The Social Logic Transforms

For a long time Jericho and Çatalhöyük, and similar other examples were isolated enigmas. These were essentially supersized villages of thousands of people. They preceded the Urban Revolution described by Childe by millennia, at a time when most people still lived in villages closer to the optimum (Dunbar’s number).

In the fertile alluvial valleys of Mesopotamia around 4000BC, suddenly dense urban settlements are established once again, but on a very different order from earlier ones like Jericho and Çatalhöyük. These are true cities, with planned streets, temples, palaces, granaries, and so forth.

But why did large groups of people suddenly start living in such dense settlements again? And why did it happen when and where it did? It’s notable that when cities reappear, they are planned, with temples, streets, palaces, etc. This has led to the conclusion that cities are intrinsically tied with the emergence of the state as a governing entity, replacing tribal or chieftainship modes of governing:

At some point during the fourth millennium BC, farmers and herders in Mesopotamia began to concentrate in large, densely occupied settlements, the best known of which is Uruk. For millennia previously, since the start of sedentary life in the Near East, settlements had, with a few exceptions, rarely exceeded a few hectares in size; now places like Uruk and Tell Brak exceeded one hundred hectares of settled area.

Contemporary with this demographic expansion, monumental architecture, specialist-produced status-marking goods, record keeping devices, and mass produced pottery appeared, which have been interpreted as signifying a new complex and centralized form of sociopolitical organization, i.e., the state. On these empirical bases, archaeologists have interpreted the record of the Uruk period as the beginnings of urbanism as a settlement form, and the state as a political structure.

Why did these settlements begin and grow where the previous failed? I suspect that it is because the intervening years had seen a transformation in the social logic. The evidence shows that Near Eastern societies had transitioned from a transegalitarian phase to a much more hierarchical one over the intervening thousand years or so. This allowed for the introduction of much more top-down political systems which were required to make cities possible. Such systems may have emerged as a result centuries of domesticated agriculture and anial husbandry, along with the attendant feasting they engendered.

There are several clues in the archaeological record indicating such a change:

1.) Temples: As Kent Flannery and Joyce Marcus point out, the emergence of hierarchy is strongly correlated with the building of temples. Temples indicate the emergence of full-time religious specialists who gained a monopoly on intercession with the gods/ancestors and derived their enhanced status thereby. The lack of any specialized religious structures was noticeable at both Jericho and Çatalhöyük.

We have used the building of men’s houses as an indicator of village societies where leadership was based on achievement. This enables us to use the decline of the men’s house and the rise of the temple as an indicator of societies with some degree of hereditary leadership…the transition from the men’s house to the temple seems to have been associated with the decreasing importance of ordinary people’s ancestors and the increasing importance of the celestial spirits in the chief’s geneology. (COI: 207)

Temples…went on to replace men’s houses in several parts of the New World…the transition was accompanied by evidence of hereditary inequality…we have seen that as chiefly elites emerge, they begin to dedicate buildings to the highest celestial spirits in their cosmos.

Mesoptamia[n]…societies were among the first to replace the small ritual house with the temple. Beginning 8,700 years ago with the Terrazzo Building at Cayonu, Turkey, villages of the Tigris-Euphrates drainage built increasingly temple-like structures. For centuries, some early temples coexisted with circular building that look like men’s houses or clan houses. Finally, between 6,500 and 6,000 years ago, the temples stood alone. (COI: 260)

But we can see this hierarchical transition most accurately reflected in the pottery. Pottery first becomes widespread at this time. Pottery, being fired clay, does not decay, and it has very distinct artistic motifs and creation methods. This leads archaeologists to use pottery artifacts (along with grave goods and building types) to classify distinct cultures before the introduction of writing.

The Samarran culture is defined by Samarran ware pottery, and these pieces have distinctive markings indicating the makers of the pottery, and possibly the owners. This is a clear evidence to archaeologists of 1.) The existence of specialized laborers, and 2.) The emergence of private property.

At Tell es-Sawwan, evidence of irrigation—including flax—establishes the presence of a prosperous settled culture with a highly organized social structure. The culture is primarily known for its finely made pottery decorated with stylized animals, including birds, and geometric designs on dark backgrounds. This widely exported type of pottery, one of the first widespread, relatively uniform pottery styles in the Ancient Near East, was first recognized at Samarra. The Samarran Culture was the precursor to the Mesopotamian culture of the Ubaid period.

Samarran ware was traded far and wide in the Near East at this time. The ability to store goods individually for long periods of time indicated a greater shift toward inequality. As mentioned earlier, storage for foodstuffs would have also aided greatly in feasting.

https://en.wikipedia.org/wiki/Samarra_culture

Following Samarran Ware is the introduction of Halaf Ware, a distinctive polychromatic (multi-colored) pottery style. Early evidence indicated that this style was primarily traded between various political centers in the region rather than between neighboring villages, indicating the presence of an elite trading network.

The clay that allowed pottery to be made also allowed the first permanent records to be kept. Halaf culture also saw the introduction clay seals called bullae, indicating ownership and management of surpluses. Even more importantly, such seals were often included in burials indicating that status position were now being inherited.

Tell Arpachiyah is the main settlement of the Halaf culture that has been excavated. Excavations start to show differentiation in housing sizes and belongings. There are also the presence of what are called tholoi: keyhole-shaped structures that are thought to indicate the presence of early temples and religious specialists. The clay token heralds the eventual appearance of writing later in Mesopotamia:

In pre-agricultural Mesopotamia, there was little need for counting. Egalitarian societies practise reciprocity (the rule of hospitality) and there is no separate portion of society which needs to keep track of what it is owed or who owes it…With the development of agriculture, one sees the introduction of clay tokens representing quantities of grain, oils, etc., and units of work. These tokens indicate a major conceptual leap as well as a need for systemization.’

[T]he conceptual leap was to endow each token shape … with a specific meaning’. Previously, any markings, such as those on tally sticks, could not be understood outside the context in which they were notched. With tokens, anyone conversant with the system could immediately understand their meanings. Moreover, as each token represented a particular object, it was now possible to systematically ‘. . . manipulate information concerning different categories of items, resulting in a complexity of data processing never reached previously’.

In the fourth millennium, accompanying urbanization or the formation of classes, these tokens assumed new shapes, were of a higher quality indicating production by specialized craft workers, and featured lines and marks which required the development of writing and reading skills. Writing emerges from bookkeeping. The marks are designed to solve the technical problem of storage and cumbersome tallying. When tokens were few in number, it was easy to both store and count them. With a growth in the number and types of token, a new system had to be developed to allow easy maintenance ‘of the books.’ Hence, a particular mark indicated so many tokens, and one mark replaced the physical presence of (say) ten tokens.

We also now begin to see tokens as part of the funerary goods found in grave sites, and these are only found in the graves of the wealthier members of society. Tokens are a status symbol, indicating a change from egalitarian to hierarchical society. Eventually, the production of tokens and their administration becomes a temple activity, associated with the system of taxation that has supplanted the older tribal obligations. Writing – in this case the marks on the clay tokens that are the unit of account – was ‘invented to keep track of economic transactions’.

Taken together, these indicators show that the transegalitarian societies of Mesopotamia, especially in the Northern plains, were becoming more stratified.

A number of ancient villages in Northern Mesopotamia provide us with clues to social inequality such as elite children buried with sumptuary goods, long-distance exchanges of polychrome pottery among elite families, the clustering of satellite hamlets around chiefly villages, and the burning of elite residences in raids. For Southern Mesopotamia, the evidence for rank is more subtle… (COE: 260-261)

2. The plow: The domestication of cattle allowed for eventual the introduction of the plow. The plow may seem unrelated to the emergence of the state, but in fact it likely had a great social impact.

Early gardening was based around the hoe. Archaeologists believe that much of this hoeing labor was initially done by women, possibly as an extension of their gathering role. In fact, agriculture was typically associated with female deities, possibly indicating their initial role in cultivating grains. Or it may simply related to the earth being perceived as “womb” from where the planted “seed” grows, similar to the female’s role in human reproduction:

Early agriculture may …have made use of an organization of work along sexual lines, the women, perhaps assisted by children, planting and cultivating while the men hunted. Ancient mythology possibly lends credence to the assumption of women as agriculturists; Isis, Cybele, Demeter, and Ceres, the Egyptian, Asian, Greek, and Roman divinities of grain-raising are all goddesses. More probably, however, the goddess seemed appropriate as a symbol of fertility…(BtSoTB)

But it takes significant grip and upper-body strength to control a plow pulled by large animals. The first plows in Mesopotamia were called ards, and were basically hoes attached to a wooden frame.

In all of the Old World’s high cultures, crop cultivation started with plowing. Its indispensability is reflected even in the oldest writing. Both the Sumerian cuneiform records and the Egyptian glyphs have pictograms for plows. Plowing prepares the ground for seeding much more thoroughly than hoeing does: It breaks up the compacted soil, uproots established plants, and provides weed-free, loosened, well-aerated ground in which seedlings can germinate and thrive.

The first primitive scratch plows (ards), commonly used shortly after 4000 BC in Mesopotamia, were pointed wooden sticks with a handle. Later most of them were tipped with metal. For centuries they remained lightweight and symmetrical (with the draft line in a vertical plane with the beam and share point). Such simple plows, which merely opened up a shallow furrow for seeds and left cut weeds on the surface, were the mainstay of both Greek and Roman farming. They were used over large parts of the Middle East, Africa and Asia until the twentieth century. In the poorest regions they were pulled by people. Only in lighter, sandier soils would such an effort be speedier than hoeing (EWH: 30)

Plowing was undoubtedly the activity where animals made the greatest difference. Given the relatively high power requirements of this task, it is hardly surprising that the first clearly documented cases of cattle domestication involved plow farming. In time, these animals were also used in many regions for lifting irrigation water and for processing harvested crops, and they were eventually used everywhere for transportation (EWH: 41)

Evidence indicates that cattle became much more common in the Ubaid period:

Archaeologists…find impressive numbers of cattle bones in the refuse of ‘Ubaid villages. Their abundance raises the possibility that oxen had now been harnessed to wooden plows, allowing families to cultivate larger tracts of land.(COI: 283)

With plowing came significant social changes 1.) The control of food production passed exclusively into the hands of men. If women and their children wanted to eat, they needed to submit to the control of their fathers, uncles, brothers and husbands. This is thought to be directly related to the emergence of patriarchy and the demotion in the status of women to little more than chattel in many ancient Near East cultures.

Its often said that the passing down of land to firstborn sons led to the need for “paternity assurance” and hence the strict and oppressive controls imposed on female sexuality. This is unlikely, as land was typically collectively owned by the temples and clans until later periods. What’s more likely, given the evidence of clay seals above, is that it is status positions that being passed down. Thus, men needed to be assured of paternity, and marriage contracts became dependent upon strict assurances of virginity.

Once patriarchal authority became established and politics became firmly entrenched in the hands of males, much more hierarchical structures were able to form, leading to much more hierarchical householding systems replacing the communal structure we see in the earliest farming villages:

Farming, as it started and spread from the Fertile Crescent, was originally hoe-based, thus largely women’s work, as hoe-based farming can be done while child-minding. The men hunted and later herded, the women farmed. There was no inherent reason to shift away from egalitarian norms and beliefs. But the larger population led to the development of substantial permanent settlements, which persisted for centuries or even millennia, and then collapsed. Settlements which were physically structured in a way that did not reflect any apparent social hierarchy.

It has been suggested that such settlements failed because the belief system could not longer sustain them. But it had for many generations. It is more likely that some new factor destabilised the social arrangements, leading to the abandonment of the concentrated settlements. Otherwise, they would more likely have simply reached an upper limit and plateaued in size.

One factor could be climate change: the productivity of the region declined. Though there is apparently no correlation between a drop in regional surges and collapses in population in Europe and climatic conditions.

A possible disrupting factor could be pastoralist raiders; disrupting the productivity of the region. This has been suggested as reason for the collapse of “Old Europe”, the farming settlements of the Danube valley…

A third possible factor could be the introduction of the plough, disrupting the social logic of the egalitarian settlements…Ploughs have two effects–they increase the productivity of farmers and they concentrate farming in the hands of males. More productivity means (1) more people, (2) more possibility for social differentiation, (3) a more sizeable possible extracted surplus. Moreover, ploughing is men’s work–both because of the greater grip and upper body strength required and, more crucially, as it is not compatible with childminding. As neither is animal herding, that leads to a male monopoly of the major productive assets and, as a consequence, male domination of public social space.

Suddenly, family relations become much more hierarchical. Hierarchical families provide easier support for wider social hierarchy: ploughs predate the first states. Contradiction between the egalitarian social logic which originally sustained the first wave of urban settlements–manifested in their physical construction–and the new logic of male domination of productive assets, and so public social space, could have been so disruptive as to lead to the abandonment of the first wave of concentrated settlements–which reflected, and were associated with, the previous social logic–and dispersal into new villages, which could now reflect physically the new social logic. Possibly helped by the plough increasing the land area which could be cultivated. A social logic that had not yet developed the means to support larger aggregations of population.

When sizeable settlements arise again, they are both significantly larger in population–they are undoubtedly cities–and physically reflect much more hierarchical social arrangements. Including explicit physical public spaces, which Çatalhöyük, the largest of the earlier settlements, had entirely lacked–it had no streets, one went from house to house via roofs.

Hierarchical families, based on unequal gender relations, may well make the generation and acceptance of wider social hierarchy more acceptable, but that is hardly enough in itself to generate states. Though the larger populations, higher individual productivity and capacity for social differentiation from the plough created a much larger possibility for the creation of states.

Origins of the state (Thinking out loud)

In fact, we see in the ethnographic record that the introduction of cattle does lead to significant status differentiation between individuals and families. As mentioned earlier, cattle-herding cultures often do have a hierarchical structure of powerful chiefs, subchiefs and clan elders who control the political life of the tribe. They also engage in elaborate feasting rituals, often involving sacrifices to the gods.

In fact, North Africa is unique in that it developed cattle herding before crop cultivation. Unreliable rainfall during the “wet Sahara” period placed a premium on being able to move around with changing climate conditions, meaning herding was much a more logical way of life to adopt than sedentary farming, and domesticable sheep and goats are not native to North Africa. Some archaeologists consider this crucial to the formation of Egypt’s hierarchical top-down political system. The Pharaoh often depicted himself as a “great bull” trampling his enemies, and carried the crook and flail–herding implements–as symbols of his authority. Some archaeologists believe that the office of Pharaoh is the direct decedent of the powerful headmen typically seen in herding societies.

Of special relevance to the development of economic institutions is the work of Thurnwald. From his ethnological studies in East Africa he developed a theory of development of simple societies into stratified social systems, feudalisms and despotisms. He pointed out that a stratified society with clearly distinguishable social classes usually results from cultural contacts between gardening, artisan, or hunting-fishing peoples on the one hand and herding peoples on the other, with the herdsmen tending to form an aristocracy. Such a society may develop along feudal lines if the clan heads of the herdsmen remain relatively equal rivals, into a despotism if power can be centralized under a single dynasty, or into a tyrannis if someone outside the traditional aristocracy can seize power. The ancient despotic state, such as Egypt is a development typical of this scheme. Not only is the economy intimately connected with the social structure in Thurnwald’s schema, but the development of the two is pictured as a dynamic relationship.

Thurnwald also placed great stress on gift-giving, or reciprocity, as a pervasive element in primitive economic life, a pattern far removed from the acquisitive motives of the market economy and requiring a symmetrical pattern of social relationships for its operation. Indeed, Mauss has suggested that gift exchange is the fundamental principle underlying all primitive trade.

Polanyi, Trade and Market in Early Empires, pp. 345-347

Much larger tracts of land could now be cultivated via the plow. This meant that a single farm could feed many more people than before. While earlier agriculture had been based on shifting cultivation, in the alluvial plains of Mesopotamia, the same ground could be cultivated year after year, allowing land to be passed down much easier than it could in earlier farming villages.

The bump in energy utilization via plowing also freed up more people to do non-agricultural labor. The ability to cultivate larger fields most likely resulted in significant inequality. Throughout history we see that new technology that allows labor to be more productive allows fewer people to manage more labor, leading to inequality in and of itself.

With limitations on field size due to labor needs, there was a limit on how big a farm could grow. With plowing, certain families could effectively cultivate much larger fields if they had access to cattle. Although plantation slavery did not develop in Mesopotamia as it did later in Rome, often times debtors would become debt slaves to large landowners, causing a spiral of inequality. People who lost their farms and people fleeing from debt were likely some of the earliest inhabitants of cities.

Sumerian descent was reckoned in the male line, although elite women were mentioned in the genealogies of aristocrats, and women could hold high office. Sumerian kings, like the monarchs of other societies, were allowed multiple wives. Royal polygamy was not just a perquisite of office but a diplomatic strategy, allowing rulers to forge marriage alliances with the aristocracy of other cities.

Commoner marriage, with few exceptions, was limited to one man and one woman. Divorce was allowed, but bigamy and adultery were punished, often severely. One inscription discovered at Lagash states that “the women of former days used to take two husbands, [but] the women of today [if they attempted this] were stoned with stones [upon which was inscribed their ‘evil intent.’

What evil intent? Most of the societies discussed in earlier chapters saw no harm in polygamous marriage. For societies that believed in reincarnation, paternity was not a concern. Babies were seen as recycled ancestors, and all children born into a polygamous marriage were considered full siblings.

The logic of Sumer was different. Men were seen as “planting a seed” in the woman, and because of the male-oriented system of inheritance, the origin of this seed was a major concern. A woman who lost her virginity before marriage, committed adultery, or took two husbands had created intolerable doubt about paternity. The state intervened to protect what it saw as a husband’s rights but phrased it in terms of good and evil to make it appear that it was carrying out the will of a deity.

The term for “father’s brother” appears in Sumerian cuneiform texts. This suggests …that one of the preferred types of marriage might have been between a man and his father’s brother’s daughter. Anthropologists call this “patrilateral parallel cousin marriage,” and it is still common today in parts of the Near East.

Sumerian marriages, like those of the less complex societies seen in earlier chapters, required gifts between the bride’s and groom’s relatives. Exchanges of gifts could go on for months. Marriage was considered a legally binding contract, and divorce could cost the husband a fee in silver. Owing to sexism, it was harder for women to get a divorce.

It is probably from the Sumerians that later Near Eastern societies, including the Aramaic-speaking authors of the Old Testament, got the notion that marriage should be restricted to one man and one woman. The flexible marriage partnerships of egalitarian societies, which came in six or seven varieties, had been arbitrarily reduced to a legal contract between a man and a woman. Nothing could be allowed to make a man worry that his male heir was the result of someone else’s “seed.” (COI: 478-480)

3. Marriage: One intriguing theory for the origin for inequality in Flannery and Marcus’s book, The Creation of Inequality, is marriage alliances with neighboring cultures. For example, societies with surpluses often wished to establish regular trading relationships with neighboring cultures who had access to desired status goods. To create such relationships, women from the “advanced” society would be often exchanged as wives with the leaders of such cultures. The recipients of these wives then emerged as a hereditary overclass in the “lesser” culture.

We know that the inhabitants of southern Mesopotamia established trading outposts all throughout the ancient Near East early on. We know that they desired all sort of goods from neighboring cultures, from timber to ivory to precious stones, and later metals for bronze. We know that trade took place, including of jewelry, metals, pottery, and other artifacts. Might this have been instrumental in expanding social inequality throughout the region? In fact, even into the era of Bronze Age kingdoms, marriages between royal households was commonly used to establish political/economic alliances, and only aristocratic households could participate. This certainly must have cemented status differentiation all cross the Levant.

In their book they describe the establishment of hereditary inequality in a Burmese hill tribe called the Kachin by way of interactions with a more complex hierarchical farming society called the Shan:

There may Once have been more than 300,000 Kachin living in the hills of northern Burma. Hpalang lay 5,800 feet above sea level in forested hills receiving 120 to 150 inches of rain a year. The Kachin cleared patches in the forest, growing rice, millet, buckwheat, yams, and taro by taungya, or slash-and-bum agriculture. Taungya is called a long-fallow system because’ new land must be constantly cleared, while old fields are given 12 to 15 Years to regain their fertility. The Kachin also raised zebu (humped) cattle, water buffalo, pigs, and chickens. The meat of the larger animals, however, was eaten only after the latter had been sacrificed during ritual, and at such times many guests shared in the feasting…

The Kachin themselves used the term gumlao to refer to societies in which all social units were considered equal. ‘When such units became ranked relative to one another, they used the term gumsa…The contrast between gumlao and gumsa leaders was great. Under gumlao, each village was autonomous. Some gumsa chiefs, on the other hand, oversaw more than 60 villages at a time. They could ill afford to forget, however, that it was the chief’s entire lineage that enjoyed high rank, not the chief alone. This led to a complex dynamic among brothers…

One scenario [for hereditary inequality]…includes interactions with a more complex neighboring society, called the Shan. The Shan differed from the Kachin in significant ways. Instead of practicing long-fallow, slash-and-burn agriculture in the highlands the Shan were supported by permanent wet-rice paddies in the riverine lowlands. Shan agriculture was so productive that it could support princely states with lineages of aristocrats, commoners, and slaves. While the Kachin sacrificed to spirits of the earth and sky, Shan rulers had been converted to Buddhism.
Hereditary aristocrats sought to communicate their rank through displays of valuables called sumptuary goods. The sumptuary goods sought by the Shan included jade, amber, tortoise shell, gold, and silver. The resources of the Kachin hill country included all these items. Significantly, the Kachin were chronically short of rice, while the Shan produced a surplus.

For several generations the family of the saohpa, or Shan prince, of a district called Möng Hkawm sent noble Shan women to marry the Kachin leaders who controlled the jade mines of the hill region. Sometimes a dowry of wet-rice land accompanied the bride. The Kachin chief reciprocated with raw materials for sumptuary goods.

One effect of this intermarriage…was that it encouraged the shift from gumlao to gumsa. Having a Shan wife raised the prestige of a Kachin leader and encouraged him to model his behavior on that of a Shan prince. Incipient Kachin chiefs might convert to Buddhism, dress like a Shan, and adopt Shan ritual and symbolism. They did so in spite of a serious contradiction in social logic: the mayu-dama relationship of the Kachin, in which the recipient of the bride was inferior, was incompatible with Shan logic. Shan princes all had multiple wives, and it would be unthinkable for any of their marriages to make them someone else’s dama.

While ambitious Kachin leaders considered Shan-like behavior a mark of prestige, it only increased their followers’ resentment and hastened their over throw. The result was an inherently unstable situation in which hereditary inequality was repeatedly created, lasted for a few generations, and then collapsed. (COI: 197-198)

Interestingly, both the unification of Upper and lower Egypt, and of Northern and Southern Messopotamia, was preceded by a cultural unification, in the Naqada and ‘Ubaid periods respecitively. All throughout these area, we begin to see cultural uniformity–similar goods, similar temples, similar artistic motifs. We also begin to see much more status differentiation–for example the Naqada III shows the presence of elite graveyards set apart from commoners. Did intermarriage play a role in this? Did the “lesser” cultures slowly adopt the religion and behaviors of the “higher” agricultural people with whom they traded, just as the Kachin adopted Shan customs and religion?

