Outlines of economics

Preface

When I began the present work I asked the assistance of Mr. H. H. Powers, then of the graduate department of the University of Wisconsin, and now professor-elect of Political Economy in Smith College, Northampton, Mass. I anticipated help which could be passed over with little more than mere mention in the preface, but the aid received is so great that it becomes both my duty and pleasure to make particular acknowledgment of it and to state frankly that this book is a joint product. While I am primarily responsible for the whole, as according to agreement I have freely rejected, qualified, or accepted what has been done by Mr. Powers, it should be known that much credit is due to my fellow-worker for whatever success the book achieves.

Mr. M. B. Hammond has rendered efficient assistance in the collection and critical examination of statistics, and Mr. J. W. Crook has read the proofs of the book and offered useful suggestions from time to time. I am also indebted to Mr. David Kinley for helpful suggestions. All of these gentlemen are connected with the graduate department of Economics in the University of Wisconsin, and I wish to express to them my thanks for their aid. Professors Turner and Haskins, of the same institution, have read the earlier chapters in the book, and I have to thank them for helpful criticism.

The present book was begun as a revision of my Introducvi Pkeface.

tion to Political Economy^ but it has become practically a new book, and the publishers will retain the older work on the market. This newer work is more theoretical, and perhaps naturally follows the earlier one. The Introductioyi to Political Economy^ which has been used in many schools and colleges, gives large scope to a teacher to develop his own line of thought, and may still be preferred by some who have become accustomed to it. In any future revision of the two books an effort will be made to develop still further the peculiar characteristics of each; the aim of the Introduction being to furnish chiefly historical and descrijDtive material; the aim of the Outlines being to give a systematic sketch of theory.

The limits set for the present work have made it impossible to include a discussion of State revenues and taxation, as well as much other matter necessary to fit the book for school and college use. The matter thus excluded will be included in a larger edition issued simultaneously with this and designed especially for college classes.

Madisok-, Wis., June, 1893. Richard T. Ely.

Chapter I. The Economic Life Op Unciytlized Man

Without troubling ourselves at present about exact definitions, let us notice wliat kind of history we have before us. The history of literature, the history of government, the history of religion, and many others, all have one thing in common: they are all of them histories of man. They each treat of man, however, in one line of his activities. So with economic history. Its subject is man, but it deals primarily not with his thought or his government or his worship, but with his efforts to get a living. If any one is tempted to think this a narrow subject he should remember that it means more than bread and butter. Literature, science, art, religion, government, all require, not only bread and butter for those employed in them, but books and j^apers and laboratories and art galleries and churches and courthouses— all of them a part of man's " living,"^ It is plain that every kind of activity depends on material things to some extent. So this subject of ours — man in his effort to acquire and to use material things to satisfy his wants, or, in other words, to get a living — is of interest to everybody and to every kind of human effort.

The various ways of getting things may be roughly reduced to two: one must ^^<^ things, or else one must mahe them. Of course these two ways shade into each other, but they are sufficiently distinct for our purpose. Uncivilized man finds things; civilized man makes things. Indeed, material cwilization consists largely in wanting many things and in learning how to make and to use them.

The Hunting and Fishing Stage. — The first want is food, and the primitiv© man, who has not learned to make or " raise " it, must depend upon what he can find. Wild berries and roots will count for something, but plainly not for much. He must live principally on game and fish. It has been suggested that as man has to fight many animals to keep them from eating him he naturally eats them when he kills them in the fight. This would hardly seem to be a satisfactory account of the origin of the use of animal food, for as a rule the animals dangerous to man are not those he eats, but it is possible that the attacks of wild animals may have helped to accustom man to slaughter animals generally, and this may have rendered it easier to kill even men. Hunting is the first thing in which man learns skill.

Another thing that sometimes arises at this early stage is cannibalism. Cannibals are not simply very wicked men, but men who are very ignorant and very hungry. Inasmuch as they do not know enough to help Mother Nature to raise food she furnishes very little. A tribe of hunting savages is said to require fifty thousand acres per person to live on. Now, as we know, the human race tends to multiply rapidly. Hence they live continually on the verge of starvation. If we remember that even civilized peoples are guilty of occasional cannibalism in times of famine we shall not be surprised that uncivilized man should be guilty of it frequently when he has to choose between that and starvation. The subject of cannibalism is one which does not appear to have been sufiiciently investigated, but the practice is often connected with war and religious rites. If begun as a result of hunger it would seem not unnatural that it should be continued for other reasons by an ignorant and degraded tribe.

