mass mobilization. The system may even have been effectively quite regressive, considering that it imposed a very heavy double tax –military labor and agricultural products–on those least able to afford it, the farmers, whereas other forms of wealth may have been easier to shield from state demands. Infantry warfare as practiced at the time was relatively low-cost, relying as it did above all on conscription, mass-produced weapons (presumably involving forced labor by convicts and other state workers, as in later centuries), and the food that the farmers themselves produced. p. 185
Privilege derived from holding high state office fueled personal enrichment, a process that was tempered only by interfamilial rivalries and eventually more violent factionalist struggles that checked or reversed the rise of individual families but that failed to undermine their collective grip on the most lucrative positions of public service. Wealth accumulation was greatly aided by the fact that even distant relatives of the imperial family, as well as all families endowed with noble titles and all officials and holders of official rank, were exempt from taxation and labor services, an eminently regressive system that openly favored the powerful and well-connected. Members of the same group engaged in private purchase of public land, a practice repeatedly but unsuccessfully prohibited by their rulers. p. 260
One interesting historical trend is peasants who put themselves under the “protection” of a well-connected member of the elite class in order to shield themselves from increasingly burdensome taxation during the latter stages of state breakdown. The indebtedness that results is thought to be a contributor to the various feudal systems that emerge when centralized power falls apart.
…Instrumental in returning the Han to power, the great landowning families brought more and more land under their control and subordinated its cultivators through debt. Sources of the period refer to the elite practice of falsifying census accounts in order to conceal taxable assets. The decline in the number of registered households from more than 12 million in 2 CE to fewer than 10 million in 140 CE–at a time of expanding settlement in the southern reaches of the empire–thus reflects at least in part worsening noncompliance as landlords converted freeholders into landless tenants and shielded them from state agents. pp. 67-68
As a result, elite landownership expanded at the expense of the state, and attempts to implement land equalization schemes ceased after political instability commenced in the mid-eighth century CE. The growth of large estates sheltered peasants from state taxation, allowing landlords to convert the agricultural surplus into private rent. Linked to long-distance trade, these commercialized estates helped sustain an increasingly rich elite. Those who disposed of sufficient capital to run mills diverted water from peasants, a practice that prompted complaints but only sporadic state intervention. pp. 260-261pp
…In diffferent part of the later Roman Empire, we hear of farmers who sought protection by powerful landlords (as well as officials) who assumed responsibility for their dealings with the outside world, most notably imperial tax collectors. In practice, this interfered with the gathering of state revenue and strengthened landlords’ grip on the agrarian surplus.
This in turn not only weakened the central authorities but also shifted fiscal burdens to less powerful parties, much to the detriment of middling property owners. Once again, further polarization between rich and poor was an almost inevitable outcome, and just as in late Han China, private armies and incipient warlordism were not always far behind…pp. 79-80
Tax evasion and inequality (VoxEU)
10. Slavery and forced resettlement: Chattel slavery is older than recorded history, and in many cultures, including the “freedom-loving” West, slaves were the largest asset the wealthy possessed after land. Slavery, and numerous other forms of compelled labor (corvée, bonded labor, prison labor, migrant labor, indentured servitude, etc.) obviously was a huge factor in inequality in ancient times:
…In many premodern societies, the enslavement or deportation of outsiders …also raised overall inequality. The Neo-Assyrian empire in the Fertile Crescent was notorious for engaging in forcible resettlement on a huge scale, mostly from subjugated peripheries into the imperial heartland in northern Mesopotamia…Over the following century or so, the continuing inflow of deportees allowed Assyrian kings to build, populate, and provision several capital cities… Shorn of their former assets, [the deportees] could typically expect nothing better than an existence at the margins of bare subsistence. Their position may even have deteriorated as the empire reached the leak of its power. For along time, there had been no sign in the record that resettled subjects had been formally differentiated from the indigenous population: they were “counted together with the Assyrians.” This phrase disappeared in the final phase of Assyrian conquests, from about 705 to 627 BCE, when great victories and ongoing expansion fostered a heightened sense of superiority. Deportees were downgraded to the status of forced laborers and employed in large public works projects. Forced migration not only augmented the ranks of the poor but also added to the wealth and income of the upper class…
Slavery produced similar results. The enslavement of outsiders was one of the few mechanisms capable of creating significant levels of inequality in foraging societies of small size and low or moderate complexity, not only among the aquatic foragers of the Pacific Northwest but across a wide range of tribal groups. Yet once again, it took domestication and state formation to boost the use of slave labor to new heights. Under the Roman Republic, several million slaves entered the Italian peninsula, where many of them were bought up by the wealthy to toil in their mansions, workshops, and agricultural estates…pp. 60-61