4.) Irrigation: While the old ideas put forward by Wittfogel about managing canals leading to the first central governments may have been oversimplified, the necessity of organizing collective labor to build irrigation works and keep them free of silt would have certainly required some way of managing it, even if just at the village level. This would have led to the creation of an elite supervisory class with control over labor. Piotr Steinkeller writes:

I submit that the beginnings of corvee coincided with the introduction of irrigation-based agriculture on the alluvium, which must have happened sometime during the Obeid period…organized collective labor[‘s] “invention” was directly connected with the appearance of extensive irrigation networks. It is impossible to say which of them came first. In all probability these two phenomena developed more or less concurrently, with the needs of agriculture dictating the use of labor force above that of a single family, and with the availability of labor so created enabling further expansion of irrigation works. This spiral process led to the formation of village clusters based on a shared irrigation system and subordinated to a single agency of control, eventually resulting in the appearance of urban centers and city-states.

In order to manage this labor, the priest caste used clay tokens combined with standardization of both time and materials. Out of this record-keeping developed writing and numeracy. Those knowledgeable in the specialized tasks of reading, writing, and mathematics emerged as an elite class of people. The presence of clay bullae seals indicates that this class had emerged long before the first true cities were founded.

4.) The household: Mesoptamian society seems to have transitioned from a Tribute Economy based on villages where reciprocity and redistribution prevailed, to one based primarily on Householding (oikoi). A household has a distinctive hierarchy, with a “pater familias” at the top, and a ranking order underneath that person (younger brothers, primary wives, secondary wives, elder children, younger children, servants, slaves, etc.). So too would a society based around householding structure itself along similarly ranked lines, with the “head” of the overall “household” being the ruler. Not only that, but various households would also have been ranked against each other. This would have created a gradient of hierarchy that is often mistaken for the establishment of social classes. Religious beliefs reflected this dynamic-the gods, too, were portrayed as living in a household with it’s own ranking hierarchy, overseen by the supreme ruler god, the ultimate “alpha.” The temples themselves were also organized on the household basis:

The gods were the alphas of two dominance hierarchies, one human and one divine. In the city of Lagash, for example, there was a great temple called Eninnu…It had two temple staffs: one visible and one invisible. The invisible staff began with a doorkeeper and butler, both minor deities. Below them were a divine chamberlain, counselor, and bailiff, and still further down the list a divine charioteer, gamekeeper, inspector of fisheries, and goatherd, as well as musicians, singers, and errand boys. The visible staff began with a high priest and continued with human counterparts for all the divine officials. The city’s ruler was ex officio head of the church…(COI: 478)

Most labor was “attached” to various households, and even though it was organized along kinship lines, households often included unrelated people, including full-time craft specialists (leather workers, jewelers, smiths, carpenters, etc.). These craft specialists would produce for the household primarily, but over time it appears that craftsmen could also sell their labor to others for an agreed-upon wage. These wages were paid in the temple’s unit of account. Because the temple denominated such units in weights of silver, this became a common way of paying craft specialists. This may have given rise to the misconception that people’s labor was primarily organized by “labor markets” using silver coins as a medium of exchange. In fact, coins did not exist until the Classical period, and most “salaries” were paid by the public sector, i.e. the temples, often in commodities such as wool, oil and barley.

All of these changes paved the way for the creation of early Sumerian cities in the Tigris-Euphrates river valley after 4000 BC. These cities were invariably centered on their temples, the home of the gods, with the priests organizing and managing the day-to-day operations of society. It is these activities which give cities there special character, above all the need for long-distance trade.

Temples and their precincts comprised the earliest city centers. Set corporately apart from the community at large to serve as self-supporting households of the city god and/or ruler, they were larger, more specialized and more internally hierarchic than personal households. They also included many dependents whose families on the land were unable to care for them, e.g., the blind and infirm, war widows and orphans, and others who could not function in normal family contexts. Placed in the institutional households that served as the ultimate sanctuaries, these individuals were put to work in handicraft workshops or other public professions (e.g., the blind musicians) in an early form of welfare/workfare.

It appears that archaic populations felt that the best way to keep handicraft production and exchange in line with traditional social values was to organize such activity under the aegis of temples, or at least to establish a strong temple interface as a kind of “chamber of commerce.” Public ritual and welfare functions already existed as the germ out of which this economic role would flower. As gathering places, temples became natural administrative vehicles for sponsoring trade. In retrospect it seems quite natural that the temple’s ritual functions broadened in time to include the role of sponsoring markets. Populations attending sacred ceremonies engaged in trade and exchange, much as they did at the fairs of medieval Europe. Out of this commerce developed temple sponsorship of standardized weights and measures, contractual law and the regularization and enforcement of trade obligations.

Concentration of the economic surplus was first achieved in the temple sector. Temple workshops were set corporately apart from their communities, endowed with their own land, dependent labor, herds of animals and stores of precious metal to support their handicraft activities and generate commercial surpluses. Many temple and palace lands were farmed by community members on a sharecropping basis, typically for a third of the crop or some other fixed proportion. Indeed, as history’s first documented landlords, the temples earned the first known land‑rent.

Administrators were assigned such usufructs to provide food for their support, and may have exchanged some of this barley-revenue for luxuries. The resulting “redistributive” system of production and consumption preceded market trade and pricing by thousands of years. Also, as business corporations (in contrast to family partnerships), temples appear to have earned interest.

In short, profit‑accumulating enterprise was public long before being privatized. This explains why the first economic accounting and the organization of large-scale handicraft industry appears first in public, often sacred contexts. Temples systematized profit‑seeking in ways that only gradually became acceptable for private individuals acting on their own. (Wealthy individuals were expected to use their resources openhandedly or consume them in conspicuous displays such as burials or marriage feasts.) Indeed, the temples’ entrepreneurial functions emerged out of their sacred status “above” the community’s families at large, most of whom still functioned on a subsistence basis after taking into account their luxury spending….The first organized surplus‑yielding property thus was public rather than private. ..

From Sacred Enclave to Temple to City (Michael Hudson)

COI: Kent Flannery and Joyce Marcus, The Creation of Inequality.

EWH: Vaclav Smil, Energy in World History

BtSoTB: Melvin Kranzberg and Joseph Gies, By the Sweat of Thy Brow

1. Summary

In Food and the Status Quest: An Interdisciplinary Perspective, the Feasting Theory is summarized this way:

Brian Hayden…proposes that through the lure of feasts, with their free meals, delicacies, dances, exciting entertainment, and ambitious organizers, “triple A” personalities draw others into contractual agreements that generate debts and thereby confer social leverage. In other words, through competitive feasts, surpluses are produced and converted into wealth and power by enterprising individuals, creating social inequalities. He takes a step back in time and proposes that during the Upper Paleolithic and Mesolithic periods in resource-rich environments, triple A individuals manipulated relationships through competitive feasting in such a way as to dodge the leveling hammer of egalitarian ethos. This leads him to the proposal, supported by compelling evidence, that the need for certain amounts of rare delicacies for competitive feasts may have been a significant factor in the domestication of certain plants and animals, and thus may have given impetus to early agriculture.

T. Douglas Price summarizes the ideas as:

…Brian Hayden has…suggested that it is specifically the feasting aspects of rivalries between leaders that are the driving force behind food production. Hayden argues that highly competitive individuals, or “accumulators,” emerge in resource-rich communities and that these individuals used the competitive feast as a means for developing and enhancing their power and leadership through a series of alliance and debt relationships.

…Hayden discusses the transition to social inequality in terms of different pathways or stages. In this context he defines specific types of accumulators or aggrandizers as Despots, Reciprocators, and Entrepreneurs. These individuals are the focus of change. These types of leaders respectively define a sequence of intensifying social inequality and institutionalized power.

Despot communities witness an increase in warfare along with evidence of feasting. Several strategies are used to increase the power of the leader. Feasting is used to build alliances; compensation payments for inquiry or death are made to allies. Equivalent exchange and egalitarian relations are the ideal in these societies and differences in residence and wealth are , archaeologically speaking, not pronounced. The Despot is operative only in one or two realms such as warfare and production and a number of different leaders may be present in the community. The position of Despot is ephemeral and most often achieved. (p. 145)

Reciprocator communities are overly nonegalitarian and leaders compete within the community. Reciprocators are describe as wealthier, with more wives and larger social networks. Several new strategies for creating debts, surplus, and power include bridewealth, more elaborate feasts, and perhaps child growth payments. Hayden suggests that agriculture may have originated as a means for more intensive food production among Reciprocator organizations. (p. 145)

Entrepreneur groups are characterized by intensive food production. Loans and investments are the primary strategies that aggrandizers use to obtain wealth and power. Surplus is now used in competitive feasts to create contractual debt involving interest payments. Warfare is less important in such societies as it interferes with the generation of surplus and the exchange of wealth. Marriage also becomes a major conduit of wealth through bride payments. Entrepreneurs also try to consolidate various roles of leadership, including ritual, military, and financial. Entrepreneur communities have distinct patterns of status inheritance and represent clear situations of institutionalized inequality. (pp. 145-146)

Hayden himself summarizes the theory this way:

1. Under conditions of scarce, unreliable resources vulnerable to overexploitation, sharing becomes mandatory. This limits the development of prestige technologies as well as economically based competition; aggrandizive behavior is curtailed and proscribed.

2. As resources become more abundant, more reliable, and less vulnerable to overexploitation, private ownership and the use of surpluses for competition and prestige is tolerated as long as these activities do not adversely affect the subsistence prospects of other community members. These developments differentiate generalized from transegalitarian hunter-gatherers;

3. Every sizeable community has at least a few individuals with aggrandizive and competitive tendencies; and

4. Under varying conditions of surplus production, aggrandizive individuals use combinations of strategies to persuade other members to produce surpluses and to surrender some degree of control over the surpluses. These strategies include fomenting disputes with other communities to be settled by wealth payments; obtaining marriage and war allies through feasting; making reciprocal or interest-bearing loans of wealth; establishing wealth payments as part of marriages, increasing the value of marriageable children by expending wealth at their maturation events; and the formation of secret societies to create special relationships of political, economic, and supernatural support. (p. 124)

The feasting model of domestication posits that a range of technological innovations made it possible to produce surpluses on a relatively dependable basis in certain favorable environments, especially riparian, coastal, and cereal-rich habitats. These innovations included new fishing technologies (nets, weirs, fishhooks, leisters), mass seed-gathering and processing technologies involving crushing and boiling, similar mass nut processing strategies, and long-term storage technologies. The resulting surpluses, in turn, underwrote aggrandizer strategies that transformed egalitarian bands into transegalitarian complex hunter-gatherers replete with socioeconomic inequalities, hierarchies, and economically based competition in which feasting played a key role. Because feasting was based on surplus production, and because success in feasting conferred survival and reproductive benefits (in terms of surviving food shortfalls and obtaining military allies and marriage partners), powerful pressures were created to increase food production, especially of the most desirable foods and luxury foods used to impress guests. Since individuals were vying with each other to acquire mates or allies using surplus production, there could never be enough food produced. Lower-ranked individuals could always be expected to try to produce more in order to improve their chances of obtaining better allies or partners, no matter what the absolute level of production was.

2. The Tyranny of the Gift

Gift economies have often been portrayed as ones where everyone just gives freely with no expectation of return. The chiefs in such societies have been perceived as coming by their leadership role by virtue of a bottomless, almost irrational generosity, with every measure of wealth passing through their hands immediately being given away. This has been depicted as attaining maximum prestige through maximum generosity. Sometimes leaders gave so much away that they were left destitute! This led to the supposition that tribal leaders were not self-interested at all, and unalloyed altruism was the only motivation behind human behavior in so-called primitive societies.

Hayden argues that this perception is specious. Leaders are not actually being irrationally generous, he argues, rather they are shrewdly and cunningly manipulating the social environment, pursuing “investments” that they expect will pay off at some future date, even if they have to deal with temporary hardships to accomplish it. These “investments” are ultimately in the service of generating social prestige. Gifts are not open-handed generosity, but always come with strings attached, even if is unstated. Some leaders may seem poor, but that is because all of their income is immediately poured back into more investments, with which they hope to gain more status. The fact that some aggrandizers wound up destitute due to their “generosity” is not because of irrational altruism, he argues. Rather, just as some naive or inexperienced investors sink all their money into the stock market and wind up ruined, some Entrepreneurs similarly lose all their “investments” through some combination of bad luck or incompetence:

…Ultimately the generosity of aggrandizers is a calculated economic strategy meant to centralize control in their own hands and increase production. They operate like contemporary businessmen with recruitment expense accounts or job benefits calculated to attract skilled, productive employees and administrators. In biology, animal behaviorists have also recently emphasized the importance of costly “advertising”displays such as antlers in reproductive success. In all transegalitarian societies, most people are guided by their own self-interest, and aggrandizers will only be successful to the extent they can appeal to the self-interest of others and manipulate it for their own benefit. (FOI:  69)

…other social anthropologists express the view that the altruistic cultural imperative to be generous (in exchange for esteem) is so overpowering that it leads people to contravene their own material self-interest and become destitute (the traditional foil for economic rationalism and cultural materialism in traditional societies). Such claims are simply untenable in terms of ethnographic reality. As Mauss clearly recognized: “In theory gifts are voluntary, but in fact they are given and repaid under obligation…Prestations which are in theory voluntary, disinterested and spontaneous, but are in fact obligatory and interested.” For him, transegalitarian gift-giving constituted an archaic form of contract, and wealth was primarily a means of controlling others. It is evident from all the previous ethnographic accounts that giving and feasting are indirect techniques of control and generating more wealth. Contrary to the statements of some social anthropologists, the mere act of giving wealth away by itself does not result in increased power for the giver. To be effective, wealth must be given away in contexts that generate recognized and binding obligations or other expected practical benefits.

These techniques do not work all the time any more than capitalist techniques of investment produce wealth in every business venture. Many modern businessmen experience repeated failures and bankruptcies. In both transegalitarian and capitalist societies, it is the promise, potential, and prospect of substantial increases in wealth that motivate people to spend and borrow. And transegalitarian aggrandizers and contemporary land or stock investors frequently live in reduced circumstances in order to reinvest all possible surpluses in wealth creation projects….However transegalitarian aggrandizers were no more assured of success than enterprising capitalists and many must have lost all their investments due to adverse circumstances or incompetence. Similarly, not everyone who invests in the stockmarket today can be said to understand the logic of the market;it would seem by some accounts…that not every individual who made investments in transegalitarian communities understood how aggrandizive strategies worked either. Thus, anecdotal examples of individuals who lost their wealth in giving potlatches hardly makes a convincing case for a cultural norm of generosity acting to override common sense and economical self-interest.(FSI pp. 69-70)

I began this series on feasting on American Thanksgiving, so it is fitting that I conclude it during the Christmas season, our very own modern version of competitive gift-giving and overproduction. Clearly, gift giving is meant to be both reciprocal and competitive. After all, who would continue to receive gifts while giving back nothing in return? It just “feels bad,” indicating that reciprocity is deeply hard-wired into our behavior.

Gifts are actually a way of demonstrating one’s superior social status over an inferior, especially a gift that cannot be easily repaid. Imagine if someone gave you a new sportscar for Christmas. You would certainly regard that person as “superior” and feel an obligation to that person, would you not?

Often times, the “gift” is a way of humiliating the opponent. The giver is elevated in status, and the receiver is lowered. Give enough gifts away, and everyone else is lowed in status before the efforts of the aggrandizing workaholic and his scheming accomplices. All of this is grounded in human primate social instincts. Producing surpluses as a marker of status, competition between individuals for prestige, and the use of debts and reciprocity to get people to work for you, are as much a part of primate social behavior as mating and grooming.

Howard Bloom particularly emphasizes the humiliation factor of gift exchange in The Lucifer Principle:

In many cultures…giving things to people is a way of humiliating them. It is a sneaky technique for drawing attention to the recipient’s lowliness on the hierarchical ladder. Take, for example, the “big men” of Melanesia and New Guinea. In the days before traditional practices were supplanted by Western ways, a young New Guinean would work like a maniac to raise himself in the eyes of his peers. He would strain feverishly to boost his yield of pigs, yams, and coconuts. He would recruit his wives, children, and relatives to join in the frantic race for agricultural productivity. If all went well, he would take the profits and plow them into building a men’s clubhouse. When the neighbors— pleased with the clubhouse food and entertainment—were sufficiently impressed, the struggling entrepreneur would ask them to join his growing army of pig, yam, and coconut growers.

The grand climax of the young man’s effort would come when he challenged a local “big man”—a high-placed figure revered for his powerful following. The contender would do it by inviting his older rival to attend a feast. At the grand dinner, the upstart would banquet the elder with a deluge of pork dishes, coconut pies, and sago almond puddings. The young man’s followers and those of the guest would count every dish of food that hit the table. If the mountain of delectables the rookie offered was large enough, the big man knew he was in serious trouble.

The elder would go home and spend the next year spurring his followers to new heights of productivity. Then he would invite the young challenger to a feast at his place. He, too, would heap the table with pies, roasts, and puddings. And, once again, the crowd would keep a breathless count, for if the older dignitary failed to lay on as rich a feast as the young man had the previous year, it would all be over. The venerable gentleman would be shamed. As he plunged down the ladder of prestige, his followers would desert him, and the callow whippersnapper who had mounted the challenge would leap dramatically upward in the pecking order. Now he would be the big man. In New Guinea, the man who could not give as much as he received earned only one reward—disgrace.

The New Guineans were not alone in regarding the giveaway as a technique for incurring humiliation. The Kwakiutl people of the Pacific    Northwest were famed for their potlatches. In the potlatch, a Kwakiutl chief would invite a rival and his tribe over for a visit, then shower the guests with gifts. The greater the pile of presents, the more the guest would lose face, plummeting down the pecking order. Among the Kwakiutl, to give away goods is divine, but to accept them is less than human.

Even our recent ancestors were aware of generosity’s subversive power. medieval European aristocrats threw an annual feast and invited the peasants to stuff themselves. The ritual drove home the fact that the noble was on top and the peasants on the bottom. The Anglo-Saxon word for someone on the crest of a social heap—lord—was a testament to the put-down power of the handout. The word’s literal meaning: “loaf giver.

The role of the giveaway as a hierarchical weapon goes back to our cousins the chimpanzees. ..when one of these meat gourmets is lucky enough to kill a young gazelle or a baby baboon… females, children, and even his rivals crawl toward the hunter, lowering their eyes and stretching out their hands with palms upturned. They whimper, squirm, and cry.”Such is the power of generosity to elevate the giver and cast down those who receive. No wonder those on whom we lavish aid are not particularly fond of us.

The idea that giving stuff away is a way of humiliating and controlling another person is widely known among hunter-gatherers. Marvin Harris tells a story about the anthropologist Richard Lee. Lee wishes to repay the !Kung San Bushmen of the Kalahari he has been staying with for their generosity. He purchases an ox from local pastoralists for the Bushmen to slaughter and eat. Upon hearing of this, the Bushmen constantly disparage and denigrate his gift: “I know that ox, why, it is nothing but skin and bones!”; “You bought that worthless animal? Of course, we will eat it, but it won’t fill us up.” When the ox is finally slaughtered, it is full of meat and fat, and the Bushmen feast with gusto. Confused as to why they spent so much time crapping all over his gift when they clearly enjoyed it, he asks for an explanation. One Bushman tells him:

“Yes, of course we knew all along what the ox was really like,” one hunter admitted. “But when a young man kills much meat he comes to think of himself as a chief or big man, and he thinks of the rest of us as his servants or inferiors. We cannot accept this,” he went on. “We refuse one who boasts, for someday his pride will make him kill somebody. So we always speak of his meat as worthless. This way we cool his heart and make him gentle.” (CPWW: 125-126)

The strategies used by aggrandizers may seem diverse, but they all have one thing in common – they are all expressly designed to overwhelm equivalent exchange with debt/credit relationships. Once this was unleashed and the old restrictions on accumulating behavior fell before it, we began the process that led to big men, chiefs, kings, emperors, generals, presidents, and CEOs.

The Eskimo explained their fear of boastful and generous gift-givers with the proverb “Gifts make slaves just as whips make dogs.” And that is exactly what happened. In evolutionary perspective, the gift-givers first gave gifts that came from their own extra work; soon people found themselves working harder to reciprocate and to make it possible for the gift-givers to give them more gifts; eventually the gift-givers became very powerful, and they no longer needed to obey the rules of reciprocity. They could force people to pay taxes and to work for them without actually redistributing what was in their storehouses and palaces. Of course, as assorted modern big men and politicians occasionally recognize, it is still easier to get “slaves” to work for you if you give them an occasional big feast instead of whipping them all the time. (CPWW: 126)

If people like the Eskimo, Bushmen, and Semai understood the dangers of gift-giving, why did others permit the gift-givers to flourish? And why were big men permitted to get so puffed up that they could turn around and enslave the very people whose work made their glory possible…Competitive feasting and other forms of redistribution overwhelmed the primordial reliance on reciprocity when it became possible to increase the duration and intensity of work without inflicting irreversible damage upon the habitat’s carrying capacity. Typically this became possible when domesticated plants and animals were substituted for natural food resources. Within broad limits, the more work you put into planting and raising domesticated species, the more food you can produce. The only hitch is that people don’t usually work harder than they have to. Redistribution began to appear as people worked harder in order to maintain a reciprocal balance with prestige-hungry, overzealous producers. As the reciprocal exchanges became unbalanced, they became gifts; and as the gifts piled up, the gift-givers were rewarded with prestige and counter-gifts. Soon redistribution prevailed over reciprocity and highest prestige went to the most boastful, calculating gift-givers, who cajole, shamed, and ultimately forced everybody to work harder than the Bushman ever dreamed possible. (CPWW: 127-128)

Harris argues that this creates “prestige” and contrasts that with the old hunter gatherer regime where the landbase prevented the kinds of surpluses that would empower aggrandizers, and prestige went to the humble, self-effacing, generous leader:

Among the Bushmen, Stakhanovite personalities who would run about getting friends and relatives to work harder by promising them a big feast would constitute a definite menace to society. If he got his followers to work like the Kaoka [a South Pacific horticultural society] for a month, an aspiring Bushman big man would kill or scare off every game animal for miles around and starve his people to death before the end of the year. So reciprocity and not redistribution predominates among the Bushmen, and the highest prestige falls to the quietly dependable hunter who never boasts about his achievements and who avoids any hint that he is giving a gift when he divides up an animal he has killed. (CPWW: 127)

Just as bright, colorful plumage is a marker signalling evolutionary fitness in birds, it appears that producing surpluses of food and goods is a similar form of “signaling” one’s fitness in primates. We don’t display bright and colorful plumage like birds, or large antlers like deer; as big-brained social primates, displaying wealth is our form of “peacocking.” Even today conspicuous displays of wealth are commonly seen as a strategy to attract desirable mates, as the advertising industry knows and manipulates so well.

It’s likely that most primates would also produce large surpluses to attract females if they could, but they cannot. Only humans, with our big, social brains, can sufficiently manipulate our natural environment in order to produce these massive amounts of surpluses. This probably gave us a survival edge over the other species of humans who are now extinct. Thus, one could see surplus production as a sort of evolutionary behavior hard-wired into us. And that makes our subsequent history as a species make a lot more sense.

A great example of how this concept still underpins modern methods of acquiring social for power is illustrated by this anecdote featuring one of the greatest aggrandizers of modern times, President Lyndon B. Johnson:

In the 1940s, then Congressman Lyndon Johnson wanted to hire a promising young man named John Hicks to manage his successful radio station in Austin. Meeting late at night at a restaurant, Johnson gave the eager kid the kind of pitch that most of us dream of getting at some point in our lives.

“Johnny, I want you on my team,” Johnson said. There was more than that—he was prepared to be incredibly generous.

“I’m going to lend you ten thousand dollars. And I want you to take it and buy yourself a Cadillac car. And I want you to move to a better apartment. I want you to be somebody. Furnish the apartment. Get [your wife] a fur coat. I want you to to [join some local clubs] and be somebody here in Austin.”