However, we must not suppose that the lowest savages ever killed and ate one another indiscriminately. No body of men ever existed on the basis of " every man for himself." In the lowest stages men respected family ties, and these in a larger and larger circle, till a tribe was the result. Within the tribe men were brothers who shared what they had with each other. Outsiders were enemies, to be robbed, killed, or eaten as the circumstances might require.

The Economic Life of Uncivilized Man. 5

Let us notice very carefully this fact which wc find at the very bottom of human life, in the lowest tribes of which we know anything. Man never leaves all his fellows to their fate. Even while as yet he is little more than an animal he begins to be a moral ayiimal^ setting bounds to his own liberty and imposing upon himself certain duties. Of course liis morals are crude and his circle of brotherhood narrow, but they are facts. We have said that material civilization consists in wanting many things and in learning how to make and to use. them. Moral civilization consists in perfecting the duties and enlargiyig the circle of brotherhood. From the beginning until now man has divided his fellows into those who were to be fed and those who v.'ere, figuratively at least, to be eaten, and his progress is measured by the proportion between the two.

What has been said of hunting tribes applies with slight changes to fishing tribes. The difference of occupation is due to location. On the whole, however, fishing requires more skill and more tools than hunting, and so these tribes are as a rule slightly more advanced, and they are more likely to advance to a higher stage in a near future. But primitive fishing, like hunting, is a precarious means of getting a living, and leaves those who follow it in a low social condition. Of course there is little buying and selling under such circumstances.*

So long as man depends for his living upon what Nature furnishes of her own accord population is thin, poverty extreme, starvation frequent, and war and cannibalism a natural outcome between the small and scattered tribes. To be rich, man must learn to want and learn to make; to be strong and safe, he must learn the meaning and extent of brotherhood. We shall see as we o^o on how impossible it is either to develop or to study these things separately.

* There is said to be little buying and selling to-day among the inhabitants of Iceland, because nearly all produce substantially the same things, 2

Outlines of Economics.

SUMMARY.

1. Economic history is the history of man in his efiforts to get a living; tliat is, to get tlie things needed in all his activities.

2. He may find things or make them ; uncivilized man finds things; civilized man makes them.

3. Material civilization consists in the making and using of things; moral civilization in the development of brotherhood.

4. Uncivilized man fi.-hes and hunts. Scarcity of food makes him a fighter and sometimes a cannibal.

5. Even the savage is a moral animal, and limits his depredations by selfimposed duties.

QUESTIONS.

1. How much is included under the term "living?" Wliat are tlie ecoiiomic elements in religious work ? in educfition? in government?

2. What two ways are there of getting things ? In which way can man get more ?

, 3. "What is civilization? What two kuids and the difference between them ? What are the advantages of material civilization?

4. What is the cause of cannibalism? its limits? its cure?

5. Is moral civihzation dependent on material civilization? If so, how?

LITERATURE.

English works bearing upon the economic aspect of the developments of civilization are inadequate. The following may be read w iih profit:

Lubbock, Sir John: Prehistoric Tir)ies, particularly tiie last chapter; also, Origin of Civilization and Primitive Condition of Man.

Wilson, Dr. Daniel: Prehistoric Man, dealing chiefly with natives of America.

Morgan, L. H. : Ancient Society.

Trior, E. B. : Anthropology.

Druramond, Henry: 7?^02>^■cfli 4/^r^■ca, especially chapter iii.

Stanley, Henry M. : In Darkest Africa.

Gomme, Gr. L. : The Village Community.

Reports of the Bureau of Ethnology connected with the Smithsonian Instil utiou, Washington.

Chapter II. The Economic Life Of Semiciyilized Man

Between the uncivilized man, who uses what he can find, and the civilized man, who "makes what he wants, there is a middle ground. The man of this period neither depends on what he finds nor yet makes things to any great extent, but he "raises" his living ; in otlier words, to a limited extent he has learned to give direction to the forces of nature. He has learned to produce, but he lives on " raw materials," not knowing how to work them up. Man very soon makes a few simple tools like bows and arrows and the early stone implements, as knives, hatchets, and arrowheads; but with this exception it is worthy of note that as man begins to subdue nature he begins not with dead nature, but with living nature; he uses not metals, but animals and plants, and learns to increase their amount. Moreover, of these two kinds of living things, he first subdues the higher life, that most like his own, and not until long after learns to control plant life for his uses.

