Saturday, October 22, 2011

Civilisation and surplus

I once asked an Israeli archaeologist why archaeologists (and historical anthropologists) seem to be so influenced by Karl Marx. He replied that it was because Marx talked about economic surplus and they study the products of economic surplus. Makes sense.

Civilisation rests on the production of surplus—that is, the production beyond the needs of subsistence. In agrarian civilisations, typically 8 out of 10 people worked as farmers. That meant that they produced enough surplus food (and other agrarian products such as material for clothing) for 1 in 5 people to do something else. That "something else" being all the things that make a civilisation (which may include farmers working on other things in down times).

Early civilisations start off in warm climes near water (i.e. river valleys towards the equator) because you can have a concentrated population cultivating fertile land and less effort is put into staying warm, so it is easier to produce a surplus.

Surplus is not exploitation as such (although there are certainly exploitative ways to extract surplus: the most efficient ever exploitative extractor of surplus being Stalin's regime—he could make mass starvation work for him). Surplus is the basis of civilisation.

As technology improves, being in a warm area becomes less important as better technology means it becomes easier and cheaper to stay warm. Indeed, there is some tendency for the technological "cutting edge" of civilisation to move to colder climes, since they get more pay-off from technology and tend to be more time-conscious due to the need to store food and other supplies over winter. (Climate's effect on temporal outlooks may have had something to do with which parts of Europe adopted the Reformation and which did not, though distance from Rome and consequent command-and-response issues were clearly also important.)

With the transformation of production we call the Industrial Revolution, the ratio of people needed to produce food dropped dramatically as technology allowed more to be produced with less human effort. By 1920, primary production stopped being the biggest employer in the US. (By 1930, services were the biggest employer, so the "manufacturing moment" in US economic history—when secondary industry dominated employment—lasted 10 years.)

Institutions make a difference; some sets of institutions are much better at facilitating transactions (and so gains from trade and thus the production and use of surplus) than others. Clearly, the British institutional heritage of US and Canada works better than the Iberian institutional heritage of Latin American. (Which is why Hispanics flood North: they can earn more income simply by being in a different institutional context.) Scandinavians in the US do considerably better (in terms of average incomes) than do (pdf) Scandinavians in Scandinavia.

Culture (which overlaps with institutions and is profoundly affected by religion) also makes a difference as it affects attitudes to time, willingness to transact, etc. Hindus and Sikhs from South Asia, on average, do considerably better in the UK (in terms of employment and income) than do Muslims from South Asia.

Combinations of differences within cultures and institutional contexts also make a difference: Muslims in the US do considerably better (in terms of income, employment and integration) than do Muslims in Europe.

Geography can make a difference beyond producing food and staying warm. Water transport is generally much cheaper than land transport. It is easier to produce a surplus operating out of water hubs than relying on land transport. Capital markets are about trading in surplus: ideally, directing it to more productive ends. And, if you are a trade hub, the demand for capital will be greater. There is a reason why the Serene Republic of Venice was a persistent financial innovator (inventing bonds in 1171, for example).

So, Marx was correct in that surplus matters: but he was utterly wrong in what it represents and the implications thereof.

[Cross-posted at Critical Thinking Applied.]

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