This was an offer to someone making $75 a week, coming from one of the most powerful Congressman in the United States. This was said in a restaurant that should have been closed but not stayed open any time Johnson wanted to eat there. Here was a rich, powerful man making an offer that couldn’t, shouldn’t be refused.

But somehow, this kid, John Hicks, said no. Why? It had a lot to do with Johnson’s next words, according to Robert Caro.

Asked how he would ever expect to be paid back, Lyndon smiled and in his charming way said “Johnny, don’t worry about that. You let me worry about that.”

It’s interesting to see the levers of Johnson’s mind work. He wasn’t just selling a kid on a job, he wasn’t just trying to put him in debt either. He was trying to put him in debt while committing him to a number of very attractive lifestyle choices that are hard to ever walk away from. No ever moves to a crappier apartment by choice, no one ever wants to go back to not being someone.

Lyndon was a notoriously horrible boss—known for working employees almost like slaves, demanding complete and total subservience, utter and unquestioning loyalty. But he was also a brilliant, manipulative reader of people. To suck people in, he knew exactly what to do and say.

If You Don’t Take The Money, They Can’t Tell You What To Do (Thought Catalog)

And this was actually fairly innocuous signaling behavior for this particular silverback: Johnson was a dong-waving sex machine (Cracked.com)

3. How the Rich get Rich (and stay that way)

What really struck me reading this literature was how similar the methods of gaining and keeping power in transegalitarian societies are to those in our own transegalitarian culture.

I first had this realization when Hayden talked about how elites made “investments” in their offspring in order to “raise their value,” particularly as marriage partners. The identification of this behavior among America’s upper-class and aspiring upper-class parents is unmistakable. So-called “helicopter parents” spend outrageous sums to get their children into the “right” schools, sometimes putting them on waiting lists before they are even conceived! In Manhattan, even preschool can run tens of thousands of dollars per year if is “exclusive” enough. Then there are the “extracurriculars” that are now de rigeur for the children of the upper class – sports like swimming and tennis, horseback riding lessons, dance lessons, music lessons, summer camp, foreign languages and travel, volunteering, and getting private tutors for the all-important testocracy.

In New York City, it costs more to let a 3-year-old socialize with other 3-year-olds than it does to educate a college student. This is mind-blowing. And it’s not only about the cost. Let’s say that I was able to pay $1,100 a month to put my daughter in preschool. There’s a wait list to get her in. Certain nursery schools are as coveted as some of the most prestigious liberal arts colleges. For example, my 3-year-old daughter is currently on the wait list of at least three different preschools because there are no available slots for her. Should a place open up, these schools are more than happy to take my $1,100-$1,400 per month to teach my daughter how to share and build with blocks.

http://www.huffingtonpost.com/sarah-fader/in-new-york-city-preschool-tuition-can-equal-college-tuition_b_4756223.html

Elite children now have to be full-time applicants for the next round of exclusive schooling due to the unrelenting pressure placed on them in American “achievement culture.” These parents also spend outrageous sums on what Hayden called “maturation rituals” and “child growth payments” including birthdays, bar mitzvahs, high-school and college graduations, weddings, and baby showers. It follows that the more unequal the society, the more lavish and expensive these events become. In America, the sums of money spent on these things are staggering, and usually much higher than in more egalitarian Europe. Such expenditures serve no useful propose other than status differentiation. In India, with some of the worst wealth disparities on earth, one recent five-day wedding cost 5 billion rupees – an astonishing 74 million dollars!

…marriage became a primary sphere of exchange and for acquiring wealth. Not only were child growth payments elaborate, but children of elite families underwent prolonged and costly training for various roles…In some cases…[training]…could be very costly and last many years. The apparent motive behind this functionally unnecessary and costly elaboration of training was to increase the value of children …Thus, bridewealth increased considerably in Entrepreneur communities, and affinal relationships were sought for their economic value while establishing a biological family was often of only secondary importance…

Entrepreneurs could eventually maneuver themselves into positions where they could invest so much wealth in the growth payments for their children that only families of other…elites…could provide the requisite bridewealth. Even at the Entrepreneur level, the tendency for children of Entrepreneurs to marry the children of other Entrepreneurs is pronounced

Assortative Mating – It’s an unspoken rule that you can only marry within your class – bricklayers don’t marry doctors, and glamorous actresses don’t marry auto mechanics. When marriage happens, it creates an alliance between two families just as much now as back then, and if those families are not at least somewhat equal in wealth and status, a marriage will not happen, and even if it does, it is unlikely to succeed.

Assortative mating is the idea that people marry people like themselves, with similar education and earnings potential and the values and lifestyle that come with them. It was common in the early 20th century, dipped in the middle of the century and has sharply risen in recent years — a pattern that roughly mirrors income inequality in the United States, according to research by Robert Mare, a sociologist at the University of California, Los Angeles. People are now more likely to marry people with similar educational attainment — even after controlling for differences between men and women, like the fact that women were once less likely to attend college.

Equality in Marriages Grows, and So Does Class Divide (NYTimes)

So-called “power couples” abound in modern day America. It’s difficult to find any member of the power elite whose spouse is not also a member. Bill and Hillary Clinton are one prominent example, but there are countless others, most of them unknown to the general public. Many elite marriages today are between graduates of Ivy league universities, which leads directly to the next point:

Functionally unnecessary  and costly elaboration of training for highly specialized roles – can anyone think of a better description of American colleges and universities than that?? College is not about education – it doesn’t take four to six years of exclusively reading books and attending lectures to become a brain surgeon much less an architect, engineer, economist, or lawyer. No, college is all about maintaining exclusivity to the upper classes. Occasionally, you will get some people to admit that college is actually all about the “social experience”, meaning that from some reason we need to put 18-year-olds at least five figures into debt to socialize them properly, I guess. That’s a sad reflection on our society if that is truly the case.

The sponsorship of youths into secret societies or elite social institutions is another way in which the status of an individual can be reinforced. It is generally presumed that the possession of esoteric knowledge, which can be acquired through such organizations, is an important element in supporting and increasing social status in all societies. However, secret societies also played important roles in the creation of personal links involving wealth exchanges and political support. They were therefore another key strategy in attempts by ambitious individuals to restrict others’ access to power and to acquire power for themselves of their corporate group.
Prehistoric Rites of Passage, in JOURNAL OF ANTHROPOLOGICAL ARCHAEOLOGY ARTICLE NO. 16, 121 – 161 (1997)

Secret societies and elite social institutions. That includes everything from the Skull and Bones Society to the Bilderberg Group to the Rotarians. Clearly, “initiation” is a tool used by the elites to enhance their status relative to the rest of us, and as a way to grant only highly “selected” individuals access to the inner sanctums of power.

The final social mechanism through which the social position of a child or youth could be elevated in status and economic potential was through specialized training and education…one strategy for increasing the social value of a child was to expand on this general instruction, either by extending its length and severity or through training in specialized occupations…..We view this frequently extensive and esoteric training as one strategy used by aggrandizers to claim privileged control over resources and activities that were held in common among generalized hunter-gatherers…Among groups with ascribed status, high-ranking male children often received additional specialized administrative and esoteric instruction and were subjected to longer training periods than the general populous [sic]…The analysis of the training data suggest two different types of training in addition to the general education requirements received by community members: (1) male occupational specializations and (2) administrative and esoteric training of elites.
ibid.

Occupational specializations and administrative training. M.D.’s. J.D.’s and M.B.A.s anyone? Clearly, undergoing extensive occupational specialization, such as that of an attorney, scientist, engineer, university professor or medical doctor are ways to achieve status and differentiate yourself in our society. These professionals are well compensated and gain high status by virtue of having exclusive knowledge of, for example, critical engineering or medical techniques. Attaining such intensive education is frequently the path to high status for many individuals. It’s notable that access to these professions in strictly rationed by various professional organizations. For example, the American Medical Association and the American Bar Association strictly limit the number of lawyers and doctors through extensive examinations and onerous licensing requirements. These professions set their own educational requirements and typically make them costly and onerous to limit access to people from wealthy and prominent families.

Displaying costly and difficult to obtain goods. – “Critical to displaying wealth and success was the ability of the host or hosts to procure, display, and give away difficult to obtain or specialized labor-intensive items.” If you went to someone’s house and they had a genuine Picasso hanging on the wall, what would you think? The reason rare artwork is so valuable is because they are our society’s “prestige items.” Rich people bid against each other to acquire them, and in era of extreme inequality the prices of such things escalate not due to any “market forces,” but simply because having them is desirable for status reasons. There are many such objects too numerous to list here – expensive watches, sportcars, jewelry, even comic books!

Image-building activities – Have you ever wondered why there is a “donor wall” on everything? Or why the rich people spend money donating to the symphony when it seems like they don’t even like art or music all that much? Elites know the importance of image-building, which is why they underwrite artists, just like the chiefs who retained specialized craftsmen. Our elites may not build temples like the kings of old, but they do fund our secular substitutes – “cultural” activities such as symphony orchestras and the theater, and the art museums which function as our secular “temples” where we display the quasi-mystical artifacts that define our culture, replacing religious relics in our “rational” post-Enlightenment society. Consider that ever-more lavish art museums are being built all over the world, funded primarily by the wealthy and corporations, yet these buildings serve no economic purpose! They have nothing to do with a profit-orientated society, so why, then, do we build them? For the same reasons the Egyptians built the Pyramids, the Mesopotamians built ziggurats and medieval people built Gothic cathedrals – as forms of cultural expression and identity. And, often times, just like a cathedral, these art museums become the critical building that defines a place in the modern world, such as the Louvre in Paris, the Guggenheim Bilbao, or even the art museum here in Milwaukee.

Segregation from the commoners in clubhouses and exclusive events – I’ve already talked about this, but there are million different ways the elites use “exclusive access” and “velvet ropes” to seclude themselves away from the “commoners,” from golf clubs to executive washrooms to gated communities.

Cultivating exclusive social networks

Elite members of transegalitarian societies created unusually long-distance networks based on kinship, ritual ties, and exchange relationships. Maintaining such networks entailed great expenditures and considerable time. In contrast, normal community members maintained, on average, much smaller and more local networks. Thus, elites would have had greater flexibility to cope with resource fluctuations.

The rich are rich thanks to their access to exclusive social networks of other rich people. The wealthy preach “rugged individualism” to the masses, but are always doing favors for each other and helping each other out. It’s all about social affiliation; for example, wealthy businessmen cultivate social ties with other people of the same “class” as they are in order to get special business deal and contracts, often negotiated on the golf course or in luxury sports boxes (see above).

Debt and interest payments

Getting something for nothing and getting other people to do ones’ producing for oneself have always been effective lures for getting people to enter into contractual agreements. For many people they are still irresistible, as modern-day advertisers and con artists who offer free gifts to their targets are well aware. These same lures operate in traditional societies, as is…apparent in [the] description of the moka system in New Guinea, and [the] descriptions of the potlatch among the Kwakiutl of British Columbia. All of these authors use modern economic terms such as “credit”, “investment”, and “interest” to describe these systems. They make explicit comparisons between these traditional “gift-giving” systems and modern economic practices of “high finance.” (p. 133)
Typically, the supplement or interest, expected on a loan is quite high, ranging from 50 percent to 100 percent, or even higher for risky loans. Given the inherently inflationary nature of these systems, families are frequently pushed to their maximum willingness to produce surpluses in order to avoid defaulting on debts. Defaulting can result in the rupture of relationships between families, clans, and communities, which carry important economic, political, martial, and defence consequences. These can be the form of outright retaliation or simply lack of support for important undertakings; few people would risk involvement with families that were obvious failures. (p. 133)

The use of surpluses to generate debt and interest repayments by the wealthy to control and manipulate the rest of society need not be elaborated further. One is referred to David Graebers Debt, the First 5000 Years.

Control over the means of production

It seems evident that the main goal of aggrandizers was to attract, control, and manipulate labor. To do this, aggrandizers had to provide tangible benefits…the generosity of aggrandizers is a calculated economic strategy meant to centralize control in their own hands and increase production. They operate like contemporary businessmen with recruitment expense accounts or job benefits calculated to attract skilled, productive employees and administrators…

Of course the rich are rich not through their own efforts, but because they control the labor of numerous others, from the handful of employees of a small business, to the the tens of thousands of employees all over the world working for a major corporation. Highly specialized experts such as engineers and scientists are retained by wealthy entrepreneurs, yet it is the entrepreneurs who ultimately profit from their labor. For example, the Koch Brothers’ wealth is predicated on ownership of their global corporation and the knowledge and technical expertise of thousands of individuals who work for it. Yet the fruits of this labor disproportionately accrue to the Koch Bothers themselves, who use it to further aggradnize themselves at the expense of society, all while claiming that they are wealthy exclusively through their own efforts.

4. Where Capitalism comes From

What’s all this stuff about feasting and gift-giving have to do with the modern world, anyway?

It’s no coincidence that Hayden calls his aggrandizing personalities “Entrepreneurs.” I’m sure you’ve noticed by now the similarities between the Triple-A personalities of the Stone Age tribes and the businessmen, bankers and CEOs who control our modern political/economic system. This is not lost on Brian Hayden:

…The same process is followed throughout the world even today. Elites are constantly developing desirable, labor-intensive or rare materials, including foods, to distinguish themselves from others and to provide motivation for participating in competitive organizations. Elites know that many people will compete to obtain the “best” that is available. Because these items are widely desired, other entrepreneurs are constantly seeking ways to make them available to more and more people, eventually developing technologies that substantially reduce costs. Thus aluminum, plastics, and complex industrial goods like automobiles all began as labor-intensive elite consumable items and became commonplace items as the technologies were refined. Similar developments can be seen with elite exotic food fads in contemporary society, and this undoubtedly occurred in prehistoric times, although at a much slower pace. (p. 143)

Competitive feasts are thus primarily mechanisms for converting surpluses in subsistence economies into wealth and power…Even in contemporary industrial society, promotion may depend in part on the display of competence and achievement through the holding of business or political dinner feasts with appropriate displays of prestige items and socially accepted self-aggrandizement. To the extent that such dinners or parties are used as criteria for promotion to desirable or powerful positions, they constitute competitive battlegrounds for Triple A personalities, and they can be considered as a special industrial type of competitive feast. (p. 144)

Neither was this lost on Marvin Harris:

…with the rise of capitalism in Western Europe, competitive acquisition of wealth once more became the fundamental criterion for big man status. Only in this case, the big men tried to take away each others’ wealth, and highest prestige and power went to the individual who managed to accumulate and hold onto  the greatest fortune. During the early years of capitalism, highest prestige went to those who were richest but lived the most frugally. After their fortunes had become more secure, the capitalist upper-class resorted to grand-scale conspicuous consumption and conspicuous waste in order to impress their rivals. They built grand mansions, dressed in exclusive finery, adorned themselves with huge jewels, and spoke contemptuously of the impoverished masses. Meanwhile, the middle and lower classes continued to award highest prestige to those who worked hardest, spent least, and soberly resisted all forms of conspicuous consumption and conspicuous waste. But as the growth of industrial capacity began to saturate the consumer market, the middle and lower classes had to be weaned away from their frugal habits. Advertising and mass media joined forces to induce the middle and lower classes to stop saving and to buy, consume, waste, destroy, or otherwise get rid of ever-larger quantities of goods and services. and so among middle-class status seekers, highest prestige now goes to the biggest and most conspicuous consumer. (CPWW: 128-129)

Here’s how I see the history. For thousands of years, since the birth of inequality in the distant past, kings and potentates have appealed to religious authority to justify their differential access to wealth and power. With the Enlightenment, all that was swept away. This was most likely due to the migrations to the New World, and the exploitation of its seemingly limitless resources.

The aristocrats whose ancestors may have worked the hardest and kept the least in the remote past now worked the least and kept the most, and people started to take notice. The decline of universal religious belief thanks to the Reformation and the rise of Enlightenment “rationalism” (which also contributed to the birth of science), caused people to increasingly question the social order. Nullius in verba–“take no ones word for it” was the motto of the Royal Society. No longer could the aristocrats appeal to religion and were swept away or became increasingly irrelevant.

At the same time, the new world envisioned by Enlightenment thinkers would be devoid of classes assigned at birth—no more hereditary princes and serfs; everyone would be equal. That is, ascribed status would vanish, only achieved status would matter. With the settlement of the Americas and the French Revolution in Europe, this seemed like a realistic possibility. One’s status would be determined by what one could accomplish with one’s own two hands and intelligence, rather than an accident of birth.

I would argue that in the aftermath of the Enlightenment, we once again entered another transegalitarian phase, strikingly similar to the Stone/Bronze Age world, except with steam engines and the resources of much of the “undeveloped” world at our disposal. Once again, overproduction and debt engineering would become the primary means to acquire status, wealth, and power, and the best minds of an age began to scheme once more.

And that, ladies and gentlemen, is what gave birth to what we now call capitalism. Except this time debts and investments were done in the interest of selling in “free” markets with the end goal of converting money into more money, and converting that money into social status, wealth, and power. The aggrandizers of the Stone Age are the precursors of today’s corporate titans, investors, entrepreneurs, CEO’s, executives, bankers, and so on. Just like their Stone Age counterparts, they are constantly scheming to profit, only this time in the markets rather than through feasting. Rather than piling up roast pork, coconuts, sago-almond puddings and racks full of yams, they piled up sugar, cotton, tobacco, spices, and eventually cars, refrigerators, computers, and cell phones.

They began by importing exotic and addictive foodstuffs into Europe—sugar, tobacco, cloves, pepper, tea, coffee, even opium! These substances were both useful and addictive, and could only be obtained through adventurous, buccaneering trade. This is very similar to the use of psychoactive substances by the aggrandizers back in the Stone Age—manipulating human appetites to gain wealth and prestige, except these aggrandizers were able to convert the entire Caribbean into sugar plantations staffed by slaves, for example. Introducing these substances into urban areas and getting people hooked on them once again became a method of attaining wealth and prestige and moving up the social hierarchy.

Then came industrial mass production. It began with the British Agricultural Revolution— ways to dramatically increase agricultural output. Then, Triple-A personalities reorganized labor in the factories spinning New World cotton into cloth for the global marketplace. First powered by water, and later by coal, the factories unleashed unparalleled material abundance, and the mechanization of production caused a radical reorganization of society. This vast overproduction was noted even by capitalism’s critics, including Karl Marx, who coined the tern capitalism to describe the system of investment and profit of what he termed capital. In Britain, numerous highly-skilled “tinkerers” constantly searched for new ways and means to increase output. Today we call this the Industrial Revolution. These processes fed on each other—more production gave rise to the means to increase production still further. The drive to understand the forces that lay behind this abundance helped further the rise of science–the steam engine gave birth to science rather than science giving birth to the steam engine.

Mass production took a major step up with the assembly line pioneered by stereotypical Triple-A personality Henry Ford, who once again reorganized labor, and now even high-tech goods such as automobiles and refrigerators could be put in the hands of ordinary people. Institutionalized science became enlisted in the unrelenting drive to increase production still further, and entrepreneurs constantly pursued new innovations in order to come up with new products to put in the marketplace in the service of their own profit and aggrandizement.

This behavior is fundamentally the same as that of the Big Man Entrepreneurs described by Hayden, perhaps not in specifics, but in kind. Investments are pursued that lead to profit. Some entrepreneurs succeed, while others fail. The entrepreneurs work ceaselessly night and day to increase production. They promote a stringent ethic of hard work and sacrifice (The Protestant Work Ethic). They strive to attract and retain the best labor–competent, hardworking, highly skilled individuals, and to lure such workers away from their rivals. They compete to outproduce their opponents, whom they hope to defeat and humiliate. They invest in image-building activities to promote themselves and advertise success (luxurious buildings, advertising, sponsorships, etc.). The “winners” of such competitions eventually drive all other players from the field.

It’s easier to understand the emergence of capitalism when you realize it is grounded in human social instincts and the drive for prestige. Capitalist greed and overproduction may seem irrational, but it not once you realize that it’s about production at all! Overproduction is just a means to an end – and the end is always social status. Nobody really “needs” all these goods and services. Rather, it is all about overwhelming reciprocity and getting everyone else into debt, requiring more growth to pay back the interest to the aggrandizers, like I said in my introduction. Just as there can never be enough food for feasts, there can never be enough production of goods. There must always be more, because all that matters is relative status, and relative status is not an absolute number; rather it comes from having more than the other guy. The impetus to generate growth to repay the aggrandizers is fundamentally the same now as it was then, and inevitably leads to the same results–overproduction, overwork and intensification.

Just as wealth was produced and then destroyed  in the potlatch ceremonies of the Kwakiutl chiefs—conspicuous waste—our landfills pile up with garbage that we use and then throw away. Is the potlatch destruction of goods any more irrational than our throwaway culture and mountains of waste? Is capitalist greed any more illogical than producing goods to throw a big feast in order to climb the social ladder?

Have you wondered why people with billions of dollars keep trying to earn even more even though it is more than they can spend in a thousand lifetimes?  That’s why–there is no absolute level of wealth that is “enough;” they simply need to have more than their opponents. You and I may see that as irrational, but the aggrandizers who claw their way to the top are the descendants of those who constantly sought to outproduce their rivals in the distant past and disproportionately passed along their genes, particularly in agricultural societies. Capitalist overproduction can therefore be seen as a fundamental primate instinct related to maximizing one’s social status and therefore their reproductive fitness.

Marvin Harris has a chapter on the origins of capitalism in his book, but this is one case where I strongly depart from his views. He argues that capitalism was caused by the freeing up of the  productive classes from the being under the thumb of the greedy useless-eater political establishment, the “internal bureaus of plunder” who persistently stripped them of every morsel of their surplus in order to fund their lavish lifestyles. He writes:

I believe the secret of the “great leap forward” in productive effort was the release of ambitious individuals from political, social, and moral restraints on self-serving attempts to accumulate wealth. European entrepreneurs were the first people in the history of the world who could go about their business without worrying if some “internal bureau of plunder” was about to cut them down to size. Equally important, they could accumulate wealth without sharing it with friends and relatives who helped them get rich. Like “big men,” entrepreneurs accumulated wealth by making their followers–now called employees–work harder. But unlike Solomon Island mumis, entrepreneurs did not have to beg, cajole, and entice. Possessing capital, the entrepreneur could buy “help” and hire “hands” (plus backs, shoulders, feet, and brains). And the entrepreneur did not have to promise to give everything away at the next company picnic. Since his followers were not the “big man’s relatives or fellow villagers, it was easy for him to disregard their requests for a larger share of the product. Moreover, the helping hands-backs-shoulders-feet-brains had little choice in the matter. Deprived of access to lands and machines, the “help” could not work at all unless they accepted the legitimacy of the entrepreneur’s claim to “the meat and the fat.” The “help” assisted the entrepreneur not so they could all have a feast, but simply to keep from starving. In sum, the “big man” entrepreneur was free at last to regard the accumulation of capital as an obligation higher than the redistribution of wealth or the welfare of his followers. (C&K: 265-256)

But this is simply wrong. We now know that all of the institutions for capitalist growth were present as far back as the Middle Ages, and even earlier in many places and in many periods all over the world. And the idea that the rich had to give everything away is contradicted by history. Massive fortunes were accumulated by wealthy and powerful individuals in all ancient societies that we know of–Babylonia, Persia, Greece, Rome, Byzantium, India, China, the Ottoman Empire, the Mongol Empire, and elsewhere, without worrying what anyone else thought. Hired labor goes back to ancient Babylonia. We’ve also seen that feasting was actually a means of acquiring power, and that the “gifts” were really investments, not open-handed generosity.