The Pastoral Stage. — Man may have tamed dogs for hunting and sometimes horses while still in the hunting stage, but the pastoral stage begins with an extensive pasturing of animals for food and clothing. Man no longer depends upon hunting; but having learned that if he is to have animals in plenty he must take care of them, not simply kill them, he gains their confidence and now has flocks and herds. Some marked features of the preceding stage still continue. While man now lives upon his flocks the grasses and plants upon which they feed are still left to themselves ; the flocks still live on what they can find. So, while man no longer needs to wander in search of food for himself, he must do so for his flocks. Cities are, therefore, still impossible. Moreover, while the land will now support many more inhabitants than before, much land is still needed to pasture the flocks, and as the tribes or families roam about at will they frequently come into collision and fight over desirable pastures. Thus war continues, keeping down the population, but with one important change. Cannibalism ceases. For a long time the victims of war continue to be slaughtered, but men with flocks at their disposal do not feed upon human flesh. Doubtless even this is an advance toward brotherhood, for it removes one inducement to war and so paves the way for its final abandonment. Then, too, men very slowly begin to see that war is disastrous, scattering their flocks and destroying their wealth. Thus it is clear that on the whole property tends to make men more humane, although this tendency may be one working within comparatively narrow limits. War becomes somewhat more difticult wdien men have property to lose, although the pursuit of wealth has itself been the cause of many wars.

The history of Abraham gives us examples of pastoral society and warfare, also of the peaceful settlement of difticulties between Abraham and Lot. Evidently these men are afraid that war will i-esult in their mutual impoverishment. Still it is worthy of note that they were kinsmen, and perhaps would not have made this arrangement but for the feeling, known from the first, that kinsmen must not make war upon each other. War still remains common— due, as we have said, to overcrowding, to the wandering habit of the people, and to human passions of all kinds. It is in this stage that those great migrations occur, so unlike anything we now know, whole tribes leaving their country and seeking a new one, dri\ ing out the former inhabitants before them. Many individuals do the same thing to-day ; but who ever heard of a whole city, still less a whole country, being abandoned in our day by its inhabitants? That happens only in this early stage, while as yet men are used to a wandering life.

The Economic Life of Semicivilized Man. 9

It follows from what we have said that there is very little ownership of land at this time. Tribes as a whole lay claim to certain districts and try to keep other tribes from pasturing on them. But individuals own either no land or very little, and it is doubtful whether even the tribe would claim anything quite like ownership in our sense so long as land is used only for pasturage. The notion of ownership develops as land becomes more useful.

In this stage there are frequently great accumulations of wealth, such as it is. It consists mostly of great flocks, and gold, silver, and precious stones, which early appeal to the barbarian taste for showy ornament. Wealth produces, as everywhere, extremes of condition, the rich and poor being sharply contrasted with each other. But this early wealth does not produce commerce to any considerable extent. The reason is plain. In order to have trade we must not only have wealth, but diversity of wealth. There is in general very little reason why men should exchange one ox for another, and as this is about all the primitive " cattle king " can do, trade does not develop. Of course there is some little exchange besides this. The precious metals are obtained in this way by the wealthy, and finely woven fabrics may be procured from a wandering merchant.

The AgriCTiltural Stage. — Man's next accomplishment is of immense importance. He has learned to manage animals to his advantage ; he now learns to manage plants and "raise" them at will. The effect is almost incalculable. The first result is to increase population immensely. The soil which formerly maintained a handful of herdsmen with their scattered sheep now supports a whole community. The second result is even more important. Men cease to roam about and settle in one place. Now, nothing is more necessary for human development than that men should live in definite places and have homes and a country. This results at once in new relations between men, new duties, new arts, and new possibilities. A man never accomplishes much in this or any other age till he settles in a definite territory ;

and in the slow development of the race the taking up of agriculture was a decided advance.*

A third result which came naturally though gradually was the private ownership of land. The cultivation of the soil required a good deal of detailed personal attention, and some sort of a division was necessary in this work. We must not suppose, however, that this first parceliu;^ out of the soil resulted immediately in private ownership. The tribe still owned the land, and the division was only a temporary one for purposes of convenience. Strangely enough, the first owners of the soil were in many countries not the cultivators, hut the chieftains of the tribes, an ownership which became very important in its later consequences, as we shall see.