The capture of slaves was a major reason for military operations, especially by the Romans, where human property was a major way the wealthy made their fortunes:
…Economic development grounded in market relations certainly picked up in the later stages of the Republican period. The use of slaves in cash crop production and manufacturing, as well as rich archaeological evidence for the export of wine and olive oil, points to the success of Roman capital owners. Yet this was only part of the story. Simple estimates of the likely scale of supply and demand suggest that landownership and related commercial activities could not have generated nearly enough income to make the Roman elite as rich as we know it became. And indeed, our sources emphasize the paramount significance of coercion as a source of top incomes and fortunes. p.73
Imperial unification and connectivity facilitated the expansion and concentration of personal wealth. Under Nero, six men were said to have owned “half” of the province of Africa (centered on modem Tunisia), albeit only until he seized their properties. While clearly hyperbolic, this claim need not have been dramatically far from the truth in a region where large estates could be described as rivaling city territories in size. p. 75
11. Assortative marriage, cronyism and nepotism: Wealthy families commonly made ties with other wealthy families in every culture, exacerbating the concentration of wealth. Things like dowries and bride-prices encouraged the trend of wealthy families to intermarry into other wealthy families. Nearly every hierarchical society has had ways to ensure that elites marry one another rather than commoners, from cousin marriage, to cotillions, to arranged marriages to the university system today. Tang Dynasty China offers some of the most extreme examples:
The most extravagant disparities were created at the very top, by families that back in the sixth and seventh centuries had closely cattached themsleves to the imperial court by abandoning their local bases and relocating to the capital cities of Chang’an and Luoyang, where close proximity to the throne ensured the most immediate access to political power and attendant lucre. This spatial clustering helped them secure access to senior government positions and provincial offices. Distinct from a provincial upper class that rarely ascended to state offices, these families formed a closed cultural elite that was increasingly interconnected by marriage. The most detailed study of this group and the numerous tomb epitaphs it left behind finds that by the ninth century CE, at least three-fifths of all known members of the resident imperial elite of Chang’an were linked by ties of kinship and marriage, including the majority of senior officials such as ministers and most top-tier officials in charge of provincial administration. What has been called a “highly restricted marriage and kin network” had thus come to control the Tang state, in no small part for the personal benefit of its members. p. 261
Similarly, during the Han Dynasty:
These dynamics both favored and constrained familial continuity in wealth holding. On the one hand , the sons of high officials were more likely to follow in their footsteps. They and other junior relatives were automatically entitled to enter officialdom and benefited disproportionately from the recommendation system employed to fill governmental positions. We hear of officials whose brothers and some six of seven–in one case, no fewer than thirteen sons–also came to serve as imperial administrators. On the other hand, the same predatory and capricious exercise of political power that turned civil servants into plutocrats also undermined their success…The top tier of the Han elite…did not last for much more than a century and was removed alongside the remnants of the ruling houses of the Warring States period. New favorites took their place… pp. 66-67
12. Wage Suppression and theft: Rather than simple “supply and demand” as promoted by professional economists, a cursory glance at history shows that the wealthy have always gone to great lengths to hold down wages as low as possible since the very first appearance of paid labor by using every legal (and some illegal) means at their disposal. In some cases this succeeded, in other cases it failed, depending on the prevailing sociopolitical conditions:
Elites had a powerful incentive to contain the leveling effects of the Black Death and its recurrences. The success of such measures varied widely between different societies depending on their power structure and even their ecology. Employers lost no time pressuring the authorities to curb the rising cost of labor… The actual effect of these ordinances appears to have been modest. (p. 299)… Within a generation, however, these measures had failed.p. 300
In western Europe, workers benefited because gains from labor scarcity were usually passed on to them. Not only did restrictions on wages and mobility fail, but the demographic shock of the plague also largely killed off the earlier medieval institution of serfdom…peasants asserted their mobility, moving to other manors if they offered better work conditions. This drove down rents and led to the commutation and eventual elimination of labor services that had been a standard feature of the manorial economy. Tenants ended up paying only rent and had the opportunity to work as much land as they could manage. This fostered upward mobility and led to the creation of a yeoman class of prosperous peasants…
On occasion workers resorted to violence in resisting elite attempts to deny them their newfound gains…popular rebellions in the form of peasant uprisings such as the Jacquerie in France (1358) and the Peasants’ Revolt of 1381 in England were the result. In the short term, the uprising was put down by force. But although new restrictive statutes were passed…the movement did deliver concessions to peasants: poll taxes were abandoned, and peasant bargaining expanded over time…By and large workers managed to benefit from labor scarcity, at least while it lasted.