For example, recent data has suggested almost modern rates of growth in ancient Greece, where the economy was highly decentralized and private ownership was the norm. And Peter Vries has made the case that the “weak” state was far more true of China than of the Western European nations where capitalism was born. The notion that the productive classes were always and everywhere kept in a state of perpetual deference to an all-powerful bureaucracy in order to support a feckless rentier elite uninterested in economic growth and improvement in technique is an outdated one that has been thoroughly debunked by recent scholarship, as Gregory Clark points out:

The popular misconception of the preindustrial world is of a cowering mass of peasants ruled by a small, violent, and stupid upper class that extracted from them all surplus beyond what was needed for subsistence and so gave no incentives for trade, investment, or improvement in technology. These exclusive and moronic ruing classes were aided in their suppression of all enterprise and innovation by organized religions of stultifying orthodoxy, which punished all deviation from established practices as heretical….There may have been societies before 1800 that fit this popular stereotype. There were frequent attempts by religious authorities to impose fallacious dogmas about the natural world. But…as an explanation of the slow nontechnical advance of the world as a whole before 1800, the prevailing view makes no sense. It is maintained only by a contemporary variety of dogmatism–that of modern economics and its priestly cast [sic].

The central vision of modern economics, the key massage of Adam Smith and much of his followers, is that people are the same everywhere in their material preferences and aspirations. They behave differently only because of differences in incentives. Given the right incentives–low tax rates on earnings, security of property and of the person, free markets in goods and labor–growth is guaranteed. The long Malthusian night persisted because of the inability of all societies before 1800 to create such institutions. This vision permeates contemporary economics, from the practical councils of the International Monetary Fund and the World Bank to the theorists of university economics departments…In economic history…the Smithian vision is the dominant intellectual tradition. Indeed much of modern quantitative economic history has been a search for empirical confirmation of his vision of growth. These empirical studies of past societies, however, rather than confirming Smith’s hypothesis, systematically find that many early societies had all the prerequisites for economic growth, but no technological advance and hence no growth…(pp. 146-147)

…By 1200 societies such as England already had all of the institutional prerequisites for economic growth emphasized today by the World Bank and International Monetary Fund. These were indeed societies more highly incentivized than modern high-income economies: medieval citizens had more to gain from work and investment than their modern counterparts. Approached from the Smithian perspective, the puzzle is not why medieval England had no growth, but why today’s northern European countries, with their high tax rates and heavy social spending, do not suffer economic collapse. The institutions necessary for economic growth existed long before growth itself began.(FTA p. 10)

Rather, I would argue that capitalism was impossible before technological advances made it possible to drastically increase production in a short time frame. Wealth is not a means in itself, but always a means to an end – and that end is always social status. But in pre-market societies, social status was achieved not through possessing lots of money (since preindustrial societies were not market-based, as Karl Polanyi documents at length in The Great Transformation), but by ownership of land. A recurring theme in Moses Finley is that of the successful merchant making a pile of money and then using it to buy a villa and a title and retiring to the countryside to live the life of a gentleman. This causes no end of consternation among modern-day economists—”Stupid merchants, why didn’t you keep working harder and break through to capitalism!!!”

But this is a classic Flintstonization of history. Limited by the constraints of thermodynamics, and without the technological or material means to rapidly increase production, land ownership was controlling the means of production, since all wealth ultimately derived from what could be grown on the land via photosynthesis. In preindustrial societies, merchants did not increase production, they just moved goods around in space (as the Physiocrats argued). As Paul Colinvaux would point out, one way to deal with a stagnant society is through the creation of a caste system – people are rationed to their niches. In agricultural societies, land ownership was the highest niche, not buying and selling. Therefore, it is extremely logical in such a world to convert wealth into status by purchasing land, because land was what conveyed status. Landowners were the only people who cold vote, for example, and they filled all the important political offices, not the merchants. Thus, becoming a wealthy landowner was the main way of achieving prestige, and commercial activities were simply a means to that end. The economists’ mistake follows from their assumptions that economic behavior is is something wholly divorced from society, and that the “natural” human drive is to maximize wealth rather than to maximize social status.

By contrast, in market societies where literally everything can be bought and sold – including land and labor, it is access to capital–wealth which can be reinvested–which conveys status. This is typically in the form of money, so today’s status seekers strive to turn money into more money through investments and the sales of commodities (Marx’s M-C-M’), in order to maximize the amount of money the have, and therefore maximize their social status. In a world of rapid technological advance thanks to institutionalized science and the voyages of discovery and colonization, rapid growth was once again possible for the first time since the emergence of settled agriculture.

“Societies before the Industrial Revolution were dependent on the annual cycle of plant photosynthesis for both heat and mechanical energy. The quantity of energy available each year was therefore limited, and economic growth was necessarily constrained. In the Industrial Revolution, energy usage increased massively and output rose accordingly…What can, however, be asserted with confidence is that a necessary condition for the move from a world where growth was at best asymptotic to one in that it could be, at least for a period, exponential was dependent upon the discovery and exploitation of a vast reservoir of energy that had remained untapped in organic economies. Only by adding the products of plant photosynthesis accumulated over a geological age to the annual cycle of photosynthesis, which had previously been the source of almost all the energy available for human use, could the energy barrier that had constrained growth so severely in the past be overcome…”

http://rsta.royalsocietypublishing.org/content/371/1986/20110568

Harris’s mistake is not understanding that Western Europe was the first “market society,” where markets became the chief organizing principle of society, rather than religious or kinship ties. Furthermore, it is the first one where Triple-A personalities could significantly increase production for sustained periods of time, because of the vast resources of the New World, and later fossil fuels. Centuries of technological advance during the medieval period could now be utilized for this purpose. In Robert Allen’s view, high wages in England led to the drive to substitute capital for labor.

Once again, debt, interest, and investments come to the fore. Constraints against usury which made sense in the thermodynamically-constrained agricultural world were relaxed, and then eliminated. The prime tactic of the status quest once again became hard work, overproduction, savings, investment, and debt engineering, just as in the previous transegalitarian phase. People once again mimicked the behavior of their Epipaleolithic ancestors. The wealth pouring into Europe from the New World led to the what economists call the Industrious Revolution in Northern Europe after 1600, and the advent of coal and the steam engine led to the Industrial Revolution. Triple-A personalities once again invested their time and effort into overproduction and invention in order to gain status. We know their names—Fugger, Arkwright, Owen, Boulton, Darby, Smeaton, Ford, etc. These are the people Adam Smith wrote about.

The Protestant Work Ethic lionized hard work and self denial, and Calvinism preached that the wealthy were favored by God. A new generation of Triple-A personalities took advantage of this new order to topple the land-owning aristocrats from their perch and replace them on the ladder of the social hierarchy. This long, protracted battle is what we call “Economic Liberalism” today. The aggrandizing producers eventually decisively won this battle, and used their newfound power to reshape society. They enclosed the common lands and removed the self-sufficiency of the peasants, allowing them to gain control over their labor and use it to build their fortunes. Market relations would now permeate all of society, sweeping away all that had come before, as Marx noted (“all that is sold melts into air…”). Social relations became replaced by monetary ones. They spread Markets all over the globe, often by force, using machine-based overproduction to destroy local economies and undermine self-sufficiency. They imposed taxes on people to put them into debt and thereby forced them to work in their fields and factories in order to acquire the money they needed to pay their taxes. They forced people to work harder than ever before. In this new world, they–the entrepreneurs–would be the ruling class. Wealth was power, and the wealthy would be the rulers. The world once again separated into classes, the workers and the owners, rather than aristocrats and commoners.

Fast-forward to today where, in many places, the rich rule either directly or indirectly. America, for example, is now a plutocracy–rule by the rich. The politicians must go hat-in-hand to the “job creators” and seek their support. The bankers now control the money supply and lure everyone else into debt. Or, sometimes, the rich simply seek office and rule directly as in our last presidential election.

Just as back then, this was accompanied by changes in the underlying social logic:

5. The Social Logic

Just like back then, the increasing power of entrepreneurs would have been justified by a number of alterations to the social logic. And just like then, religion would become pressed into service to justify the wealth and power of the elites. Except, in the post-Enlightenment era of rationalism and science, this new religion would have to use scientific principles and rationalism  in order to justify the new social arrangements and inequality. We call this new religion economics, and its high priests economists. Note how the importance and prominence of economists and their arguments has risen exactly in tandem with rising inequality and the disappearance of social mobility.

The changes in the social logic are now commonly deployed to justify the grotesque and increasing inequality in our own transegalitarian society are probably the exact same ones as were deployed back in the Stone Age, viz:

We are all made better off through the aggrandizers’ efforts. The aggrandizers are portrayed as increasing production beyond what it otherwise would be. The increased production makes us all better off, goes the logic. Reining in the activities of the aggrandizers, or putting any brakes or limits whatsoever on their behavior will only make us all worse off in the long run, they argue. Their bottomless desire for wealth and  power leads to a better world for all  through the “trickle-down” effect. The investor class claims to have a unique ability to organize labor and “allocate capital” “We alone can do this,” they claim, and even argue that it is doing “God’s work.”  It’s the doctrine of the “Invisible Hand” a concept whose religious origins should be obvious.

No doubt this was the logic of the Stone Age as well. The people who stumbled out of the clubhouse with full bellies after a night of feasting and fornicating no doubt would argue that the aggrandizers’ efforts made them quite well off indeed. What they didn’t realize is that they would now have to work harder then ever before thanks to the aggrandizers’ behavior. They were forging the very chains that would bind them.
How often do you hear this argument: “Corporations don’t rich through exploitation– You can’t get rich except by selling stuff that people want!!!” That is, the system constrains the behavior of corporations and makes them act in pro-social ways via the “invisible hand.” In my opinion, this is THE motive for allowing the aggrandizers to retain unlimited power. Not a day goes by when you don’t hear this rationalization somewhere. Here’s one randomly plucked from Reddit: “Free-market capitalism makes new wealthy people. Bill Gates was not born a billionaire. Mark Cuban was not born a billionaire.”

The reason this justification is so seductive is because there is a grain of truth in it. The aggrandizers’ efforts do raise the level of production above what it would normally be, and this can provide for temporarily better living standards in the short run, as Marvin Harris pointed out. Having a “safety net” thanks to overproduction no doubt helped early humans to survive – it may be one of the the reasons why we’re the only species of Homo sapiens left on the planet.

The problem with this is that even without the aggandizers efforts, the tribe could still produce everything it needed to survive, but it would get it without having to repay the aggrandizers by constantly working harder and producing more. Instead of letting the aggrandizers take control, people could theoretically produce what they needed cooperatively for themselves (as they did initially), rather than allow the aggrandizers to put everyone else in hock and convert this into despotic power. For example, we’ve seen a combination of corporations and banks essentially trap almost the entire nation in debt slavery. Entire nation-states are now  controlled by a small group of wealthy bankers via debt payments. As Thomas Jefferson noted, banks are more dangerous than standing armies.

The wealthy work harder than everyone else–they deserve what they get!!!

This is another very popular one today. Our modern media is constantly touting the heroic work ethic of today’s business elites that would put Alexei Stakhanov to shame. Our executive/entrepreneurial class are portrayed as literally superhuman—working hundreds of hours per week, sleeping only a few hours a night, falling asleep at their desks or popping pills to stay awake, going for days without eating or subsisting on fast food and meal replacement powders, living at the office for weeks at a time, missing life events like weddings and funerals, even skipping the birth of their children—all in order to work more. Wall Street promotes a culture of superhuman overwork where employees have literally died at their desks and uses this as a way to justify their multi-million-dollar bonuses–bonuses which far dwarf the collective wages of every single minimum wage worker in America.

One of the most-read articles on the Wall Street Journal’s web site last week was a piece about how 4 a.m. — a time so ungodly there’s even a TED Talk about how surreal it is — has become the most productive hour for go-getters. Donald Trump has been endlessly knocking Hillary Clinton for sleeping (gasp!), calling out her lack of stamina as he brags about not needing much sleep and his former staffers say that vacations would “bore and perhaps scare” the GOP presidential nominee.

And then there is Yahoo CEO Marissa Mayer, who said in a recent Bloomberg BusinessWeek interview that she regularly pulled all nighters when she worked at Google and can judge a startup’s chances for success by whether people are working on the weekends. “Could you work 130 hours in a week?” Mayer said, referring to the value hard work played in Google’s success. “The answer is yes, if you’re strategic about when you sleep, when you shower, and how often you go to the bathroom.”

Stop touting the crazy hours you work-it helps no one (Washington Post)

This is no doubt a reaction to the extreme inequality of our present age. By constantly promoting the superhuman work ethic of Triple-A personalities in the media, it justifies their mind-boggling wealth and makes the commoners believe the rich “earned” every cent by dint of working longer and harder than the “lazy” commoners who are concerned with just getting by and wasting their valuable time on things like on sleeping and recreation.

Consider the words of this classic aggrandizer:

“I’m a strange man, an odd man,” [Shigenobu] Nagamori, 71, says in an interview from Nidec’s headquarters in Japan’s ancient capital, with his old prefabricated shed preserved in the building’s lobby 19 floors below. “I push against the grain.”…More than four decades into the job, he still works every day and vows to stay on in some capacity until 2030, his target for increasing annual revenue to 10 trillion yen from 1.2 trillion yen in the year ended March…

…Even in a nation renowned for devoted workers, the company stands out for its demands on employees. Meetings, Nagamori says, are held on weekends or after regular tasks are done. New staff are sometimes told to clean toilets, and taking days off is seen as lazy. Nagamori makes no apologies. “These days, if you tell people to put everything into their work, you’re soon dubbed a black company,” he says, referring to the Japanese term for firms that flout labor standards. “I have no problem saying that. If you don’t work, you lose. The only ones I can’t stand are layabouts.”

Nagamori decries what he sees as a lack of ambition in Japan. Too many young people are content with only “small happiness,” like going home to their children in the evening rather than working late to become their company’s next president, he says.

The Eccentric Billionaire Who Ignores Investors to Get Them Rich (Straits Times)

Compare that to a Siuai Big Man named Soni recounted by Harris:

That night, exhausted from weeks of feverish preparations, [Soni’s followers] talked about the rest they had earned now that the feast was over. But early the next morning they were awakened by the booming sound of wooden gongs being beaten in Soni’s clubhouse. A handful of sleepy people straggled over to see who was making all the noise. It was Soni, and this is what he told them:

“Hiding in your houses again; copulating day and night while there’s work to be done! why, if it were left up to you, you would spend the rest of your lives smelling yesterday’s pig. But I tell you yesterday’s feast was nothing. The next one will be really big.”

Clearly Soni (or rather his forefathers) is the literal and figurative ancestor of today’s capitalist entrepreneur and CEO. And we all dance to their tune.

Conversely, the poor are seen as lazy rather than unfortunate. Anybody undergoing hardship has only themselves to blame for not pursuing profitable investments, or not repaying their loans. The poor deserve their misfortune as surely as the rich do their wealth.

While no doubt there are some “ten times” workers who are far more productive than average, it simply beggars belief that anyone can “earn” thousands of times more than anyone else through “hard work” alone. For example, the three Wal-Mart heirs have more wealth than a city the size of Phoenix, Arizona. And twenty people have as much wealth as the lower half the entire American workforce! As Oxfam discovered, 83 people have as much wealth as the world poorest three and a half billion people. Can anyone believe this is simply he result of “working harder?” The answer for many people, apparently, is “yes.”

They are favored by the gods/God!

It may seem ridiculous to include this in our modern “rational” society, yet its clear that the rich are perceived by the average person as having some sort of supernatural power or ability, just as they were in stone age times. The rich are commonly portrayed in the media as preternaturally competent and intelligent, and not, for example, lucky or fortunate, even if their wealth is mostly inherited. For every successful business person there are hundreds of failures who were presumably less “gifted” entrepreneurs. This is seen as divine favor and not for what it is—survivorship bias.

It’s telling that  the expression “rainmaker” is often used to denote someone who can make business deals happen through social connections, ascribing almost magical abilities to such people. Without the “rainmakers,” the thinking goes, any business would go under, as though the “rain” they make is somehow down to their very existence, and not through manipulating social connections (just like a tribal chief!). It’s telling that charisma, roughly means “touched by the gods.” I can tell you from conversations I’ve had with people that they see the rich as just having a certain magical “something” about them that they can’t describe that leads to their success. This, along with ideals of “hard work,” leads people to accept the extreme inequality of modern-day capitalism. It’s also notable that highly religious people seem to be much more accepting of extreme inequality, and the prevalence of religious beliefs are strongly correlated with levels of inequality both between nations and within them (as the U.S. demonstrates).

6. The Modern Religion

The modern “religion” used to justify the aggrandizing behavior of our elites is called economics. Just as the kings and chieftains of old supported a full-time priestly caste to rationalize their hold on power, today’s rich spend fortunes supporting economic institutions and paying generous salaries to a professional economist caste that disseminates pro-wealth propaganda to the masses. Thousands of economics classes in schools all over the world every single day repeat free-market dogma the way theology schools once taught the Bible.

Economic “science” is mainly simplistic libertarian propaganda clad in scientific drag in the service of justifying extreme wealth inequality and never-ending growth. It is non-falsifiable, and denies human nature insofar as it requires all people to be rationally-motivated calculating machines constantly seeking to increase pleasure and avoid pain (homo economicus). Work is seen as a disutility, and all players in the market are said to have perfect knowledge (i.e. omniscience). “Welfare economics” argues that money taken from the wealthy and given to the poor is wrong, since each derives the same amount of “utility” from such wealth.  Consistent with the Enlightenment era, it obscures its shaky foundations and implicit assumptions not in the opaque, colorful language of theology but with fiendishly advanced mathematics. Just as the illiterate commoners were once kept in deference by the rituals of the Catholic Church, the average person today is prevented from criticizing economics by its use of the inscrutable mathematics that economists use to construct specious models that justify their foregone conclusions, all based on a foundation just as hypothetical as the existence of remote gods and ancestors.

One is not required to understand the Market, only to have “faith” in it, and to believe its ministrations will work out for the best in the long run. The Market is said to be “all-knowing”, and its workings are said to be beyond human comprehension, much like the unknowable “will” of the gods in past societies. The rich are entitled to rule, because toppling them from their perch would lead to “chaos,” similar to concepts of “unrule” in ancient Egypt and China. The nevereneding cycle of booms, busts, manias, and crashes are just part of the system, just like the floods, droughts and famines in times past, and nothing can be done about them, claim the economists, despite the fact that the Market is theoretically a human construct. Like the Cargo Cults of the South Pacific (another Marvin Harris chapter), the economic priesthood fiddles with interest rates and money creation to spur “growth” despite the fact that economists admit they have no real understanding as to its actual cause (hint: energy capture). The Market religion even has it’s own version of human sacrifice in the form of the unemployed, whom we are told are necessary victims in order to prevent the dreaded “inflation.”

A full critique of economic “science” is beyond the scope of this post, but this article is one of the best I’ve seen recently in describing the profession of economics vis a vis society:

How economists rode maths to become our era’s astrologers (Aeon)

7. Conclusion

The birth of domesticated agriculture and the birth of industrial capitalism are both based on the same fundamental primate social instincts–the quest for social prestige through competitive overproduction.

Initial inequalities become institutionalized over time when wealth becomes passed down through generations—dynastic wealth. The endgame is when people start falling into debt to the aggrandizers, and the debt becomes trans-generational too. The resulting inequality is then justified by subtle transformations in the social logic (either religious or otherwise) that take place over time. Creeping normalcy allows small changes to accumulate generation after generation—consider, for example, that levels of debt that would have been seen as outrageous just one generation ago are now seen as “normal,” and an Orwellian police state is just taken as a given even in Western democracies. The Law of Cumulative advantage magnifies this process over time. The transegalitarian arrangement of achieved status falls in the face of ascribed status when contestant growth can no longer be maintained, such as when the land became filled and intensification reached its upper limit. Or as when the environment gives way or fossil fuel extraction reaches it peak output.

I believe we’re in another transegalitarian phase now, and we’re about to enter an era of permanent lords and serfs (aka Neofeudalism). Hierarchy will once again be ascribed at birth. The world is full, and “innovation” is increasingly just intensification as more and more resources are brought to bear just to maintain the status quo. Thomas Piketty has shown that wealth is increasingly being derived from inheritance, not earnings. He points out that if the growth of stocks and investments is faster than the growth of the economy as a whole, earned wealth will be unable to compete with inherited wealth, leading to an ossified social order. He points out that the wealth of heiress Lilliane Bettancourt, who did nothing but inherit a fortune, grew as fast as that of software developer Bill Gates who started a company. Gates’ wealth increased just as much after he left Microsoft that when he worked as its founder and chairman. In other words, Bill Gates “earned” even more by being a professional billionaire as he did being a “hard-working” entrepreneur.

It’s often argued that people are constantly moving up and moving down the social ladder, but this is deceptive. In fact, the vast majority of people stay in the same class they are born into their whole lives. Social mobility is not as high as commonly believed. Even in the sclerotic caste systems of the ancient world, people still moved up and down the social ladder, contrary to popular belief. It’s just that it was very hard to do, and required extraordinary skills and luck, which few possessed. That’s once again where we’re headed. Gregory Clark has demonstrated that social mobility even over multiple generations is surprisingly static, even taking into account the past few centuries of economic growth.

The problem today is the same as it was back during the birth of agriculture–intensification always makes the average person worse off in the long run. This social logic is the reason we work longer hours than medieval peasants did in today’s fossil-fuel powered, highly automated world. We have so much abundance that we are constantly subjected to thousand of advertisements per day preying on our insecurities and our desire for status to get us to buy all the stuff we are producing. And yet we must live in this world to pay back the entrepreneurs who can never, even have enough, since it is a classic arms race with no endgame.

And the end of this game might be mutually assured destruction considering that our environment cannot take relentless overproduction and intensification forever and ever, even with the tools modern science at our disposal, any more than it could thousands of years ago. Eventually, it will hit a limit (which it almost certainly already has). We are destroying the very life-support systems of this planet in order to allow the aggrandizers to play their competitive status games. It’s time to rein them in, or like the elk whose antlers grew so big they could no longer escape their predators, we may go extinct due to success rather than failure.

Capitalism, then, is a system that is committed to an unbounded increase in production in the name of an unbounded increase in profits. Production, however, cannot be increased in an unbounded way. Freed from the restraints of despots and paupers, capitalist entrepreneurs still have to confront the restraints of nature. The profitability of production cannot expand indefinitely. Any increase in the quantity of soil, minerals, or plants put into a particular production process per unit of time constitutes intensification. It has been the burden of this book to show that intensification inevitably leads to declining efficiencies. That declining efficiencies have adverse effects upon the average standard of living cannot be doubted.

What must be made clear is that environmental depletions also lead to declining profits. This relationship is not easily understood because, according to the laws of supply and demand, scarcities lead to higher prices. Higher prices, however, tend to lower consumption per capita (the market symptom of declining living standards). Profits can be sustained temporarily if the drop in per capita consumption is compensated for by an expansion in total sales based on population growth or the conquest of international markets. But sooner or later the curve of rising prices caused by environmental depletions will begin to rise faster than the curve of rising consumption and the rate of profit must begin to fall.

The classic entrepreneurial response to a fall in the rate of profit is exactly the same as under any mode of production that has been overintensied. To compensate for environmental depletions and declining efficiencies (which manifest themselves as falling rates of profit), the entrepreneur seeks to lower the costs of production by introducing labor-saving machines. Although these machines require more capital and hence usually have higher start-up costs, they result in lowering the unit cost of the product.