But the most important characteristic of this period is slavery. Men now cease to kill their prisoners of war, but make them slaves instead. Slavery begins long before agriculture, but it now attains its full magnitude as an institution. It is hard work to till the soil, and men, especially primitive men, are not fond of hard work. So they save the lives of their prisoners in order themselves to be spared the necessity of work. This is a poor reason for becoming humane, perhaps, but it is well to become humane even for a poor reason. There have been many discussions as to whether slavery is right or wrong. It is both. There is a time in human development when slavery represents a step in human progress, the best and longest that men are able then to take. Such a step is always right. It is wrong when men have learned how to do better. The slavery of the early period we are now considering was not only inevitable, but, inasmuch as slaves, like other property, were seldom bought and sold, it was very mild. The existence of a large slave population, however, which can be kept regularly at work greatly

* The Book of Job gives us a fine picture of an early ngricultural stage. The plow was in use, but wealtli was estimated in "live stock." His "substance was seven thousand sheep, and three thousand camels, and live hundred yoke of oxen, and five hundred she asses, and a very great household; so that this man Avas the uroatest of all the men of the east,"

The Economic Life of Semicivilized Man. 11

increases the wealth of society. We now know that free labor is better than slave labor, especially in the later stages of industrial development; but, inasmuch as primitive man is with difficulty induced to work at all, slave labor is a great improvement on free idleness. Of course all that we have said is subject to many exceptions, for as men develop they become more diverse. Among some peoples slavery never became an important institution, while in others it was highly developed, affecting their entire social life.

With every increase of wealth the tendency to trade increases, but as yet the occasion for it is comparatively slight, for men's wants and wealth are still much the same everywhere. Fixed residence develops village communities — not cities; these have a different origin — and these have little to gain by trading wdth others like themselves. Such trade is usually by barter; that is, goods are exchanged for goods, not for money. Money does not at this time perform important functions in the life of every day.

But we must notice the change or enlargement in men's ideas during this period. This w^e shall find in their laws and customs; the Mosaic code is our best example, as it w^as designed to govern a people in the pastoral and agricultural stages. Before this time there w^ere numerous customs regulating life, and there may have been such a thing as even the tyranny of custom, but we are struck wath the immense increase of duties and restrictions which are now recognized. With fixed residence has come the State, with its institutions of justice, guidance, and protection, its numerous thou shalts and thou shalt iiots. At every turn w^c see that men may not do as they please, but that they are restricted, or perhaps, rather, have restricted themselves for their own good. Why all this, when we saw comparatively little of it before ? Simply because men are now become permanent neighbors, and they have need of an understanding on many points to keep from trespassing on each other's libert}^ ' If men are to live close together and accumulate property and enjoy it in peace there must be general agreement among the many and vigorous compulsion for the few on many points. And so again interests of property and person lead men to recognize duties and establish laws which they learn to obey later as a matter of sacred honor, even though it cost them life and property to do so. It is noteworthy, however, that these duties and laws are chiefly recognized at home. Beyond the boundaries of the tribe or nation these duties are scarcely held to be binding at all. In the early German communities, when the scattered tribes were still small and separated by unoccupied land, each tribe lived in relations of brotherhood within itself, property being common and mutual rights closely guarded. But between different tribes no rules held. When they met on the neutral ground or Mark, as it was called, to trade, all kinds of sharp practice were deemed admissible. Things not to be thought of at home were here unquestioned. This Mark and the trading that took place in it suggest our modern market, and even if the word market is not derived from the word Mark, as their similarity would indicate, it probably gets some of its practices from the trading in this neutral ground. Thus we still see the division with which we are already familiar into those who are protected from man's rapacity by moral restrictions and those who are not.

The Economic Life of Semicivilized Man. 13

SUMMARY.

1. Between the finding of things, which is savager}', and the making of things, wiiich is civilization, comes a period of " raising " things, or semi-civilization.

2. The domestication of animals assures subsistence, helps to stop cannibalism, introduces slavery, checks war, and creates wealth,

3. The cultivation of the soil fixes residence, extends law and custom, and develops tribal ownership of land.

4. Barter trade begins with a different code of law, and lionor for neighbors and strangers, much to the disadvantage of the latter.

QUESTIONS.

1. What part of nature does man subdue first? Why?

2. Why does the hunter not accumulate wealtli? Why does he not own land? Why does the shepherd not own land? What advantage has the shepherd o"er the hunter?

3. What influence has agriculture on wealth, and why ? on slavery ? on law? on moral civilization?

4. What was the Mark'? its code of honor? How much does this code correspond with our present market code?

LITERATURE.

Maine, Sir Henry: Ancient Law; Village Communities in the East and West; Early History of Institutions; Early Laio and Custom; especially chapter viii in the last work. These four works are standard.

Seebohm, F. : The English Village Community.

Allen, W. F. : Monographs and Essays.

Wallace, Mackenzie: Russia, contains a popular account of Russian communities.