Yet in other regions landlords were more successful in suppressing worker bargaining. In eastern European countries–Poland, Prussia, Hungary–serfdom was introduced after the Black Death.…central and eastern Europe faced the same problems of depopulation, abandoned land, and falling land and grain prices as were experienced farther west. The landed nobility resorted to legal measures to stem a decline in revenue, imposing ceilings on wages and the price of urban goods. Unlike in western Europe, the powerful strove mightily to increase labor obligations instead of reducing them, especially labor dues, cash payments, and restrictions on freedom of movement. In various countries, such as Prussia, Silesia, Bohemia, Moravia, Silesia, Russia, Lithuania, Poland, and Livonia, tenants were prohibited from leaving without permission or without paying a large fee or all arrears, or except at a certain time, or in some cases at all.
Poaching of workers was forbidden by law or lordly agreement; cities could be ordered to reject migrants, and rulers entered treaties for their return to their native countries. Tenant debt was a powerful instrument of retention. Obligations and restrictions continued to expand in the sixteenth century. A number of factors conspired to constrain workers, perhaps most importantly the growing political power of the nobility who held increasing jurisdictional sway” over the peasants on their manors, alongside unfavorable developments in commercialization and urbanism. As nobles expanded their powers at the expense of the state and cities failed to provide a counterweight, workers were trapped in increasingly coercive arrangements. … outcomes for workers differed much from those in western Europe. pp. 310-311
All told, this pattern holds across all ancient and preindustrial societies: Political leadership is channeled to wealth inequality. Or, to take the inverse: Large fortunes were the result of political power and influence. As Scheidel concludes:
Many more cases from around the world could easily be added but the basic point is clear. In premodern societies, very large fortunes regularly owed more to political power than co economic prowess. They differed mostly in terms of their durability, which was critically mediated by state rulers’ ability and willingness to engage in despotic intervention. Intense resource concentration at the very top and high inequality were a given, and although wealth mobility varied, this was of little concern to those outside plutocratic circles. Sketched out in the opening chapter, the structural properties of almost all premodern states strongly favored a particular coercion-rich mode of income and wealth concentration that tended to maximize inequality over time. As a result, these entities were often about as unequal as they could be. p. 84
Underneath their institutional and cultural differences, the empires of China and Rome shared a logic of surplus appropriation and concentration that generated high levels of inequality. Imperial rule mobilized flows of resources that were capable of enriching those at the levers of power on a scale that would have been unimaginable in smaller settings. The degree of inequality was therefore at least in part a function of the sheer scale of imperial state formation. Building on mechanisms of capital investment and exploitation that had first been developed thousands of years earlier, these empires raised the stakes ever higher. Greater profits were to be had from state office; lowered transaction costs for trade and investment over long distances benefited those who had income to spare. In the end, imperial income inequality and wealth polarization could be terminated and reversed only by dismemberment through conquest, state failure, or wholesale systems collapse, all of them intrinsically violent upheavals. The premodern historical record is silent on peaceful ways of combating entrenched imperial inequalities, and it is hard to see how any such strategies could have arisen within these specific political ecologies. p. 80
All of this is to answer the fundamental question I posed a few posts ago: How did private property originate? I guess we now know how. Rather than the happy fairy-tale and just-so stories told by libertarians like Brian Caplan (many of whom are on the payroll of the plutocrats), the above demonstrates in exhaustive detail how elites took control of the political apparatus of ancient states and used them to create vast inequalities of wealth and power.