Thus a system that is committed to perpetual intensification can survive only if it is equally committed to perpetual technological change. Its ability to maintain living standards depends on the outcome of a race between technological advance and the relentless deterioration of the conditions of production. Under the present circumstances, technology is about to lose that race. (C&K 266-267)

C&K: Marvin Harris, Cannibals and Kings.
CPWW: Marvin Harris, Cows, Pigs, Wars, and Witches.
FTA: Gregory Clark, A Farewell to Alms.

Read Part 1

Last time we saw that at the end of the Ice Age, humans all over the world started increasingly focusing their efforts on acquiring abundant plant foods, allowing them to establish consistent, reliable, and storeable surpluses. These surpluses gave rise to a “feasting complex” which was a standard feature of human social communities all over the world. Such feasts served not only as a way of spreading out periodic shortage risks over diverse areas, but also as a means of integrating larger human social groups, engendering cooperative behavior on a level no other species could match. This likely meant that even as far back as the late Paleolithic era, although immediate groups were still mostly quite small (20-150 individuals), such bands were already part or much larger ethnolinguistic networks spread out over broad geographical areas consisting of potentially thousands of individuals who could cooperate on a large-scale basis for reasons of labor pooling, mate exchange, trade, warfare, and other efforts.

During these feasts, certain individuals, or “Triple-A” personalities (aggressive, ambitious, acquisitive, aggrandizers, or I would just say “assholes”), devised various underhanded means to gain control of the surpluses in order to enhance their status and prestige by supplanting reciprocal (equal) exchange with debt/credit relationships. Such cunning social manipulation allowed them to control people, even in the absence of any formal institutions. The subsequent alteration of the social logic of the tribe (caused by abundance) caused people to work ever harder in an attempt to reciprocate the “gifts” of the aggrandizers, leading to an arms race of intensification. As the capacity to produce surpluses increased, feasts became larger and more elaborate. In response, these aggrandizers devised additional means of engendering even greater surplus production and gaining control of the goods produced thereby in order to further enhance their standing and influence in the feasting community and set themselves up over the rest of the tribe.

Hayden describes this sequence by examining the ethnographic record and broadly categorizing societies into three separate levels. Of course, there are no hard-and-fast divisions here, but this framework allows us to describe the sequence from egalitarian foraging bands to chiefdoms in a more comprehensible manner.

1. Despot Societies

In these societies, warfare is the chief rationale for surplus production. In these societies, the deaths of relatives and allies in battles and raids are compensated by death payments. In addition, military alliances are sealed and treaties ratified by wealth exchanges between villages. These payments are typically more than any single individual can produce on their own. This engenders the need for surpluses that the “Despots” can then control by acting as generals and diplomats. Such places have significant warfare, but minimal population density and minimal food surpluses (for example, the eastern New Guinea highlands which are unsuitable for taro production). As such, they do not have competitive feasting, rather feasting is used to recruit allies and make restitution payments.

“Despot communities do not have competitive feasts, but feasts of solidarity and alliance; Great Man despots are not necessarily wealthy as a result of their own productive efforts, but they typically play prominent roles in warfare, and, more importantly, they play central roles in peacekeeping and in arranging death compensation payments that provide access to benefits unavailable to others, such as choice foods, prestige goods, coercive power in demanding surpluses, and power in negotiations…only exchange of equivalent items occurs in Great Man societies; however…death compensation payments are used to create peace everywhere in New Guinea, and…death compensation payment is a key factor in changing the practice of ‘equivalent exchange.'” (FOI: 30)

Hayden portrays these societies as ones in which ambitious individuals are constantly scheming and conniving in an almost Machiavellian manner to foment conflicts in order to provide a rationale for producing the surpluses which are then turned over to them for peace negotiations and death compensation payments.

“It is essential to realize that …what makes warfare a useful tool for ambitious aggrandizers is not necessarily the conflict itself, but the creation of debts that can be partly managed or manipulated by those with ambition. This is what differentiates transegalitarian warfare from warfare in egalitarian communities. Debt is created in three ways:

(1) when individuals are killed in battle, retaliatory killings can be avoided by paying for the initial death with economic surpluses.

(2) in order to secure allies for battles, surpluses can be used to pay potential or actual allies for their support.

(3) when allies suffer losses in battles, they must be compensated by wealth payments for their losses.

All of these situation are predicated on the practice of substituting the value of economic surpluses for a human life–a practice that does not appear to occur to any great extent among strictly egalitarian societies where a human life must be paid for with a human life (i.e. strict equivalent or revenge)” (p. 32)

In some rare instances, straight-up extortion and intimidation was used as a means of increasing wealth and prestige:

“By generating a climate of danger, Despots could make strong demands in the rest of their communities for power and goods. In some instances, the strategy clearly led to the concentration of considerable power in the hands of Despots who married up to 20 wives and who killed members of their own community at whim. These individuals were supported by the community because their fearsome reputations provided increased security from attack” (p. 32)

Nevertheless, the main emphasis was on generating conflicts, and the using surpluses to manage the conflicts and acquire power through such efforts:

Of importance for the present discusion is the fact that transegalitarian warfare required both military and economic strength. It is as the organizer of the compensation payments, generally entailing subsequent exchanges, that ambitious individuals could acquire additional advantages for themselves. They could motivate community members in a positive fashion to produce and surrender surpluses rather than obtaining these through extortion and protection racketeering that was unstable at best…Typically, the amount of wealth deemed to equal the value of a human life for compensation payments was far more than normal individuals or families could amass…I feel that the appropriation of surplus for peacemaking was a key strategy of economically ambitious individuals.” (p. 34)

Corporate Kin Groups

What are corporations doing in traditional foraging societies? Typically, in traditional societies, key resources such as garden plots or water wells are not alienable property owned by solitary individuals to control as they see fit, but owned and managed by what anthropologists call corporate kin groups.

In our modern use of the term, a corporation is a legal entity allowing unrelated people come together to pool capital and labor for some sort of business purpose, such as the production of goods or services. As defined by anthropologists in traditional societies, however, “a corporation is composed of a plurality of individuals; the life of the corporation is independent of its individual members; and, membership is limited to individuals of certain qualification.” Corporations can either be economic, political or religious, or some combination of all three: (1)“economic,” material satisfaction of human needs; (2) “political,” the ordering of human relations; and (3)“religious,” relations with the supernatural. Membership in corporate groups is usually through kinship – relatives by blood, marriage or adoption, and you don’t ever get fired from these corporations:

A landowning group of kinsmen that is autonomous politically and maintains its own system of social controls is often called a “corporate kin group.” Such a group exists in perpetuity, and serves as a ceremonial group and a primary or face-to-face group, in which each individual is responsible to and for other members and they are responsible to and for him…Kin groups are based on ties of blood or marriage. Groups in which all the members claim descent from a common ancestor are called “descent groups,” and one of the most important of such groups is the “lineage”–a descent group in which the members can actually demonstrate (and not merely assume) their relationship…Several lineages whose members claim (but cannot necessarily demonstrate) common descent are generally referred to collectively as a “clan.”

The groups that people develop are among the instruments by which they make use of energy potentials in their habitat. Thus, it is neither necessary nor possible for hunter-gatherers to form corporate kin groups because their relationship with the habitat involves little investment of energy in land and because their groups must split up recurrently. But horticulturalists plant seeds and must wait for crops to grow and to be harvested, and because of these different relationships with the land and with other resources, they develop different kinds of groups, more suitable for coping with their habitat.

Consider a lineage, for instance. This is a corporate kin group designed to deal with the allocation of land and other resources, to maintain legal and social control, to engage in short-term political relations with other groups, and to undertake religious and ceremonial activities. Hunter-gatherers do not face the horticultural problem of allocating land and other resources; hence, lineage organization is never found among the former but is widespread among the latter in one form or another.(MIA: 27)

Gaining control over such corporate kin groups is another method of gaining power used by aggrandizers, according to Hayden.

Since the ability to produce consistent surpluses is quite low, there are too few resources to be used by Depots to generate indebtedness. Instead, feasting is used to ensure social solidarity, make peace, and generate alliances. It is also used as an opportunity for Despots to prominently display rare and valuable artifacts that they have in their possession and thus increase their status and prestigein the eyes of the rest of the tribe:

“The ostensible reason for holding these feasts and dances from the community’s point of view was to attract and consolidate labor in the form of productive workers in the community, good mates, and good military allies–all essential for survival in the Despot community environment. Large communities were critical for success in warfare…from the Despot’s point of view…The important element was …marshaling community or kinship labor…used … to acquire prestige goods used for display in dancing or rituals, all of which Despots could manipulate much in the same fashion as they manipulated death compensation payments…”

“Critical to displaying wealth and success was the ability of the host or hosts to procure, display, and give away difficult to obtain or specialized labor-intensive items. Obtaining such objects via regional trade networks and/or by supporting local craft specialists therefore eventually became absolutely essential features of reciprocal and competitive feasting in most cases…The obligations and bonds incurred at feasts could be strengthened even further by carrying them out in ritual or sacred contexts. This is undoubtedly one reason why ritual performances are integral parts of almost all transegalitarian feasts.”

2. Reciprocator (Leadership) Societies

These are societies which can produce much greater surpluses than Despot Societies can. In these societies economic competition between aggrandizers begins in earnest. They represent an intermediate stage between Depot societies and true Big Men societies:

“The distinguishing characteristics of Leaders…are that the communities are openly nonegalitarian, that Leaders compete openly with each other within their communities, there is more emphasis on their organizing and financial role (combined with their ongoing role as warrior leaders) although still nominally for the benefit of the group, and that they initiate exchange with ex-enemies for their own benefit. Leaders are also described as being wealthier, having more wives, having larger social networks and followers, and as participating in many marriage exchanges…they are clearly an evolutionary step toward the Big Man Entrepreneurs, and differ only in degree.”

In these societies, additional means are used besides warfare to enhance the standing and prestige of aggrandizers, the major ones being bridewealth and child growth payments.

Bridewealth is wealth that must be given to the family of a bride by a suitor before a marriage can be contracted. It is an outgrowth of bride service, where the groom is expected to perform services for the brides’ family for a species period of time (bride service is found in the story of Jacob and Rachel/Leah in the Bible). In Reciprocator communities, bridewealth becomes a major avenue of acquiring wealth and power for Reciprocators. In such societies, more wealth = more (and better) wives:

“Communities without Big Men (i.e. Despot or Reciprocator communities) often give wives or pigs to allies that have sustained battle losses on their behalf…and that substitution of wealth for human lives is fairly common in societies without Big Men. By extending this principle to marriage, that is, by transforming the egalitarian ethic of exchanging a woman for a woman into the transegalitarian ethic of exchanging wealth for a woman, Reciprocators could achieve several self-serving goals:

(1) Bridewealth enables Reciprocators with economic advantages to obtain more desirable (generally more productive) wives by simply paying more than other men in the community. Bridewealth may easily have begun as a supplemental payment to bride service or other more egalitarian wife exchange arrangements.

(2)The substitution of wealth for wives enabled wealth Reciprocators to obtain more wives than they might otherwise be able to acquire, thereby acquiring more productive labor to increase their economic advantages.

(3) Bridewealth was an extremely powerful and effective mechanism for creating and enhancing wealth an power inequalities between families in the same community.

(4) Bridewealth could eventually obligate everyone who wished to marry to produce substantial amounts of surplus as well as going into debt.

(5) Bridewealth payments exceeded the net worth of most junior members of the community, thus placing junior men who wished to marry firmly under the control of, and in contractual debt to, aggrandizers with wealth. Men that wanted to marry had to attach themselves to corporate kinship groups or unrelated aggrandizers. Marriage  could thus become largely a contract (and alliance) between corporate kin groups.

(6) Bridewealth payments, like death compensation payments, could be promoted by aggrandizers as “loans” of wealth rather than payments (or a combination of the two). Reciprocators from different corporate groups could agree between themselves to reciprocally pay back these loans in a neverending cycle of exchange that not only could be portrayed to the community as solidifying relations between the groups (and ensuring the flow of mates for the future), but would also continually create a demand for the production of surpluses and of debts both between groups and within groups.” (FOI: pp. 42-43)

Maturation events were used as a means to increase the future marriage value of children. The additional investments in wealth and training only available to certain elite members of the community contributed to establishing a ranked society of elites and commoners. In such cultures, initiation ceremonies became much more complex and elaborate, and required much more costly expenses and specialized training. Think of these as a sort of primitive bar mitzvah.

“Child growth payments are simply the logical extension of bridewealth where surpluses are abundant enough to warrant still higher marriage payments…By investing wealth in children at specified life events (birth, namings, first menstruation, initiations, tattoos, piercings) and in costly training for specific roles, the parents (or corporate group) successively raises a child’s value, especially as a marriage partner. Anyone wishing to marry such a child would therefore have to provide a marriage payment (and/or funeral payment) comparable to or exceeding the amount invested in the child in order to compensate the investing group for the loss of their investments in an explicitly valued corporate member…Clearly advantageous for aggrandizers, such practices would increase the volume of exchange, stimulate expropriatable wealth production even further, and create larger, more binding debts between groups as well as within groups…This investment of labor and resources in children for exchange purposes is not fundamentally different from the investment of labor and resources in the raising and fattening of pigs or cattle for exchange.” (FOI: pp. 44-45)

In Reciprocator societies, feasts are given, and wealth is given away, but the expectation of repayment with interest by the receivers of gifts is still limited. It is encouraged, but not absolutely mandatory. This is probably because the surpluses were not yet abundant enough for people to feel confident in their ability to repay loans, so to get them to agree to accept gifts, exchanges are still considered mostly reciprocal rather than debt-based:

“It is at the Reciprocator level that individual household economic production and exchange becomes the lynchpin for acquiring wealth and power. Like contemporary small capitalists starting businesses, Reciprocators work especially hard to amass the capital necessary to begin the somewhat risky investment cycle and to enhance their subsequent relative position…Leading Reciprocators vigorously promoted a strong work ethic among all their community coresidents to pay off debts. It is also at the Reciprocator level that the manipulation of ideology to consolidate positions of power can first be discerned…for example, success at gardening and especially in producing large yams was largely attributed to the personal magical abilities of the male gardeners…”

3. Entreprenuerial Societies

These are the most productive areas with the highest capacity for regular surpluses, the richest resource base, the densest populations, and the greatest overall abundance. Many places have a significant food resource, such as salmon or tubers such as yams or taro, where they derive most of their calories. In addition to all of the tactics and strategies above, feasts are now used to generate much more formalized contractual debt obligations in which interest payments are now expected and demanded. Economic competition is ratcheted up to a prodigious level due to the richness of the tribe’s natural environment.

“Besides the intensive food production efforts of the immediate family, loans and investments become the major avenue to wealth, success, and power. Entrepreneurs therefore use all previous pretexts for establishing exchange relationships (especially death compensation and marriage payments), they initiate more individual exchange relationships, they organize larger and more elaborate feasts of many types with blatant competition between participating corporate groups and individuals, and they invest considerable amounts of wealth in child growth payments.” (FOI: pp. 51-52)

A key point is that authority is created by this achievement in overproduction, rather than invested in an inherited leadership role. Also the power of the Entrepreneur is not rooted in coercive power, but rather through social prestige. Anthropologists generally describe this as the difference between achieved status and ascribed status. Achieved status is where prestige is attained by personal efforts during one’s own lifetime, such as being a fearless warrior or skilled hunter. Such societies are described by anthropologists as “achievement-based.” Ascribed status is one where one’s status and role are determined at birth, regardless of individual achievement.

Michael Dietler describes the nature of the Entrepreneurial feast:

[Entrepreneurial feasting] involves the competitive manipulation of commensal hospitality toward the acquisition of “symbolic capital” which translates into informal political power and economic advantage. By informal political power I mean what is often called “prestige,” or…”free-floating power.” That is an ability to influence group decisions or actions which derives not from authority vested in a particular formalized status or role, but rather from the relations created and reproduced in the process of personal interaction. In this case, those are multiple relations of reciprocal obligation and sentiments of social superiority/subordination between hosts and guests, created through generous displays of hospitality…(p. 92)

This type of feasting has been described by various anthropologists in many contests ranging from Melanesia to Central America to Asia to Africa. In societies with an egalitarian political ethos, the self-interested manipulative nature of the process may be concealed or euphamized by the fact that it is carried out through the socially valued and integrated institution of generous hospitality, and it may even be perceived as a leveling device. However, this apparent leveling is merely the conversion of economic capital into “symbolic capital”. Feasts may be used as a form of…”indebtedness engineering” every bit as much as the prestation of valuables. This is quite clear in the cases where feasting is recognized by participants to be openly aggressive, but is equally operative in cases where competitive manipulation is subtly euphamized. (p. 93)

Hayden describes the proto-capitalistic behavior of these so-called Big Men Entrepreneurs:

“At the Entrepreurial level, aggrandizers had “capitalist” characteristics. Entrepreneurs had a great deal of wealth and many wives and engaged in a great deal of transactional, investment and administrative work. They sought wives and children that were hardworking and productive. Entrepreneurs tended to establish crafted prestige goods (through their regional connections to other entrepreneurs or their control over high-labor investments) to further increase their control over the finance system (e.g. the control of the coastal shell trade necessary for marriage in Highland New Guinea or the dentalium shells necessary for marriage among many groups of the Northwest)…this control over important prestige items may have been critical in the emergence of chiefdoms…In addition to controlling exchange, wherever possible, aggrandizers attempted to extend their control over basic subsistence resources to the point of even charging fees for passage through owned territories.”

“In addition to death compensation payments and competitive feasts, marriage became a primary sphere of exchange and for acquiring wealth. Not only were child growth payments elaborate, but children of elite families underwent prolonged and costly training for various roles: elite wives, political leaders, warriors, hunters, runners, ritualists. In some cases, menstrual seclusion or boys’ initiatory vision quests could be very costly and last many years. The apparent motive behind this functionally unnecessary and costly elaboration of training was to increase the value of children in terms of marriage payments and subsequent exchanges. Thus, bridewealth increased considerably in Entrepreneur communities, and affinal relationships were sought for their economic value while establishing a biological family was often of only secondary importance…”(FOI: pp. 57-58)

In these societies, warfare was no longer in the interest of Entrepreneurs, so it waned. Warfare actually got in the way of wealth acquisition and reciprocal feasting. Instead, trade networks expanded, under the control of the Entrepreneurs, who used them to acquire prestige and promotional technologies. These goods were used to burnish their own importance, and to attract supporters and followers. For example,the Kula Ring trade was a trade of prestige items (armbands and necklaces) between Trobriand Island chiefs, (and only chiefs), and a way of enhancing their power and prestige. Wealth leading to declining warfare is actually not a new, but a very old concept. The lure of profit was another new way in which Entrepreneurial Big Man attracted sycophants and supporters who were willing to work hard to increase the surpluses that they controlled. Hayden describes two major changes between Reciprocator and Entrepreneurial societies:

1. The first change involves the use of profit as a means of attracting supporters. The greater the return for profit that Entrepreneurs could offer their supporters for contributions to competitive feasts, the stronger would be the motivation of supporters to produce surpluses and to permit Entrepreneurs to influence the use of the surpluses. This would also indirectly increase the total contractual debt in the community. . .

2. The second major change from Reciprocator to Entrepreneur systems was in the importance of warfare. While warfare was still important and was avowedly manipulated by Entrepreneurs for their own economic interests, warfare could also be viewed as interfering with profitable exchange…The New Guinea ethnographers …suggest that it was more difficult to gather large numbers of warriors together for raids in Entrepreneur communities because increasing numbers of people viewed fighting as being contrary to their own marital and exchange interests. (p. 53)

It should be pointed out here that some anthropologists argue that warfare was the chief means of generating prestige in transegalitarian societies, and feasting only came to prominence after warfare was suppressed by formal states and colonial authorities in countries like New Guinea, Melanesia, and the Northwest coast of the United States.

Attracting the best possible labor was a major task of potential Entrepreneurs; only by surrounding themselves with fellow workaholics could the Entrepreneurial Big Man hope to produce the surpluses necessary to build his empire. Hayden quotes the remark of a Northwest Coast Big Man to a visiting anthropologist: “If his ‘tenants’ are good…then…he can do much (i.e. potlatching). If they are not good…he can do nothing.” Attracting and retaining the best labor thus became a major factor in the Entreprenuer’s success, or lack thereof, which is why prestige and promotional technologies become so important, leading to wider trade networks and more elaborate goods. In fact, Entrepreneurs often retained specialized craftsmen just to produce prestige and promotional technologies in order to attract desirable labor to their villages and steal them away from their rivals:

“Another important feature of transegalitarian communities [is] the central importance of attracting energetic, productive, competent, skilled, and successful labor.  It is upon the ability to attract such labor that the success of the aggrandizers, as well as their supporting or corporate groups, depends…Many ethnographies stress the strong, almost Puritan work ethic promoted by aggrandizers at all levels of transegalitarian communities and the work-oriented values sought by aggrandizers in recruiting supporters and tenants. (p. 66)…the expenditure of surpluses or profits for conspicuous displays of wealth …constituted essential advertising and self-promotion to indicate which groups were the most successful, the most wealthy, the most powerful, thereby enabling them to attract the best labor. Many types of artifacts and features were created with no apparent purpose other than to advertise success. (p. 67)

“While practical technologies served to produce food or solve material requirements of life, and while prestige technologies had inherent value that could be traded or invested, “promotional” technologies …could not be used in a practical sense, nor could they be exchanged as valuables. Promotional (advertising) technologies included objects specifically made for grave offerings or ritual offerings (and never used in other contexts), many luxury feasting foods, monumental ancestral poles, megalithic tombs and burial mounds. Obviously prestige objects sometimes were also used as promotional objects, especially when they were destroyed…”

Max Weber claimed that Protestantism led to the austere work ethic and self-denial necessary to produce capitalism, but it turns out that such attitudes extend all the way back to the Stone Age.

Three fundamental changes take place in societies at the Entrepreneurial level that set the stage for the transition to the next level in social complexity–chiefdoms. One, the leaders now begin to regularly claim to have some sort of supernatural power or esoteric knowledge; that is, they begin to manipulate the religious belief systems of the tribe as a method of legitimizing their own authority. The second change is that leadership roles increasingly begin to be passed down to the Entrepreneur’s descendants, although still not through any formalized institutions. There is no heredity “office” of Big Man, yet most Big Men strongly encouraged their sons to follow in their footsteps, much like ambitious Entrepreneurs do today. And third, Entrepreneurs use their influence and authority to command massive labor pools to build much more elaborate feasting facilities and ritual structures with which to enhance their image and emphasize their special connection with the ancestors or gods (as exemplified by structures such as Göbekli Tepe and Stonehenge).

“Beginning in Reciprocator communities, supernatural claims to power constitute one strategy that aggrandizers in most areas of the world attempted to use in order to bolster their influence and power. Supernatural claims could…be used as important validation or legitimization for Reciprocator, Entrepreneur and chiefly privileges…aggrandizers…promoted death cults for their ancestors who were portrayed as supernaturally powerful (often involving the reverence of preserved heads or bodies)…In all transegalitarian societies, aggrandizers have probably attempted to promote and manipulate belief in their own supernatural powers and in the powers and in the power of their ancestors for their own benefit. But it is only as the economic power of aggrandizers increases that they can convince other community members to accept these claims, and can appropriate more overtly the prerogative of being the primary communicator with, and spokesman for the will of, powerful ancestors or other spirits.”