Stepniak: Russia Under the Tsars, contains a clear account of the Russian village community, the Mir. A cheap edition is published in Harper's Franklin Square Library,

Note.— The works enumerated at the end of these chapters often bear upon the subjects of other chapters as well, but to save space we shall mention works hut once, except iu cases of special Importance. No attempt is made to make the enumeration a complete bibliography.

Chapter III. The Economic Life Of Civilized Man— First Stage

It must not l>e supposed that these periods are sharply defined in date or character. They shade into one another gradually, and come at very different times for different peoples. But, nevertheless, most peoples pass through these stages, and at any particular time a given kind of economic life will be found to be dominant among a given people.

We have said that civilization begins with making things, or, if we prefer a longer word, manufacture. This is of two kinds, hand manufacture and j^ower manufacture. It is with hand manufacture that we now have to deal.

The Trades and Gommerce Stage. — Though this stage is characterized by the development of trades and commercey as the name implies, the real cause of this is manufacture. Men learn to weave fabrics and fasliion things in wood, metal, etc., and use dead as well as living nature. The results of this arc:

1. Trades. To make anything well requires so much skill that a man needs all his time at it. The man who makes only one thing makes it better tlian he who makes many things. So labor learns to specialize, as we say, and we have division of labor or trades, such as blacksmiths, shoemakers, weavers, dyers, etc.

2. Commerce. We have seen that there was little commerce so long as everybody was engaged in one business — the raising of animals and grain — because each had nearly all the kinds of wealth which any one else had to sell him. But, plainly, when men learn trades and each makes only one kind of an article, he will neither want all the things he makes nor make all the things he wants. He must trade.

Economic Life of Civilized Man — Fiest Stage. 15

And so wherever manufacture develops we find trade growing up as a necessity. For convenience' sake some men spend all their time in exchanging goods which other men make, and so save tliem time and trouble. Difterent countries have different trades, and merchants find it convenient to make exchanges between them.

3. Money. Plainly, such a general system of exchange cannot be carried on by barter. The shoemaker who needs bread cannot wait till he finds a baker who needs shoes and make a trade with him. Under such a sj^stem everybody would be poor for the lack of the things that everybody else was anxious to furnish. They would simply fail to make necessary exchanges. In order to effect exchanges easily we must have some common article for which we can exchange everything. This was early felt, and yet it lias proved one of the most difficult of all problems to find precisely tlie right thing and just enough of it. Many things have been tried: near the times of barter, skins, shells, cattle, etc.; then iron, copper, bronze, silver, and gold. Silver and gold, which still constitute the world's universal money, came fully into use during this period, and money becomes increasingly important.

4. Cities. We have seen the tendency of those employed in agriculture to form small village communities. These existed in early times for reasons of protection, cooperation, and sociability, but they could not become large because agriculture required the population to be scattered. Manufacture requires precisely the opposite. If people are to live by trades and exchanging each other's goods they must be near together for convenience' sake. So cities situated according to the convenience of commerce develop wherever men learn to manufacture. Except in case of rare combinations of political forces, cities not only do not, but they cannot, grow up until men learn to manufacture ; for if they only knew herding and agriculture the inhabitants would perish for lack of emplojnnent where there was no land for cultivation or pasture. So, wherever we find the remains of a city, we may conclude that the people had learned manufacture and commerce and passed into the stage of economic civilization.

5. The Guild System. New forces introduced into society do not take care of themselves. So the trades had to organize in order to reduce their business to some kind of order. Each trade had its guild, which specified in detail how the business should be carried on, how many should be admitted to it, and how the trade should be learned. Where, as was usual, the guilds controlled the cities their rules were early sanctioned by law.

6. Political Freedom. The agricultural stage had in the greater part of Europe culminated in the feudal system. The feudal lord occupied a commanding position, like that held by the patriarch in an eai-lier state, and he owned the land occupied by the tribe, and the tillers of the soil had become serfs; that is, while they could not be sold they were obliged to stay on their lord's domains and work for him lor such pay as he chose to give them or such remuneration as might be established by custom and public opinion, especially as manifested through the Church. The manufacturing cities were the natural rivals of these great feudal estates. The lords felt their power threatened and bitterly opposed the cities. And so there were wars and alliances and treaties until finall}^ the cities conquered, as they were bound to do in the end. These cities were free, and serfs who fied to them were accepted and made freemen. Thus feudalism began to perish, and, slavery and serfdom gradually disappearing, another step was taken toward liberty and humanity by man's progress in learning to get his living.