The story Scheidel tells is quite the opposite of today’s Ayn Rand-inspired model of the mass of “takers” stealing the wealth of the tiny sliver of superhumanly-talented “makers” through government and the welfare state. I’ts pretty clear from this book that rather than wealth being created by a tiny minority and appropriated by the majority, in fact wealth is collectively produced and privately appropriated, and has been throughout history.
In societies that relied exclusively on solar power, there was no way to quickly and dramatically produce larger output, so there was no “economics” which endorsed things like privatization and trickle-down. The reason why these ancient societies did not function as modern societies do is explained by Francis Fukuyama by something he calls “the iron law of latifundia”:
There is something like an iron law of latifundia in agrarian societies that says that the rich will grow richer until they are stopped-either by the state, by peasant rebellions, or by states acting out of fear of peasant rebellions.
In premodern agrarian societies, disparities in wealth do not necessarily reflect natural disparities in abilities or character. Technology is fixed and no one is rewarded for being entrepreneurial or innovative. Before the mechanization of agriculture, there were no particular economies of scale to be had, either, that would explain the growth of large latifundia in terms of efficiency. Even large landowners had their fields worked by individual peasant families farming on small plots. But small initial differences in resources reinforced themselves through the mechanism of debt peonage. A wealthier peasant or landowner would lend money to a poorer one; a single bad season or crop failure would then reduce the debtor to serfdom or slavery, with the forfeiture of his family’s property. Over time, the advantages of greater wealth became self-reinforcing, since larger landowners could then buy influence in the political system to protect and expand their holdings.
This is why the anachronistic application of contemporary property rights theory to historical situations leads to fundamental misunderstandings. Many economists believe that strong property rights promote growth because they protect private returns to investment, thereby stimulating investment and growth. But economic life in Han Dynasty China resembled the world described by Thomas Malthus in his Essay On the Principle of Population much more than the world that has existed since the beginning of the Industrial Revolution of the last two hundred years…In a Malthusian economy where intensive growth is not possible, strong property rights simply reinforce the existing distribution of resources. The actual distribution of wealth is more likely to represent chance starting conditions or the property holders’ access to political power than productivity or hard work. (Even in today’s mobile, entrepreneurial capitalist economy, rigid defenders of property rights often forget that the existing distribution of wealth doesn’t always reflect the superior virtue of the wealthy and that markets aren’t always efficient.)
Left to their own devices, elites tend to increase the size of their latifundia, and in the face of this, rulers have two choices. They can side with the peasantry and use state power to promote land reform and egalitarian land rights, thereby clipping the wings of the aristocracy. This is what happened in Scandinavia, where the Swedish and Danish monarchs made common cause with the peasantry at the end of the eighteenth century against a relatively weak aristocracy. Or the rulers can side with the aristocracy and use state power to reinforce the hold of local oligarchs over their peasants. This happened in Russia, Prussia, and other lands east of the Elbe River from the seventeenth century on, as a generally free peasantry was reduced to serfdom with the collusion of the state. The French monarchy under the Old Regime was too weak to dispossess the aristocracy or remove their tax exemptions, so it ended up placing the burden of new taxes on the peasantry until the whole system exploded in the French Revolution. Which course the monarch chose-to reinforce the existing oligarchy or to lean against it-depended on a host of contextual factors like the cohesiveness of both the aristocracy and the peasantry, the degree of external threat faced by the state, and rivalries within the court. pp. 142-143
However, Schiedel takes a dismal view of the possibilities for non-violent political reform. Sure, they happened from time to time, he says, but mostly they were just a blip on an overall inexorable trend line towards more and more wealth in the hands of a few—small anomalies that did nothing to exacerbate the overall historical trend. As noted above, the French Revolution managed to equalize incomes–largely by executing the aristocracy and expropriating their (and that of the largest landowner–the Catholic Church’s) property.
We’ll take a look at some of Scheidel’s “Great Levelers” next time.