“Aggrandizers therefore frequently devised the construction of ancestral “ritual” structures, including burial grounds and shrines that made manifest the power and importance of their ancestors…Such structures included death cult structures; men’s houses used by the Entrepreneur and his ceremonial support group as residences, sacrificial huts, feasting and cooking shelters; wealth display huts; ceremonial grounds; and “temples.” (p. 56)

“Finally, there is some tendency for roles to be inherited even in Despot communities, the tendency is stronger in Reciprocator communities, and much stronger in Entrepreneurial communities. About 75% of New Guinea Entrepreneur Big Men had fathers that were also Big Men…”

In addition to feasting facilities, Entrepreneurs also begin to construct “men clubhouses” where they and their allies can segregate themselves from the rest of society, and where invitation is by “members only.” Gaining access to the clubhouse thus becomes another motivating factor for supporting a Big Man and economic overproduction. Entrepreneurial Big Men set themselves apart from the rest of society by claiming some sort of esoteric knowledge that only they possess such as an ability to communicate with distant ancestors or the ability to intercede with the gods on behalf of the tribe. They often liked to depict their success as being due to supernatural forces, and depicted themselves as  “rainmakers” (which in some cases, they literally claimed to be!) The importance of elites setting themselves apart from the herd is evident even today with our exclusive resorts, gated communities, members-only golf clubs, downtown athletic clubs patronized by wealthy business elites, invitation-only black tie events, and executive washrooms, just to name a few.

4. Chiefdoms

Chiefdoms were a very common political arrangement before the rise of states. Chiefs were now hereditary offices, passed down from father to son (or within a ruling family). Per Wikipedia, “A chiefdom is a form of hierarchical political organization …usually based on kinship… in which formal leadership is monopolized by the legitimate senior members of select families or ‘houses’. These elites form a political-ideological aristocracy relative to the general group…chiefs lead because of their ascribed status, not their achieved status.”

Hayden ascribes the following four characteristics that distinguish chiefdoms from Entrepreneurial societies:

“First, chiefdoms occur in environments that lend themselves to even greater surplus production and intensification than Entrepreneur communities, often involving intensive agricultural practices and irrigation.” (FOI: p. 63)

“Second …Entrepreneurs could …invest so much wealth in the growth payments for their children that only families of other chiefs (or elites) could provide the requisite bridewealth. Even at the Entrepreneur level, the tendency for children of Entrepreneurs to marry the children of other Entrepreneurs is pronounced…This practice would have excluded a large number of people from being able to compete with the chief for the ultimate control of the debt system, resulting in an almost closed class system in which strict heredity of resources, wealth, and power became established. Thus, the hereditary aspect of chiefdom may be incidental and not central to the emergence or functioning of chiefdoms…” (FOI: pp. 63-64)

Third, because of this development, profit-based Entrepreneur competitive feasts (used primarily by the general populace as a means to select aggrandizers or corporate groups for support when succession was not fixed) were emptied of their function and disappeared…ostentatious material displays became most pronounced when there was uncertainty in reckoning relative status…Nevertheless, the chief is still expected to “give” considerable quantities of goods to community members and especially to other elites…However, power and support no longer appear to be predicated on providing direct investment profits to supporters in return for their feast contributions. Rather, benefits to contributors seem to be of a more indirect nature. (p. 64)

A fourth observation… is the extension, intensification, and elaboration of the importance and use of ancestors to validate claims to power. Chiefs become the direct descendants of the most powerful ancestors and the main priests of the ancestral cult. Communities are organized into real and fictitious lines of descendants from founding ancestors (clans). Chiefs, like transegalitarian corporate heads, erect monumental ritual structures to promote their ancestors as powerful supernatural agents. (p. 64)

That last point becomes especially important in a book by anthropologists Kent Flannery and Joyce Marcus called The Creation of Inequality, which surveys anthropological literature from all over the world to determine the prehistoric origins of hereditary inequality. Flannery and Marcus point out that heredity inequality is a product of manipulation of the social logic of any society in order to justify hereditary claims on leadership. They also argue that such a change in the social logic is indicated archaeologically by the  construction of temples to replace men’s clubhouses, indicating that one particular lineage or clan has achieved primacy over all the others, signifying that it alone has a special and unique  relationship with the tribal deities:

“We…take note of a change that accompanied the rise of many rank societies: men’s houses were replaced by temples. This change reflects an important social and political transition. Men’s houses were built by clans or Big Men and tended to be places where men sat around communing with their ancestors. Temples tended to be places where actual deities lived on a full-time or part-time basis. Temples were staffed not by initiated clansmen but by people trained as priests. Often the construction of a temple was directed by the chief because, after all, there were supernatural spirits in his ancestry.” (COE: 210)

Flannery and Marcus dismiss feasting as a source of hierarchical power. They write:

[some archaeologists]…have argued…that hereditary inequality was generated by competitive feasting. There are several problems with this oversimplification. As we have seen…competitive feasting in achievement-based societies usually escalated only after warfare had ceased to be a path to prominence. Instead of creating hereditary rank, it produced individual Big Men who had no way of bequeathing renown to their offspring…if feasting were all it took to produce hereditary inequality, there would have been no achievement-based societies left for anthropologists to study (COE: 199)

I think they misunderstand the feasting theory, however. The feasting theory does not argue that every society that practices competitive feasting will end up with hereditary inequality. As Hayden indicates above, whether or not that happens depends on a constellation of other factors such as the amount and nature of the surplus, how easily it is controlled and appropriated, the nature of the labor it takes in order to produce it (cooperative versus individual households), the population density, the presence or absence of warfare, and the supernatural belief systems. Feasting in delayed-return societies begins the snowball of inequality, but whether that process ends with Big Men, Chiefs or Kings varies by location, culture and time period.

Flannery and Marcus argue that hereditary inequality begins when one segment of society actively manipulates the social logic of the society in order to set themselves up as superior. Often times this was accomplished by an appeal to supernatural forces. This is why the segment of society that sets itself above the rest builds temples: such sacred structures demonstrate their claim on a connection to divine authority as the justification for their favored status vis a vis the rest of the society.

They use the example of the Kachin, a Burmesese hill tribe who have both ranked and non-ranked societies, studied by Edmund Leach in the 1940’s. In the ranked societies, one lineage convinces all the others that is descended from the spirits (nats) who control the village, and therefore, it has a right to rule over the village. They note that a ruling class often recounts a special claim to descent from a either favored elder ancestor or higher-level spirit. For example:

Anthropologist Jonathan Friedman’s scenario begins with a [Kachin] society whose lineages are equal in rank…Each local lineage has its own set of ancestor spirits, arranged in short genealogies of three or four generations. There is also a village nat (spirit) whose domain is the local territory. On a higher plane than earth lie the earth nats and sky spirits which, in the egalitarian mode of Kachin society, can receive sacrifices from any lineage through the intervention of ancestral spirits….the creation of hereditary rank takes place when one lineage convinces all the others that the village nat is its ancestor. That move converts one Kachin social unit into a chiefly lineage, descended from the nat who rules the whole territory. At this point the Kachin revise the cosmology to allege that their most highly ranked lineage is descended from Madai, while their lower-ranking lineages are descended from the lesser nat Thunder. (COE: 198)

[…]

In Kachin society the lineages that worked the hardest and produced the greatest surplus could sponsor the most prestigious sacrifices and feed the most visitors. Their fellow Kachin, however, did not attribute such success to hard work; they believed that one only obtained good harvests through proper sacrifices to the nats. Wealth was seen not so much as the product of labor (and control over other’s labor) as the result of pleasing the appropriate celestial spirits. The key shift in social logic was therefore from “They must have pleased the nats” to “They must be descended from higher nats than we are.” (COE: 199)

Another key insight is that leaders achieved power not by becoming the “alpha” of a particular group, but rather no leader could ever rise higher than a “gamma” in any particular society. They note that Chimpanzees naturally set themselves in a natural hierarchy of alphas, betas, and gammas. In hierarchical human societies, however, the alphas were always the gods (or God), the betas were the ancestors or ancestral spirits, and the leaders were merely the “gammas,” the “bottom” tier of the supernatural hierarchy. By invoking this logic they were able to convince others of their claims on power. In many of their anthropological descriptions, a ruling lineage or clan typically claims descent from a first-born ancestor (or last-born in societies where the youngest inherits property), and thus they “inherit” the leadership claims of that society. The leaders of these clans serve as paramount chiefs, with “lower-ranked” clans serving as lesser chiefs and subchiefs, all determined by the lineages of long-departed ancestors.  No doubt this became more common as societies became larger and more complex, and more heirachical leadership was called for. Why not look to the ancestors for justification?

Interestingly, Flannery and Marcus also raise the possibility of debt dynamics giving rise to ranked societies:

There is a third scenario for the establishment of rank society among Tibeto-Burman speakers…Its premises are to be found in Leach’s description of Kachin marriage and the mayudama system.

In the 1940s a moderately well-to-do Kachin groom might have to give his bride’s lineage four head of cattle, plus valuables such as slit-gongs, swords and spears, coats and blankets, and pottery vessels. In many cases the haggling over bride-price went on for a long time, with negotiators using tally sticks to represent cattle and valuables.

Often a groom had to go into debt to pay for a bride. This was as true for wealthy grooms as for ordinary grooms, since bride-price was set higher for the former. One of the contradictions of Kachin logic was that bride-price was supposed to reflect the prominence of the bride’s family, while in practice it reflected what the bride’s family believed the groom could pay. A prominent groom could thus go even further into debt than a man of modest means. It is no accident that the Kachin word hka meant both “debt” and “feud.” Although debts might be left unpaid for long periods, thereby allowing social relations to continue, failure to pay could eventually have repercussions.

In Charles Dickens’s England there were debtors’ prisons for those who failed to repay their creditors. The Kachin punishment was just as grim: debt slavery. Many Kachin, unable to pay their loans, had to sell themselves into bondage to work off such debts. Leach estimates that in days of old, up to 50 percent of the Kachin may have been mayam, or slaves, nearly all owned by the chiefs or village headmen who extended the loans. A rule …held a debtor’s whole lineage accountable for his failure to pay. This swelled the ranks of the mayam.

Slaves in societies such as the Kachin, to be sure, do not fit our stereotype of chattel slavery in the pre-1860 United States. Mayam status was more like that of an illegitimate child, or a poor son-in-law working off his bride service. Debt slaves were considered Kachins, but of a particularly low lineage. Some eventually worked off their debts or married into nonslave lineages.

We consider debt slavery a third scenario that might have brought about the inequality of lineages, both among the Kachin and (as we saw earlier) the Native Americans of the Pacific Northwest….(COE: 199-200)

An even more grim depiction is provided by David Graeber in Debt: The First 5000 Years:

…One extreme possibility might be the situation of the French anthropologist Jean-Claude Galey encountered in a region of the eastern Himalayas, where as recently as the 1970s, the low-ranking castes–they were referred to as “the vanquished ones,” since they were thought to be descended from a population once conquered by the current landlord caste many centuries before–lived in a situation of permanent debt dependency. Landless and penniless, they were obliged to solicit loans form the landlords simply to find a way to eat–not for the money since the sums were paltry, but because poor debtors were expected to pay back the interest in the form of work, which meant they were at least provided with food and shelter while they cleaned out their creditors’ outhouses and reroofed their sheds.

For the “vanquished”–as for most people in the world, actually–the most significant life expenses were weddings and funerals. There required a good deal of money, which always had to be borrowed. In such cases it was common practice, Galey explains, for high-caste moneylenders to demand one of the borrower’s daughters as security. Often, when a poor man had to borrow money for his daughters marriage, the security would be the bride herself. She would be expected to report to the lender’s household after her wedding night, spend a few months there as his concubine, and then, once he grew bored, be sent off to some nearly timber camp, where she would have to spend the next year or two as a prostitute working off her father’s debt. Once it was paid off, she’d return to he husband and begin married life.(DF5KY: 9)

Another argument for hereditary inequity is simply this: why not choose leaders via heredity? How else to do it? Heredity inheritance prevents squabbles over leadership succession and ensures an orderly transition. We have notions of “meritocracy” and “fairness” ingrained in us by Western Liberal Democracy, but ancient people did not have such conceptions, by-and-large (Greek city-states were highly unique even in the ancient world). Thus, choosing leaders by descent is not so illogical as we might think at first, as this review of The Creation of Inequality points out:

…Students in my global history class at Notre Dame struggle to understand societies that esteem birth more highly than wealth and that rate breeding above achievement. Yet such values are normal—or have been for thousands of years—because, despite the unwillingness of Americans to acknowledge it, heredity is a rational, practical, scientifically grounded basis for selecting leaders.

Societies that adopt the hereditary principle do so because it is consistent with common observations: Leadership qualities often run in families and, as we now suppose, can be encoded in heritable genes. By limiting contenders for power, heredity makes violent disputes less frequent than in societies run by competing alpha males. Inherited authority discourages corruption and reduces factionalism and partisanship. There is, on balance, less chance of tyranny than under the rule of toughs or visionaries. As with every system, there are disadvantages: Some leaders are bound to be incapacitated by incompetence, sickness or insanity; dynasties become extinct. In the U.S., however, the advantages of a hereditary system elude most people’s attention, perhaps because Americans are so used to seeing themselves as models for the world. “Why can’t others be more like us?” is the implicit question. The often unnoticed answer is: “Why should they be?”

We see in societies that allow unlimited jockeying for power by elites, society is torn apart and riven by civil strife and conflict. A classic case is the late Roman Empire (as well as the late Republic), where constant internal divisions and civil wars tore the empire apart and contributed to its downfall. Although Greek cities sometimes chose their leaders by ballots from the polis, on a larger scale this was difficult given the resources limitations in the ancient world. Hereditary leadership – essentially running the entire proto-state as the “household” of the ruling family, had a certain logic to it.

I would also point to the distinction between de facto hereditary leadership, and de jure hereditary leadership. I suspect the former was present for thousands of years before gradually evolving into the latter by osmosis. For example, in the United States, most contenders for higher office come from a closed circle of elite dynastic families (Bushes, Clintons, Kennedys, etc.), and as inequality becomes more and more pronounced, that circle grows ever tighter. George W. Bush managed to become president despite almost total incompetence even in our “merit-based” democracy. Another Bush son ran for office this year against the wife of a former president, but was upset by the scion of another wealthy elite family who is clearly intent on setting up a dynasty of his own (much of his transition team is comprised of close family members). People are encouraging the wife of the current president to run for elected office. The current prime minister of Canada is the son of a former prime minister. And in Russia, Vladimir Putin has established essentially permanent rule despite the formal existence of elections and democracy.

My guess is that the Iron Law of Oligarchy kicks in over time and limits leadership to a small circle or hereditary elites in any complex society over a few thousand people, regardless of what the nominal system of government happens to be. Eventually, one individual or family wins out over all the others. But such leaders have always been mostly symbolic; in a complex society, no one individual has any hope at all of controlling all the parts and pieces. The difference is, post-Enlightenment societies have to pretend that it is otherwise in order to maintain a veneer of legitimacy.

5. Archaeological Indicators

Hayden considers what sort of archaeological evidence would help determine where along this spectrum a past society would have fallen. Some of the archaeological indicators he cites are:

1.) A Despot society would show evidence of lots of warfare; therefore skeletons showing signs of wounding and violent death would be common.

2.) Beginning with Reciprocator societies, much wealth was expended in marriages and child maturation events. Thus, we would expect to see much more lavish burials of women and children, with rare and luxury grave gods advertising their higher status than commoners.

3.) Obviously, as certain people became more important in their respective societies, we would expect to see either much more elaborate and lavish burials of these individuals, or such individuals and families buried separately from the “commoners,” often in different burial grounds. More elaborate grave goods and personal adornment (jewelry, etc,) would be found in such elite graves. Mummification indicates the sacred status of certain elites.

4.) The need for prestige and promotional goods for Entrepreneurs to display their wealth and status and attract supporters from other villages would lead to greatly expanded regional trading networks. Increasingly, “luxury” goods which were much finer and of higher quality than those used by commoners would be found in such societies. Goods used especially for feasting such as elaborate storage and drinking vessels would be expected to be found. Elites begin to support full-time specialized craftsmen and establish trading networks among themselves over wide geographical areas.

5.) Houses of leaders would be expected to be much larger and more elaborate than those of the average person.

6.) Ritual structures not used for everyday purposes like habitation or food storage would be found in societies where Entrepreneurs emphasized their connection to the ancestors and manipulated religious beliefs for their own benefit. Feasting centers, men’s clubhouses, ritual centers, sacrificial altars and eventually primitive temples would be found in the remains of Entrepreneur settlements, indicating greater and greater degrees of hierarchy.

“In brief, emphasis on death compensations and the management of warfare should be reflected in fortifications, armor, violent deaths, parry fractures, and settlement patterns. Emphasis on the control of brideprice payments can lead to the formation of residential corporate groups in extreme cases, possible female-oriented cults and figurines, and richly endowed adult female burials in cultures where wealth is buried with the dead. Use of child growth payments can generally be expected to lead to rich child burials in cultures where wealth is interred with the dead. Use of surpluses to obtain political power and some control of others’ products will involve the development of prestige technologies. Reliance on reciprocal and competitive feasts can result in the development of prestige food vessels, initial forms of public architecture, regional trade, and domesticated feasting foods. Investment strategies with interest payments can be expected to lead to wider regional trade networks, higher volumes of of prestige goods, increased craft specialization, and, frequently, systems of numeration in physical form. Finally, the auxiliary emphasis on ancestral power to justify claims to supernatural abilities should affect burial practices, evidence for cults (e.g. the keeping of skulls), and the occurrence of special burial or cult structures.” (p. 76)

Feasting also gives us a very good explanation about how we eventually stumbled into agriculture as a way of life. The need to produce greater and greater surpluses to repay the requisite interest to Entrepreneurs and to throw increasingly elaborate feasts as a means to acquire power and prestige led to ever more intensification, which eventually resulted in domestication proper. That’s what we’ll be considering next time.

FSI: Foundations of Social Inequality. edited by T. Douglas Price, Gary M. Feinman

MIA: Man in Adaptation: The Institutional Framework. Yehudi Cohen, editor.

COE: The Creation of Inequality: How Our Prehistoric Ancestors Set the Stage for Monarchy, Slavery, and Empire. Kent Flannery and Joyce Marcus

DF5KY: Debt, The First 5000 Years. David Graeber.

I spent some time recently listening to the Powell Memorandum, courteously read aloud by the Attack Ads podcast: http://attackads.libsyn.com/the-powell-memo

If you have some time to kill and a strong stomach, it’s a fascinating document to listen to all the way through.

The Powell memorandum struck a paranoid tone that the “free enterprise” system was a under merciless and sustained assault centered mainly on collage campuses. I had not realized the extent to which the Powell Memorandum specifically focuses the spotlight on America’s higher education system as the prime source of discontent. If you take the memorandum’s argument seriously, Americas universities were virtual leftist madrassahs inculcating revolutionary fervor in America’s youth and doing it on corporate America’s dime. According to Powell, Communist firebrands were barnstorming the country brainwashing America’s youth to overthrow the free enterprise system and inculcating contempt for its core institutions. College campuses were nothing less than an injection system for radical ideas into the body politic, funded by corporate America itself, and they needed to be stopped, or else the free enterprise system was doomed!:

“Yale, like every other major college, is graduating scores of bright young men who are practitioners of ‘the politics of despair.’ These young men despise the American political and economic system . . . (their) minds seem to be wholly closed. They live, not by rational discussion, but by mindless slogans.” A recent poll of students on 12 representative campuses reported that: “Almost half the students favored socialization of basic U.S. industries.”

A visiting professor from England at Rockford College gave a series of lectures entitled “The Ideological War Against Western Society,” in which he documents the extent to which members of the intellectual community are waging ideological warfare against the enterprise system and the values of western society. In a foreword to these lectures, famed Dr. Milton Friedman of Chicago warned: “It (is) crystal clear that the foundations of our free society are under wide-ranging and powerful attack — not by Communist or any other conspiracy but by misguided individuals parroting one another and unwittingly serving ends they would never intentionally promote.”

Powell makes corporate America out to be like a cuckolded husband, underwriting the very people who sought to destroy it. In other words, corporations were funding their own demise. Imagine if Star Wars’ rebel alliance were cashing checks signed by Darth Vader. He chides big business for being “apathetic” to the gathering storm developing on college campuses:

One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.The campuses from which much of the criticism emanates are supported by (i) tax funds generated largely from American business, and (ii) contributions from capital funds controlled or generated by American business. The boards of trustees of our universities overwhelmingly are composed of men and women who are leaders in the system.

The message was clear: education was a threat to big business. This led to the radical divestment of big business from education, part of the overall “revolt” against taxes which precipitated a dramatic shrinking of all of America’s public institutions (except military/security and corporate welfare) across the board.

In the public sector, which educates 80 percent of American students, state funding hit a peak in 1980 and has been falling ever since…[1] If states had continued to support public higher education at the rate they had in 1980, they would have invested at least an additional $500 billion in their university systems, according to an analysis by Reveal from The Center for Investigative Reporting.That’s an amount roughly equal to the outstanding student debt now held by those who enrolled in public colleges and universities.[2]

[1] http://www.nybooks.com/articles/2016/10/13/how-the-financing-of-colleges-may-lead-to-disaster/
[2] https://www.revealnews.org/article/who-got-rich-off-the-student-debt-crisis/

The Powell Memorandum is, of course, the impetus for the creation of all of the subsequent right-wing think-tanks (AEI, Cato, ALEC), propaganda news outlets (FOX, talk radio), foundations (Bradley, Heritage etc.), astroturf groups (Tea Party) and the like. But the extent to which all that was driven by what was happening on America’s college campuses in the late 1960’s and early 1970’s is often overlooked. What is also overlooked is why this led to America’s spectacularly expensive and wasteful education system.

***

One of the reasons there was so much protest in Universities was that almost anyone could go. College was not prohibitively expensive before 1980. Places like the University of California–whose Berkeley campus was synonymous with anti-war protests and leftist ideas–was practically free. It became an attractor to intellectual, independent youth from all over the country who came into contact with each other and could form a critical mass of opposition. The Vietnam War was a major driver of this. Colleges were safe havens from the draft.

It’s hard to believe today, given the apathy on collage campuses, but there was a very real concern in the days of Cold War paranoia that the intellectual ferment on campuses was an existential threat to capitalism itself. As Powell’s paranoia above indicates, corporate businessmen and right-wing politicians were genuinely scared and on the defensive.

Richard Nixon cannily realized that all the concern over bombing those poor brown people in Vietnam had nothing to do with selfless concern for others; what the students were really protesting was that their privileged white asses might be sent over to die in the jungle via the draft. In other words, they were protesting the draft and feigning concern for peace and justice and all that. So he got rid of the draft, and, just as he had predicted, the protests petered out and eventually ceased.

But then, how would America get troops for its military?

By divesting public support for education through taxes and replacing them with student loans—debt servitude—students would no longer be questioning the system, but instead be trying to get into the system as quickly as possible in order to pay off their huge debt burdens. Student loans were a way of “disciplining” students, so they wouldn’t have time to question the system, as Noam Chomsky points out:

“Students who acquire large debts putting themselves through school are unlikely to think about changing society, Chomsky suggested. “When you trap people in a system of debt they can’t afford the time to think.” Tuition fee increases are a “disciplinary technique,” and, by the time students graduate, they are not only loaded with debt, but have also internalized the “disciplinarian culture.” This makes them efficient components of the consumer economy.”

Mission accomplished.

It also served a second purpose. Because military service would fund higher education, it would drive students from poorer backgrounds to serve in America’ foreign wars. Originally, the G.I. Bill was to help returning World War Two veterans (which most college-age men were) fund a higher education so as to bring about a more educated and—the thinking went—more productive workforce. This was to compete with the Soviet threat (where everything was theoretically state-funded).

But what they had also done was accidentally stumble upon the perfect way to get plenty of recruits without having a draft and without any protest. As education costs soared into the stratosphere, more and more people would sign up “of their own free will” to get government money to pay the enormous costs burdens of that education. No reason to protest – there’s no draft. Students from affluent backgrounds didn’t have to worry, they could afford the higher education costs. And the military service option would make America’s wildly expensive college seem “just.” Can’t afford to pay? Just put on uniform and head overseas!

It was diabolically brilliant. Another mission accomplished.

Fast forward nearly forty years. Now students are told they must get a “valuable” degree that pays dividends. Anyone wasting time studying anything not “practical” has only themselves to blame. College is all about ROI (return on investment). Students are spending all their time studying, especially if they are from poorer backgrounds, to “compete” in the harsh job market upon graduation. Who has time for protests when you’re studying all day and working a job at night to get through college? Besides, a black mark on your rerecord will make you unemployable, a serious problem when you’ve got tens of thousands of dollars in debt hanging over your head before you even graduate.

The coup-de-grace of this movement is the push to completely eliminate liberal arts studies from college campuses, and make universities solely for the education of STEM topics (science, technology, engineering, math). Students in STEM courses are not a threat to the “private enterprise” system. No one in engineering or medical school is going to learn about alternative economic theory or America’s foreign policy, nor do they care. The protestors at Berkeley and elsewhere were probably not engineering/science majors after all.

Florida’s…governor, Rick Scott, wants more of the state’s youths to pick up college degrees… but only if the degrees are useful to corporations and don’t teach students to question social norms. “You know what? They need to get education in areas where they can get jobs,” Scott told a …radio host Monday morning. He continued:

“You know, we don’t need a lot more anthropologists in the state. It’s a great degree if people want to get it, but we don’t need them here. I want to spend our dollars giving people science, technology, engineering, math degrees. That’s what our kids need to focus all their time and attention on. Those type of degrees. So when they get out of school, they can get a job.”

He explained the strategy Monday in a separate interview with the Sarasota Herald-Tribune:

Scott said Monday that he hopes to shift more funding to science, technology, engineering and math departments, the so-called “STEM” disciplines. The big losers: Programs like psychology and anthropology and potentially schools like New College in Sarasota that emphasize a liberal arts curriculum.

“If I’m going to take money from a citizen to put into education then I’m going to take that money to create jobs,” Scott said. “So I want that money to go to degrees where people can get jobs in this state.”

“Is it a vital interest of the state to have more anthropologists? I don’t think so.”

Rick Scott to Liberal Arts Majors: Drop Dead (Mother Jones)

This was all part of the Neoliberal revolution on college campuses. As the Guardian summed up the situation, “Higher education is stuffed with overpaid administrators squeezing every ounce of efficiency out of lecturers and focusing on the ‘profitable’ areas of science, technology, engineering and maths. Are the humanities at risk of being wiped out?”

The emphasis on STEM degrees means that collage campuses will not be places where the system is questioned, just vocational schools were compliant corporate drones will be reliably churned out. After all, you probably won’t be questioning the system if you’re in engineering or nursing school. Economics education has been taken over by Neoliberal ideas and free-market fundamentalism–academics who even mention Marx (except as ridicule) are exiled. And rather than genuine protests, affluent students spent their time bickering over nonsense like “trigger alerts” and “safe words” and gender/sexual identity issues egged on by the corporate media echo chamber. The New Left was cleverly used to neuter the Old Left, supported by corporate America. Powell would be proud.

Republicans’ inherent hostility to higher education can be illustrated by a revealing anecdote. Wisconsin governor Scott Walker attempted to rewrite the “Wisconsin Idea”–a largely symbolic statement that guided the mission of University of Wisconsin system. Walker famously not only cut 300 million dollars of support for this formerly world-class institution (while simultaneously funding a new stadium for the Milwaukee Bucks), but also stealthy attempted to rewrite the Wisconsin Idea with new corporate-friendly language slipped into the bill:

In Section 1111 of Walker’s proposed budget legislation, Senate Bill 21, he strikes language specifying that the UW has a public service mission to “extend knowledge and its application beyond the boundaries of its campus” and to “serve and stimulate society.”

Walker adds “to meet the state’s workforce needs” as a core mission of the university.

Walker also strikes language ensuring that the mission of the UW is to extend “training and public service designed to educate people and improve the human condition,” as well as the language: “Basic to every purpose of the system is the search for truth.”

Scott Walker removes ‘Wisconsin Idea’ from UW’s mission in budget bill (updated) (The Capitol Times)

“Searching for truth” is the last thing these guys want. Neither do they care about “improving the human condition.” And they certainly don’t want people with the time or inclination to think for themselves.

A public outcry derailed his plans. But the story itself is telling. There is really no reason for messing with this statement besides pure ideology. What is that ideology? A hostility to free thinking and a desire for education to be nothing more than a handmaiden to serve big business. Wildly costly education serves that purpose nicely. Debt serfs don’t question.

Powell would surely approve.

In other words, cutting funding for higher education and student debt was all part of the plan since the 1970’s. Now you can see why “free education” is such a threat to the authoritarian structure of the United States. Corporate America spent decades putting down the insurrection on college campuses, and they surely don’t want to go thorough that again.

So, given their hostility to higher education, why do businesses universally require degrees for everything from CEO to janitor?

One reason is what we saw above – they want people to be struggling and in debt. Struggling people don’t have time to think or criticize; they’re too busy just trying to survive. They will be docile, compliant workers, because they are essentially indentured servants. Student loans cannot be discharged in bankruptcy. Their fear will keep them in line. There are bills to pay, and delinquent loans will ruin your credit rating.

Another is something called “signaling.” A degree is a way to say, “I’ll jump through any arbitrary hoops in order to climb the ladder.” I’m a docile, obedient worker, hire me!” It’s a social marker more than anything else.

Requiring a degree is one of the last remaining forms of legal workplace discrimination. A degree is a way of filtering out people and making sure only the “right” candidates apply (from affluent backgrounds, white, etc.) and are hired.

But the main factor driving this trend is the fact that today’s corporations just don’t need that many educated workers anymore. Thanks to the Neoliberal “disciplining” of labor, and the rise of the “service” economy, the majority of jobs now pay a pittance wage–barely enough to survive on. So this will drive people to struggle to acquire a degree—just like people will purchase lottery tickets no matter the cost—in the hope of getting a leg up on the competition for the few remaining jobs that pay a decent wage. This allows corporations to divest  from funding higher education and yet still have plenty of willing, educated workers banging down their door. And besides, in the global economy, corporations can sponge off of the education systems of other countries, hiring qualified workers from all over the world. Not willing to do what it takes? Well, then, you have only yourself to blame. Why invest in “American” education anymore in a global economy? America’s students are on their own. Training costs are now entirely borne by the workers/government, even as corporations constantly moan about “socialism” (another legacy of the memorandum).

For all of the above reasons, costly college is not a bug; it’s a feature. It serves so many simultaneous purposes for the elites. And I didn’t even mention the gravy train loans are for the financial sector, since they are backed by government (and hence low risk). It’s not likely they’re going to do anything about any of this without a fight.

BONUS: Good interview with Chomsky on education.

A while ago, I came across a comment from someone on r/collapse describing Functional Finance (MMT) concepts to someone droning on with the usual misinformed “we’re borrowing from the future” rhetoric. I thought those comments did a very good, succinct job of explaining some of the concepts, so I thought about posting them here.

Then I thought, in that same spirit of brevity and simplicity, what if I fleshed out those comments a bit more?

As some of you may know, Reddit has a section entitled “Explain Like I’m Five.” I wondered if there was one about MMT. There was, but it wasn’t very fleshed out.

So, I thought, here was a challenge. What you see below is the result. It’s far more wordy than I wanted, and necessarily a bit more complicated than I would have liked (maybe more “Explain Like I’m Fifteen”). I wanted it to to be no longer then a (long) Reddit comment, but I couldn’t quite do the concepts justice in that space, although, with a bit of clever cutting and pasting, it could form the basis of a suitable Reddit comment. I actually did that myself to respond to a particularly idiotic posting, and that in return helped flesh it out. Nevertheless, brevity and simplicity were the key goals here. I used more examples than I would have liked, but I really think they help in explaining the concepts.

*Plagarism alert!* A lot of this is lifted from other sources. I tried to avoid copying text word-for-word as much as possible, but there are some instances where I fell back on that because it was clearer and more accurate. I took a lot from Warren Mosler’s definitive work on the topic– “Seven Deadly Innocent Frauds of Economic Policy,” rephrasing and simplifying along the way, as well at the “Introduction to MMT” at New Economic Perspectives. I also stole a bit from David Graeber about the nature of money, along with some other authors. So don’t accuse me of plagiarism, because I admit it! Still, I hope this collection and simplification of their ideas will be of some merit.  In that spirit, I hope  the original authors will not object.

Of course, if anyone spots any severe inaccuracies or errors (bearing in mind that this is a simplified explanation), please be sure and point them out. I’m not an economist, nor do I even play one on TV, I’m just someone sick of all the misinformation and scaremongering I see out there.

Without further ado:

Introduction

Modern Monetary Theory describes the way the monetary system works for sovereign governments who control the issuance of their own currencies. It simply describes how our international monetary system actually works and what the ramifications of that are.

The great virtue of modern, fiat money is that it can be managed flexibly enough to prevent *both* deflation and also any truly damaging level of inflation – that is, a situation where prices are rising faster than wages, or where both are rising so fast they distort a country’s internal or external markets. The trick is for the government to spend enough to ensure full employment, but no so much, or in such a way as to cause shortages or bottlenecks in the real economy. These shortages or bottlenecks are the actual cause of most episodes of excessive inflation. If the mere existence of fiat monetary systems caused runaway inflation, the low, stable rates of consumer-price inflation we have seen over the past thirty-plus years would be pretty difficult to explain.

The government has no money! It can only take money from the private sector by force!!!

The government has no money? The government neither has nor does not have money. It spends by changing numbers up in our bank accounts and taxes by changing numbers down in our bank accounts. And raising taxes serves to lower our spending power, not to give the government anything to spend. Taxes do not finance government spending. As a sovereign currency issuer, the government does not need to “get something” from the private sector first in order to spend. If the private sector has to “earn” dollars, where are they to get the dollars that they must earn?

Imagine if we had a brand new country with a brand new currency. No one has any. Then the government proclaims that there will be a property tax. How can it be paid since no one has any money? It can’t, until the government starts spending. Only after the government starts spending the currency does the population have the money to pay the tax. The funds to pay the taxes, from inception, come from government spending (or lending). We need the federal government’s spending to get the funds we need to pay our taxes.

As another example, imagine if parents wanted their children to do certain household chores, so they printed up a series of coupons and gave them to their children coupons for each task completed–mowing the lawn, taking out the trash, and so on. To create a demand for the coupons, they require each child to pay them 10 coupons at the end of the week to avoid punishment. The children can trade the coupons among themselves if they wish; thus Suzy can have Jimmy clean her room by “paying” him with one of the coupons “earned” from mom and dad.

This creates a demand for these coupons. These coupons now function as the household’s “money.”

Do the parents have to somehow get the coupons from their children before they can issue them to the children for doing their chores? Of course not! In fact, the parents need to “spend” the coupons by paying the children to do the household chores if they want to collect the coupons at the end of the week. How else can the children get the coupons that they need?

If government spends currency into existence, it clearly does not need tax revenue before it can spend. Further, if taxpayers pay their taxes using currency, then government must first spend before taxes can be paid.

If you went to the local tax office and wrote a check for $1,000 to pay your taxes, the government would deduct that $1,000 from your checking account and hand you a receipt, extinguishing your tax liability. The government did not “get” anything from you–it just transferred sums in various bank accounts. If you were to pay your taxes with all one-dollar bills, the government would also extinguish your tax liability, hand you a receipt, and toss the dollar bills into the furnace. The dollar bills in this case function like a $1,000 concert ticket – once the ticket taker takes the ticket from you, she tears it up and throws it away because it is no longer needed.

Thus, the government does not need to “get” money from somewhere to give to someone else that they can then use to “spend.” The people at the U.S. Treasury who actually spend the money (by changing the numbers of bank accounts up) work in different offices than, and do not even have the telephone numbers of, the people at the IRS who collect the taxes (who change the numbers down), or the people at the U.S. Treasury who do the borrowing (by issuing Treasury securities).

Similarly, if the government owed you a tax refund of $1,000, it would simply add an additional $1,000 credit to your bank account.  It doesn’t take a gold coin or a dollar bill and stick in into a computer somewhere. All it does is change the number in your bank account by making data entries on its own spreadsheet, which is linked to other spreadsheets in the banking system. Government spending is all done by data entry on its own spreadsheet called “The U.S Dollar Monetary System.”

This is often referred to as “printing” money, although hardly any money exists in physical form such as cash or coins. Most of it exists in the various accounts through which money transferred from one account to the other via keystrokes, and the government can never “run out” of keystrokes. They are adjusting the numbers in various bank accounts either up or down.

In other words, the sovereign government that issues its own currency has unlimited spending power; it owns the currency. These credits/debits are recorded in various spreadsheets, so, the government can never “run out” of money, any more than a sporting event can run out of points, or a construction site can run out of inches. If the New York Yankees score twelve runs against the Boston Red Sox, and twelve runs get added to the scoreboard, they did not “steal” those points from the Red Sox. That is, the government is not “revenue constrained” (but does face other constraints)

If taxes are not used to raise the money the government needs to function, then what are they used for? Taxes create the demand for the government’s currency. Liabilities issued by the state will be considered ‘money’ if those are also the only thing you can use to satisfy tax obligations. The government can levy a general tax obligation on all citizens, and declare what it is payable in. That is sufficient to create a demand for their IOUs as money, and will basically drive its use even in most private transactions within the country.

To prevent the government’s spending from causing inflation, the government must also take away spending power via taxation not to pay for anything, but so that their spending won’t cause inflation. “Unprinting money” via taxation makes it more scarce and valuable, and leaves enough room for governments to spend without causing inflation.

Taxes can also regulate aggregate demand, and we can use taxation to modify market behaviors by taxing what we wish to discourage (like smoking and carbon emissions), and subsidizing what we wish to encourage (like health care and clean energy).  The amount of tax revenue has no effect on the spending power of the government. As previously stated, taxes function to regulate our spending power and the economy in general, and not to get the money for Congress to spend.

This is not to say that the government should just spend, spend, spend, without limit, but that the government’s budget constraint is the wrong constraint. The correct constraint is whether or not a particular budget position will raise inflation beyond an official target rate  (say, 2%, which seems to be the choice of most central bankers). The objective of the government should be to provide full employment while controlling inflation. This is done by investing (to increase employment) and taxing (to control inflation).  An inflation constraint provides more fiscal space than a budget constraint, but in no way does it provide unlimited fiscal space. Therefore, the government should not have deficits or surpluses as their primary objective. Rather, the conditions in the actual economy will dictate policy.

If the current economy has a lot of unemployment, than the government should invest to try and create jobs while taxing in a clever way to avoid inflation. In such a case, the government would possibly end up running a deficit. If, on the other hand, there is high employment and lost of revenue from the sales of goods abroad, then the government should tax a lot; it wouldn’t need to spend as much and might possibly run a surplus. In either case, the conditions of the actual economy determine the actions to take, not an artificial budget constraint.

The same goes for the overall amount of debt. When people say “future generations are going to pay for our debt,” they are really saying that in the future the government will be constrained and have less spending power because of the debts we run up today. This is not true; the government owns the currency and so the amount of overall debt has no impact on the government’s ability to spend. The government can always issue the money it needs to pay its liabilities.

But the National Debt is XXX TRILLION DOLLARS!!!!

The term “national debt” is deceptive, the “debt” is actually assets on the balance sheets of private entities. In the above example, are the parents, by issuing slips of paper to get their children to do their chores, in any sense “in debt” to their children by doing so? Of course not!

Similarly, in the property tax example, is the government now in “debt” as a result of issuing the coins needed to pay the property tax? Is the government how in hock to some third-party due to its “deficit spending?” Does it have to redeem those coins for wheat or pigs or anything else at some point in the future? Of course not. There’s just a bunch of money circulating out there that people can use for transactions. The treasury has made no promise to redeem those coins for anything. There’s really no reason to call those coins, or any other financial instrument the government chooses to manufacture out of thin air and swap for those coins, “national debt.” A debt that will never be paid off is a very questionable “liability.”

That’s essentially the situation with the U.S. national “debt.” The U.S. issues money by deficit spending. It puts more money into private accounts than it takes out via taxes. The private sector has more balance-sheet assets (but no more liabilities, so it has more “net worth,” the balancing item on the right-hand side of its balance sheet). The Treasury has made no promises to redeem that new money for anything (except maybe…different government-issued assets). It’s just out there. They, are only “liabilities” to the government in the most pettifogging accounting sense. If you “owed” some money that you would never, ever have to repay, would you put that on your balance sheet as a liability? Would it be anything beyond a pro forma entry designed to satisfy some obsessive impulse for accounting closure?

When government spends without taxing, all it does is change the numbers up in the appropriate checking account (reserve account) at the Fed. This means that when the government makes a $1,000 Social Security payment to you, for example, it changes the number up in your bank’s checking account at the Fed by $1,000, which also automatically changes the number up in your account at your bank by $1,000.

The U.S. and other sovereign currency issuers operate under a purely self-imposed accounting rule: their treasuries are required to issue bonds equal to that deficit spending. This is a straightforward asset swap: the private sector gives checking-account deposits (back) to the government, and the government gives bonds in return. Private sector assets and net worth are unaffected by that accounting swap; it just changes the private-sector portfolio mix — more bonds, less “cash.” In any case, issuance of these instruments represent a desire to save on the part of the private sector, otherwise they would not find willing buyers.

It’s commonly said that the private sector is “holding government debt,” since the private sector is holding treasury bonds, but this is a misnomer. The private sector is holding assets on its balance sheet, whether they consist of bonds, “cash,” or reserves. But the “debt,” such as it is, only exists as an offsetting accounting liability on the right-hand side of the government balance sheet. It is not accurate to call these a “liability” since they will never be redeemed for anything. A better term to describe the things that we tally up on the left-hand side of our private-sector balance sheets might be “government-issued assets,” as opposed to ” government debt.” The private sector holds (owns) government-issued assets, not liabilities. And even the offsetting liabilities themselves are rather dodgy and iffy accounting entries. The government issues those assets as a public good.

The government has committed itself to issuing bonds for archaic reasons, and so it needs to roll over its “debt.” When old bonds mature, the government pays them off and issues new ones to replace them. The stock of government-issued assets grows over time, as it should and must in a growing economy. As the economy expands, the government issues more assets as a necessary lubricant, and to avoid transactional lockups for the operation of the private-sector economy (i.e. to avoid a ‘liquidity trap’). The “debt” grows over time as the economy expands. The U.S. and U.K. have been issuing debt for more than two centuries, and it has never been paid back. It cannot be, because otherwise there wold be no money. (see below)

The government should be run “like a household!!” If I ran my household budget the way that the Federal Government runs its budget, I’d go broke!!! We have to live “within our means,” so the government should too!!!!

A sovereign, currency-issuing government is NOTHING like a currency-using household or firm. The sovereign government cannot become insolvent in its own currency; it can always make all payments as they come due in its own currency.

Government debt does not have to be paid back. It almost never is. To pay back government debt, you have to run a budget surplus, and while there may be modest surpluses from time to time, they don’t add up to more than a minuscule fraction of all the accumulated debt. Governments that issue their own money don’t have to pay off their debts. They actually can’t. In fact,as we saw above, they issue money — the money that’s necessary for a growing economy to operate — by deficit spending.

We have seen that money is a credit/debit relationship, and the relationship between various sectors of the economy (public, private and foreign) must always sum to zero due to an accounting identity. If the government reduces its debt, everyone else has to go into debt in exactly that proportion in order to balance their own budgets. Debt consists of issuing liabilities that others are willing to hold as financial assets.  If there were no debt, there would be no money!

You can think of this as series of interlocking balance sheets between the the major sectors of the economy: public (the government), private (business in aggregate), and foreign (balance of payments), where the total assets = total liabilities. The numbers are zero sum—a surplus in one sector necessarily means a deficit in another sector due to accounting identities.

Since income has to equal expenditure for the economy as a whole (which is the same things as saying that saving equals investment), the sums of the difference between income and expenditures of each of the sectors of the economy must also be zero—a rise in the deficit of one sector must be matched by an offsetting change in the others. These differences can also be described as “sectoral balances.” Thus, if a sector is spending less than its income it must be accumulating (net) claims on other sectors. When broken into sectors, government deficits are non-government surpluses, to the penny.

If the government declares “we must act responsibly and pay off the national debt” and runs a budget surplus, then it (the public sector) is taking more money in taxes out of the private sector than it’s paying back in. That money has to come from somewhere. So if the government runs a surplus, the private sector goes into deficit. If the government reduces its debt, everyone else has to go into debt in exactly that same proportion in order to balance their own budgets.  People just assume that the government running a surplus will somehow make it easier for all of us to do so too. But the reality is precisely the opposite: the less the government is in debt, the more everybody else is.

Why does anybody have to be in debt at all? Why can’t everybody just balance their budgets? Governments, households, and corporations; everyone lives within their means and nobody ends up owing anything. Why can’t we just do that?

Because if there were no debt, then there wouldn’t be any money. Money is debt. An individual household or business needs to get dollars to pay it’s debts, that’s true. The same is not true of the economy as a whole. Your spending is my income. Your debt is my asset. Banknotes are just so many circulating IOUs. (take out a dollar bill and read what it says: “This note is legal tender for all debts, public and private”). Dollars are either circulating government debt, or they’re created by banks by making loans. That’s where money comes from. Obviously if nobody took out any loans at all, there wouldn’t be any money. The economy would collapse.

They money that we use are liabilities issued by the central government that others are willing to hold as financial assets. For most people and firms, others are only willing to value and accept our IOUs if they promise to pay something (redeemability in say, an equivalent amount of government currency) and that the extent that our promise to pay is credible (which the banks are in the business of keeping track of).

On the other hand, almost everyone is willing to value and accept the government’s IOUs, because everyone needs to collect government IOUs to pay taxes. That valuation is so ubiquitous, we’re willing to hold far more of the government IOUs than we even need to pay taxes, because they’re a safe bet for holding value for the foreseeable future. So the government can issue more IOUs (cash, coins, reserve accounts, treasury security accounts) than they require back in taxes, and end up perpetually running deficits to satisfy private savings desires. Our money is the government’s liabilities; if there were no debt, there would be no money!

There is going to be a cascading hierarchy of money based on the government IOUs, such as bank IOUs (checking/savings account balances) that promise to pay government IOUs, and personal IOUs (checks, etc.) that promise to pay bank IOUs, etc. And those will all tend to be denominated in the main unit of account made up by the government (dollar, Yen, Pound, Euro, whatever).

So there has to be debt. And debt has to be owed to someone. Let us refer to this group collectively as “the One Percent.” If the government runs up a lot of debt, that means the One Percent hold a lot of government bonds, which pay quite low rates of interest. The government taxes you to pay that interest.

If the government pays off its debt, what it’s basically doing is transferring that debt directly to the public sector as mortgage debt, credit card debt, student loan debt, and so on. Of course the money is still owed to the one percent, but now they can collect much higher rates of interest. And this debt is accumulated by those least able to pay. There were three times in recent decades when the government ran a budget surplus, and each time the surplus was followed, within a number of years, by a recession. Every depression in our nation’s history was preceded by a big decline in nominal Federal debt.

The government can always print the money it needs via keystrokes to pay its obligations as we saw above. Private levels of indebtedness are a much greater concern, and a greater drag on the economy. Private borrowers (and non-sovereign-currency states like Greece and Alabama, for instance) do have to pay off their debts (or default). That’s why the level of aggregate private debt, not sovereign debt, is the big money management problem.

Government deficit spending creates nongovernment sector saving in the form of domestic currency (cash, reserves, Treasuries). This is because government deficits necessarily mean the government has credited more accounts through its spending than it debited through its taxes.

Austerity through government surplus means taxing/extinguishing more money than is created and injected through government spending. That either means increased private sector debt or reduced private sector savings. This is simply a fact due to double-entry bookkeeping.

The government has a monopoly on the currency!!

The government really has no need for legal tender laws, and many countries don’t use them. Neither do they need to criminalize issuing alternative currencies. Once you have paid your taxes, you are free to hold your money in dollars, Euros, Yen, gold coins, Bitcoins, local currencies, or exchange value directly through time banking. No jack-booted government thug will take  your money away from you. However, it is unlikely the corner grocery store will accept your Yen or gold coins; most domestic transactions are denominated in U.S. dollars because it is easier, and because dollars are needed to pay the tax obligation. In fact, people trade currencies all the time and these values tend to “float” against one another. Only the Federal Reserve can issue U.S. dollars however; if anyone could “print” dollars in their basement in whatever quantity they desired, a dollar wouldn’t be worth very much, and inflation would very quickly be out of control.

We are stealing from our children!! Future generations will have to pay it all back with interest!!!

The amount of debt incurred today will not stop future generations from producing and consuming all the goods and services they desire and are capable of producing. In the future, just like today, whoever is alive will be able to go to work and produce and consume their real output of goods and services, no matter how many U.S.Treasury securities are outstanding. We will not have to send real goods and services “back in time” to pay off the debt. All things being equal, and if we do not mismanage the economy, the economy will be larger in the future than it is today. Our children will change numbers on what will be their spreadsheet, just as seamlessly as we do today. Also, future generations are not just the debtors, but also the creditors. Otherwise, who would we owe all that money to?

Currently, the U.S. economy is still running well below potential output. When we operate at less than our potential – at less than full employment – then we are depriving our children of the real goods and services we could be producing on their behalf. Likewise, when we cut back on our support of higher education, we are depriving our children of the knowledge they’ll need to be the very best they can be in their future. When we cut back on basic research and space exploration, we are depriving our children of all the fruits of that labor that instead we are transferring to the unemployment lines. This is the real “stealing from our children!”

When the cost to borrow is low, it makes sense to invest in things that will pay a greater return down the line. Every business does this, and any CEO who does not know this would be fired. Like individuals, a government can increase its means in the long run by borrowing to invest in things that will make the economy more productive, and thus increase the tax revenue. If a government invests in improving the transport system, it will make the country’s logistics industry more efficient. Or if it invests in healthcare and education, that will make the workers more productive.

More importantly, unlike individuals, a government has the ability to spend “money it does not have”, only to find later that it had the money after all. The point is that deficit spending in a stagnant economy will increase demand in the economy, stimulating business and making consumers more optimistic.  If nominal interest rates are below long-run trend real GDP growth, a dollar of debt more than pays for itself in the long-run.

As we saw above, “austerity” means reducing the amount of money available and driving up the level of private indebtedness. The irony is that in order to somehow “save” public funds for the future, what we do is cut back on expenditures today, which does nothing but set our economy back and cause the growth of output and employment to decline. Currently, the misplaced fear of leaving the national debt to our children continues to drive policy, and keeps us from optimizing current output and employment.

The debt burden depends on the ratio of debt to GDP as well as the interest cost in servicing it. The way to reduce this burden is to have a combination of real economic growth, inflation and modest interest rates. If you want to show your concern for the well-being of future generations, demand macroeconomic policies that will boost demand and raise inflation a bit, consistent with continued low interest rates.

When Congress first imposed a debt limit in 1917, its intent was to limit the amount the Treasury could spend to finance America’s entry into World War I, not to control overall government spending. The basic structure of the debt limit hasn’t changed since 1940, and as a result, the debt limit is both arbitrary and static. It doesn’t take into account inflation or economic growth, and it has no relevance to the nation’s economic output or circumstances.

The Chinese “own” us thanks to deficits!!!

As a sovereign currency issuer, we do not need the Chinese to “fund” our deficits. A sovereign government does not need to “borrow” its own currency in order to spend. Indeed, it cannot borrow currency that it has not already spent! Functional Finance sees the sale of government bonds as something quite different from borrowing. As we saw above, the “debt” is nothing more than government-issued assets held at the Fed.  Whether they consist of bonds, “cash,” or reserves, it is unrealistic to call the money originally spent into private accounts a “debt.”

As we have seen, government deficit spending creates equivalent nongovernment savings (dollar for dollar). Some of the savings created will accumulate in the hands of foreigners. For many years (during the Clinton and Bush II presidencies) the domestic private sector was also running budget deficits—so foreigners also accumulated net claims on American households and firms. The US current account deficit guarantees—by accounting identity—that dollar claims on government will be accumulated by foreigners.

Net savings of financial assets is held as some combination of actual cash, Treasury securities and member bank deposits at the Federal Reserve. Normally, the nongovernment sector prefers to hold savings in government IOUs that promise interest, rather than in nonearning IOUs like cash.

The commercial banks we use for our banking all have bank accounts at the Federal Reserve called reserve accounts. This is where they acquire the money they use for loans – they borrow it. Lowering the interest rate at which banks must borrow from the Fed lowers the “cost” of money and makes loans easier to get, theoretically stimulating the economy. A reserve account is nothing more than a fancy name for a checking account. It’s the Federal Reserve Bank so they call it a reserve account instead of a checking account.

Foreign governments have reserve accounts at the Fed also. Foreigners earn US dollars from selling us real goods and services. What do they do with those accumulated dollars? Just like you do with your dollars, they either hold them as cash IOU’s (reserve accounts), or stick them in a savings account (by buying U.S. Treasury securities).

Treasury bonds are sort of like savings accounts at the Fed. Just like your checking and savings accounts at your local bank, your checking account probably offers a very low rate of interest, but you can draw against it any any time (it is “liquid”). Savings accounts are typically held for a longer period of time and pay higher rates of interest. They key thing to understand is that both are methods of saving.

A U.S. Treasury security is nothing more than a savings account at the Fed. When you buy a Treasury security, you send your saved dollars to the Fed, and then some at point in the future (maturity), they pay back the dollars plus interest. It is just like a savings account at any bank–you deposit dollars and get them back plus interest.

When government sells bonds, banks buy them by offering reserves they hold at the central bank. The central bank debits the buying bank’s reserve deposits and credits the bank’s account with treasury securities. Rather than seeing this as borrowing by treasury, it is more akin to shifting deposits out of a checking account and into a saving account in order to earn more interest. And, indeed, treasury securities really are nothing more than a saving account at the Fed that pay more interest than do reserve deposits (bank “checking accounts”) at the Fed. The government simply changes numbers on its own spreadsheet – one number gets changed down and another gets changed up. It is much like a transfer from a “checking account” (reserves) to a “savings account” (bonds). This is a straightforward asset swap: the private sector gives checking-account deposits (back) to the government, and the government gives bonds in return. Private sector assets and net worth are unaffected by that accounting swap; it just changes the private-sector portfolio mix — more bonds, less “cash.” (Treasury “forces” the private sector to make that collective portfolio-adjusting swap through the simple expedient of selling bonds at an attractive price — a point or two below similar deals in the private sector.)

The government bonds take the form of an electronic entry on the books of the central bank of the issuing government. Interest is paid on these “bonds” in the same manner, whether they are held by foreigners or by domestic residents—simply through a “keystroke” electronic entry that adds to the nominal value of the “bond” (itself an electronic entry). The foreign holder portfolio preferences will determine whether they hold bonds or reserves—with higher interest on the bonds. Shifting from reserves to bonds is done electronically, and just like above, it is a transfer from a “checking account” (reserves) to a “savings account” (bonds).

If an individual bondholder needs cash for real-goods transactions or whatever else, the necessary asset-swap transaction happens with a mouse click. Likewise holders of checking-account deposits: if they want physical currency, their bank stands ready to make the swap; it’s called “withdrawing cash.” If the bank runs short on physical currency, the Federal Reserve provides it on demand in exchange for the bank’s reserves, its account deposits at the Fed.

When the U.S. government does what’s called “borrowing money,” either domestically or internationally, all it does is move funds from checking accounts (the reserve accounts held by the banks) at the Fed to savings accounts (Treasury securities) at the Fed. In fact, the entire $13 trillion national debt is nothing more than the economy’s total holdings of savings accounts at the Fed.

What happens when the Treasury securities come due, and that “debt” has to be paid back? The Fed merely shifts the dollar balances from the savings accounts (Treasury securities) at the Fed to the appropriate checking accounts at the Fed (reserve accounts) – that’s it. To pay off the national debt the government changes two entries in its own spreadsheet – a number that says how many securities are owned by the private sector is changed down and another number that says how many U.S. dollars are being kept at the Fed in reserve accounts is changed up. That’s all, debt paid. All creditors have their money back. Paying off the entire U.S. national debt is but a matter of subtracting the value of the maturing securities from one account at the Fed, and adding that value to another account at the Fed. These transfers are non-events for the real economy and not the end of the world, as some fear.

As we saw, foreigners buy government bonds when they are more attractive than reserves, which pay little or no interest. Let us presume that sizable amounts of government bonds are held externally, by foreigners. What if low interest rates mean that foreigners decide they would rather hold reserves than bonds?

If the day ever comes when China demands that the Treasury securities which it holds have to be paid back, the Fed simply changes two numbers on its own spreadsheet. The Fed debits (subtracts from) China’s securities account at the Fed. And then it credits (adds to) China’s reserve (checking) account at the Fed. That’s all – debt paid! It’s essentially an asset swap. Paying off China doesn’t change China’s stated $U.S. wealth. They simply have dollars in a checking account rather than U.S. Treasury securities (a savings account) of equal dollars. China now has its money back. It has a (very large) U.S.-dollar balance in its checking account at the Fed. We will not have to sell off the Statue of Liberty or Mount Rushmore to pay off our “debt” to China.

If China then wants anything else – cars, boats, real estate, other currencies – it has to buy them at market prices from a willing seller who wants dollar deposits in return. And if China does buy something, the Fed will subtract that amount from China’s checking account and add that amount to the checking account of whomever China bought it all from. Refusing to “roll over” maturing bonds simply means that foreign banks will have more reserves (credits at the issuing government’s central bank) and less bonds. Selling bonds that have not yet matured simply shifts reserves about—from the buyer to the seller. Neither of these activities will cause pressure on the government to offer higher interest rates to try to find buyers of its bonds.

From the perspective of government, it is perfectly sensible to let banks hold more reserves while issuing fewer bonds. Or it could offer higher interest rates to sell more bonds (even though there is no need to do so); but this just means that keystrokes are used to credit more interest to the bond holders. Government can always “afford” larger keystrokes, but markets cannot force the government’s hand because it can simply stop selling bonds and, thereby, let markets accumulate reserves instead.

Now the private and foreign sector’s portfolio mix certainly has economic import (and even more so, changes in that portfolio mix). But that mix is secondary and subsequent to the total stock of various government-issued assets in play — be they bonds, checking deposits, whatever. Without a sufficient pool of those lubricatory assets, the financial economy binds up and freezes, as does international trade.

What happens if foreigners decide they do not want to hold either reserves or bonds denominated in dollars, and sell them off?

For the rest of the world to stop accumulating dollar-denominated assets, it must also stop running current account surpluses against the US. Hence, the other side of a Chinese decision to stop accumulating dollars must be a decision to stop net exporting to the US.  This is not going to happen, as China is very much dependent upon exporting to the U.S. for a number of reasons.

Furthermore, trying to run a current account surplus against the U.S. while avoiding the accumulation of dollar-denominated assets would require that the Chinese off-load the dollars they earn by exporting to the US—trading them for other currencies. That, of course, requires that they find enough willing buyers to take their dollars. That is, the dollars earned by China’s export surplus have to go somewhere.

This could—as feared by many commentators—lead to a depreciation of the value of the dollar. That, in turn,would expose the Chinese to a possible devaluation of the value of their US dollar holdings—reserves plus Treasuries that total over $2trillion.

If China’s central bank ceases buying its $200 billion a year of dollar denominated assets, and if nothing shocks the behavior of other central bank or collection of private foreigners, two things will happen: (1) the value of the value of the dollar will fall, and (2) U.S. interest rates will rise. The fall in the value of the dollar will boost U.S. exports and diminish U.S. imports, and the trade deficit will shrink. And–as long as the Federal Reserve is successful in avoiding recession–the rise in interest rates will reduce investment inside the United States and also lower asset values, which will make homeowners and investors feel poorer and increase their savings. It will thus reduce the gap between savings and investment, and so diminish the capital inflow.

What happens if China says, “We don’t want to keep a checking account at the Fed anymore. Pay us in gold or some other means of exchange!” They simply do not have that option under our current “fiat currency” system. Governments do not typically ship pallets of paper money or gold bars across the ocean. If they want something other than dollars, then they have to buy it from a willing seller, just like the rest of us do when we spend our dollars. In this case, they must find holders of other currency-denominated reserve credits willing to exchange these for the bonds offered for sale. It is possible that the potential buyers will purchase bonds only at a lower exchange rate, so it is true that foreign sales of a government’s debt can affect the exchange rate. However, so long as a government is willing to let its exchange rate “float” it need not react to prevent a depreciation.

Depreciation of the dollar would increase the dollar cost of China’s exports, making them more expensive, and lower the value of China’s dollar-denominated assets. US exports would become more competitive globally, which would be a boost to domestic industries, lowering the trade deficit and boosting domestic employment. For these reasons, a sudden run by China out of the dollar is quite unlikely. A slow transition into other currencies is only possible if China can find alternative markets for its exports.

The Job Guarantee

One ramification of the above is that a currency-issuing government can purchase anything that is for sale in its own currency, including the labor of every last unemployed person who is looking for a job. This is known as the “job guarantee.”

The government already creates millions of jobs, from combat soldiers, to IRS accountants, to elevator inspectors, to U.S. Congressmen (who enjoy benefits denied to most citizens). It also purchases goods and engages the labor of numerous private sector entities to accomplish various things that suit the public purpose, from building roads and bridges, to protecting the country, to basic research and development.

One key factor is that the job guarantee would hire “from the bottom,” not from the top to ensure that such programs don’t create real resource bottlenecks by competing with the private sector for highly-skilled or specialized labor. The job guarantee could also put a floor under domestic wages without costly regulations. Whether the job guarantee makes fighter planes or wind turbines makes no economic difference–the workers employed by it will spend their wages on the same things other workers buy. When you hand money over to a convenience store cashier to purchase goods, do they ever squint or turn the dollar bill sideways and ask, “Are you sure this money came from work that was performed in the public sector?” They don’t, because the money governments pay to public employees is the same money everyone else gets paid in.

What matters, economically, is whether there are sufficient real resources and labor available to produce these goods and services in line with the increased demand for them. If there are, no additional government intervention is necessary in order to mobilize them. The same private profit motivation which induces a company to produce one widget can be relied upon to produce the production of another one. If there are enough real resources available to produce the goods and services that are equal in value to the government’s job guarantee spending–if they are not already being used to produce something else–then the increased demand that results from the payment of job guarantee wages will not be inflationary, regardless of what they go to produce.

The only time the American economy ever achieved an extended, years-long period with zero unemployment, low, well-controlled inflation rates and with no significant financial aftershock at the end was the World War II era – broadly defined to include the Lend-Lease buildup of 1940 and 1941. This solution to the problem of mass unemployment worked in the 1940s and it would work today. In the 1940s, of course,the jobs were almost all war-related. But, economically, this makes no difference. Increased government spending is what ended the Great Depression, not the War per se. The former British politician Tony Benn regularly noted that if you can have full employment killing Germans, then there is no reason why can’t you have it doing other socially useful activities.

But Weimar Germany! Greece!! Venezuela!!! Zimbabwe!!!!

It should be noted that the above applies only to sovereign governments with control over the issuance of own currency. A user of the currency who does not control its issuance has no such prerogative; it needs to procure the currency from another source. Greece, as a member of the Eurozone, does not have control over its own currency. Its currency, the Euro, is used by a number of other countries with different economic conditions and is not allowed to “float,” Regulation of the currency is controlled not by the Greek government, but by the European Central Bank.

In Weimar Germany, the government was forced to pay extremely large war reparations in foreign currencies which it didn’t have, so it had to aggressively sell its own currency and buy the foreign currency in the financial markets. This relentless selling continuously drove down the value of its currency, causing prices of goods and services to go ever higher in what became one of the most famous inflations of all time. By 1919, the German budget deficit was equal to half of GDP, and by 1921, war reparation payments represented one third of government spending. On the very day that government stopped paying the war reparations and selling its own currency to buy foreign currency, the hyperinflation stopped.

In Zimbabwe, the conditions for hyperinflation were caused by the destruction of nearly half of the country’s domestic food production via misguided land reforms, plus a civil war which eliminated much of the economy’s productive manufacturing capacity. In response to food shortages, the Bank of Zimbabwe used valuable foreign exchange reserves to buy imported food, leading to a lack of foreign currency to purchase essential raw materials. Manufacturing output collapsed, but the government used much of the remaining foreign exchange to dole out political favors, rather than adding to the country’s productive capacity. The end result was inflation and then hyperinflation.

A sovereign-currency issuer might “have” to pay back their debt if they have committed to redeem their money for something else. For instance Argentina (dollar-denominated debt) and whole host of other countries who were on a gold standard had promised to give gold in return for their money. If they can’t or won’t do so, that is a default on their promise. The U.S. and the U.K. (among others) do not face that situation.

Yes, once the economy gets to full employment, then extra government deficit spending can start driving up prices, but with high unemployment and unused yet functioning factories all across the country, there is plenty of room to cut taxes and/or increase spending to get us to full employment. This is true no matter what the size of the federal deficit. Ultimately, inflation (and then hyperinflation) is about competing distributive claims over real resources, such as oil, gas, water, etc.

It is perfectly true that a poorly managed monetary system, or one which is experiencing something like an oil-price shock, can experience inflation. But people today simply don’t realize how much bigger a problem the opposite condition can be. A little bit of inflation is useful and normal. It discourages people from hoarding money and encourages healthy levels of consumption and investment. It promotes growth, provided that a country’s fiscal and monetary authorities manage it properly. Under the gold standard, and largely because of the gold standard, the capitalist world endured eight different deflationary slumps severe enough to be called “depressions.” Since the gold standard was abolished, there have been none.

The dollar is not “backed” by anything!!! Fiat currency is not “real” money!!!

Many people are unnerved by the thought that money isn’t “backed” by anything anymore – backed by gold, for example. They’re afraid that this makes money a less reliable store of value. Hasn’t money always been gold or silver, or at least backed by it? Nope. In primitive societies, people typically participated in gift exchanges, where the receiver was placed under obligation to the giver, who would then receive something back in return at a later date. Such reciprocity has even been observed in non-human primates. As societies grew larger and more complex, and more interaction was between strangers, this relationship became more formalized. Writing was invented to keep track of these relationships. Historical studies confirm that credit/debit relationships recorded on clay tablets were the earliest known form of “money.”

Coinage was invented much later as a way of raising large armies and paying mercenaries. Governments found the easiest way to provision soldiers was to issue them standard-issue bits of gold or silver and then demand everyone else in the kingdom give them one of those coins back again. Because soldiers have the coins which everyone needs to pay the tax, trade with soldiers becomes a necessity. These coins started circulating as money. Promissory notes, which recorded an obligation on the part of a third party (an IOU), passed from hand to hand in the Middle Ages as an early form of paper money. Tally sticks, upon which were recorded a farmer’s tax obligations to the crown, also circulated as money throughout medieval Europe.

The Bank of England was created when a consortium of forty London and Edinburgh merchants — mostly already creditors to the crown — offered King William III a £1.2 million loan to help finance his war against France. To this day, this loan has never been paid back. It cannot be. If it ever were, the entire monetary system of Great Britain would cease to exist.

One problem with defining the value of the dollar in terms of gold is that gold’s value fluctuates relative to all other goods and services as the supply or demand for gold changes. When economic growth was not accompanied by an increase in the supply of gold, it put downward pressure on prices. The result was deflation and rising real debt burdens. For example, news in April 1893 that the government was running low on gold was followed by the Panic in May and a severe depression involving widespread commercial and bank failures. As a result of the panic, stock prices declined. 500 banks closed, 15,000 businesses failed, and numerous farms ceased operation. The unemployment rate hit 25% in Pennsylvania, 35% in New York, and 43% in Michigan. Soup kitchens were opened to help feed the destitute. Facing starvation, people chopped wood, broke rocks, and sewed in exchange for food. In some cases, women resorted to prostitution to feed their families.

Functional finance emphasizes the role of money as a”unit of account,” and a “store of value,” rather than as a “medium of exchange.” Money is primarily a credit/debt relationship and always has been. There would scarcely be enough gold bars in the world to run a modern industrial economy. Besides, even though gold and silver have a long history of use as a medium of exchange, it is still a social convention based upon “faith” that gold and silver are valuable–rarely do people need actual gold or silver for anything, any more than they need pieces of paper. In fact, commodities used as a medium of exchange typically do not have very many practical uses, otherwise they would be far too valuable as commodities to be used for money!

Money is primarily a social tool that we use to mobilize real resources to ensure our collective long-term health and prosperity. It is not a “thing” that is inherently scarce like diamonds or gold bullion. It is not something for the rich and powerful to hoard in their bank accounts, or to hide in offshore tax havens. It should be noted that the reverse is also true: no amount of money creation can substitute for actual resources which do not exist in the real world. Used wisely, however, it can allow us to manage our existing resources more carefully, including making the best use of our natural and human capital.

Conclusion

To sum up, sovereign, currency-issuing countries are only constrained by real limits. They are not constrained, nor can they be constrained, by purely financial limits because, as issuers of their respective currencies, they can never “run out” of money. This doesn’t mean that governments can spend without limit, or overspend without causing inflation; or that governments should spend any sum unwisely. The government cannot mobilize resources that do not exist. What it does mean is that no sovereign government needs to tolerate mass unemployment because of the state of its finances–no matter what that state happens to be. Nor does it require foreign entities to finance its deficit. What this further means is that a prolonged slump or depression is, ultimately, a political choice.

Sources:

(I encourage you to read the original texts at the following locations):

https://www.reddit.com/r/collapse/comments/472285/sweden_on_the_brink_an_interview_with_dr_tino/d09ttyp

https://www.reddit.com/r/AskSocialScience/comments/3mhh05/eli5_modern_monetary_policy_mmt_the_economic/cvs1pbz

The 7 Deadly Innocent Frauds of Economic Policy (PDF)

What is Modern Monetary Theory, or “MMT”?

Britain is heading for another 2008 crash: here’s why

‘Living within our means’ makes no economic sense. Labour is right to oppose it

MMT Primer

MMP Blog #24: What if Foreigners Hold Government Bonds?

China and the Trade Deficit

Martin Wolf On Wynne Godley’s Sectoral Financial Balances Approach

Isn’t it Time to Stop Calling it “The National Debt”?

The Meme that Refuses to Die: Government Debt Must Be Paid Back

4 Ways to Fix the Debt Limit – Forever

Crisis Chronicles: Gold, Deflation, and the Panic of 1893

Panic of 1893

Randy Wray: The Value of Redemption (Debt Free Money, Part 3)

The Deficit: Nine Myths We Can’t Afford