Economic anthropology includes the examination of the economic relationships found among precapitalist societies (nonmarket economies); this includes band, village, and peasant societies. Economic anthropologists study the historical incorporation into the world market economy (capitalism) or state socialist economies of tribal peoples and peasant societies.
Cross-disciplinary studies are both an admirable and a desired pursuit. Formal economics is designed to study the psychology of marginal utility, scarcity, price theory, economizing rationality, entrepreneurial skills, and buying and selling in a market economy. The question remains: To what degree are its concepts relevant to most of the economic history of the world, in which market either plays a minor role or no role at all in the everyday lives of the people? Formal economics uses individual behavior as its methodology to answer this question.
Cost under capitalism includes labor. Cost to a peasant farm is that drudgery is the major cost. In an economic slump, capitalists cut back on wage labor. A peasant farm must increase labor to maintain the standard of living. Cultural values are important in defining the standard of living, making drudgery any work not necessary in achieving that standard of living.
Chayanov in Today’s Anthropology
Chayonov was a Russian agricultural economist who worked under both the Czars and the Bolsheviks. After he was arrested and killed by Stalin, his works were banned. When his writings were rediscovered in 1965, he became a major influence on American economic anthropology. Formal economics cannot work as a historical model because it assumes a stability of preferences. This change comes over time; formal economics as a theory is nonhistorical or at best has a very short historical scope. Formal economics theory lacks sociology, and thus is useless in explaining historical changes, such as changes in political domination, ideology, or culture.
The relationship between a capitalist world economy and local economies in which noncapitalist social relations prevail requires an understanding of the interaction between these noncapitalist social relations and a dominant capitalist economy. Purely economic categories cannot be used when studying this interaction. Much of the everyday life of any traditional people, even under capitalist domination, is based upon the nonwage family economic unit. The household economy lies outside the framework of an economic theory designed for studying capitalism. The key to understanding economic life in a fully developed capitalist economy is profitability based upon wage labor.
Without wage labor, there is no longer a purely capitalist economy. The domination of a larger capitalist economy clearly exists, but noncapitalist social relations alter its local details. Much of the economic activity is locally determined by the requirement of satisfying family needs. In a household economy, the family is both a production and consumption unit. Each economic activity meets specific family needs. Without wages, profit maximization is not the primary concern. Family economy moves toward equilibrium between two major factors: family demand satisfaction and the drudgery of the work. The primary economic decisions center around family needs.
Every economic system must equip labor power with a means of production. There is the possibility of increasing productivity, when the need arises, with increasing labor exertion, increasing division of labor, and alternative sources of income. Productivity, for the family, centers between an upper and a lower limit. The upper limit is the amount of work, which maximizes family labor to achieve family consumer expectation.
If families work to meet family demands and not for the profit of a capitalist employer, and if the conditions of life are not too harsh, the intensity of labor will remain below what it would be if family labor were fully utilized.
Polanyi, George Dalton, and the Substantivist Economists
The substantivists, using both economic history and anthropological data, openly dispute the theoretical relevance of formal concepts like “marginal utility” outside of a narrow historical view of industrial capitalism. Polanyi was the economic historian who launched the substantivist rebellion.
Polanyi claimed economic relationships are embedded in other social institutions of a society. Even the forced integration of isolated communities into a world market economy happens in a historical context of economic systems already established and operating to various degrees on principles other than “free trade.”
The differences between the various traditional economies require the researcher to abandon the use of economic categories developed to study industrial capitalism. Studying any economic system requires a truly holistic approach.
The substantivist uses empirical data rather than grand theory to create categories to study a specific economy. In the “real world,” there are various types of interaction between household economy, community reciprocity, and redistribution or exchange to make each economic system culturally and historically specific. This requires the researcher to use particular conceptual categories when studying nonmarket economies.
Formal economics focuses on economic behavior and individual psychology in a market setting. Formal economics begins with choices of individuals acting as economic agents. Production, distribution, and consumption are considered as connected to calculations of costs versus benefits. Even under a fully developed capitalist system, many decisions are imposed by external concerns dictated by the effects of a market economy and not a matter of personal choice.
In most nonmarket economies, economic behaviors are based upon specific rules governing production and distribution. Social obligations, ecology, and technology determine the rules of the economy. In these economies, choice is not an obvious issue. These restrictions are firmly set by custom, social obligations, ecology, and technology. Choice as central to consumer-based capitalism is a minor part of a peripheral market, if it exists at all.
Within the economic setting, people share a common social identity and culture. The rules governing an economic course of action are required for survival.
The economy is expressed in kinship, religious, or political terms. There is generalized social control over production and subsistence. Access to land, labor, and emergency assistance is controlled by rules and is outside of purely market considerations. Economic systems are the structured transactions and rules of action overseeing production and distribution of goods and services in a reliable style. Within the community, access to land and other resources, division of labor, production goals, and types of technology used are guided by culturally specific rules. In traditional societies, the economy is not a separate institution. Traditionally, allocation of labor, organization of work, and distribution of goods and services are expressions of political, religious, or kinship obligations being defined as the moral responsibilities of group members.
Market economy is an economic system that is self-regulated by market prices and production for profit. Until modern times, markets, where they did exist, were a secondary part of the overall economy. Even local markets were peripheral to subsistence.
Social relations in any community are more central than profit to the economic concerns of the people. The economy everywhere is primarily submerged in the social relations of that society. Economic activity is motivated for the most part by concerns for social responsibility, social prestige, and social security. In tribal and peasant societies, the economy remains an adjunct of the sociology of the community. Production is not for profit in the majority of economic activity, and the distribution within society never reflects wealth for wealth’s sake. Social interest of the whole must be used to justify the economy, including systems of production, distribution, or exchange. All social relations within the economic system reflect a person’s moral position within the community. Social ties are social security. Social obligations are reciprocal in both the material and the moral concerns of all and affect each individual of the community. Economic self-interests threaten the community and the individuals within the community by undermining the collective identity and solidarity of the community.
In all peasant societies, there is a marketplace and a market day. Within peasant society, self-sufficiency is the major economic philosophy of the households. This is and must be supplemented by a symmetrical pattern of social organization called “reciprocity,” centralization of redistribution, and a marketplace separated in time and space and importance from the rest of the economy. Without a market economy, barter can take only a secondary role in the overall economy. Within a market economy, both reciprocity and redistribution continue to exist in supplementary roles. The self-sufficiency of the household is also an institutionalized philosophy within a capitalist society and yet is very dependent on the market economy, with its necessity to sell labor power for a wage to support the household.
Before the market economy is established, the economy is only a minor part of the equilibrium of a larger sociological arrangement. Only a market economy makes production for economic gain a major motive for economic activity. The market economy is based upon the historically specific philosophy of production for profit that creates the institution of a market freed from the market place. The universal market makes all other institutions subordinate, reversing the sociological relationship found between the economy and the rest of society in traditional societies. Instead of the economy being embedded in other social relations, all other social relations are now embedded in the economy of the market. Once the economy becomes separate from its sociological constraints, the rest of the society becomes reshaped to meet the needs of the economy.
Market exchanges developed to the degree where goods are bought and sold with money. Because each side wants to gain the advantage, economic exchange must become free of any and all social obligations. Money becomes all-purpose.
All-purpose money now replaces special purpose money. The laws of supply and demand set prices and not any other social agreements as before. All goods and services have a monetary price. Most people now make a living by selling something on the market. People who have no other resources sell their labor power for wages, because these workers do not have their own capital goods or raw materials to produce the goods sold. With a market economy, land, labor, and capital are all bought and sold. The economy follows no law other than the laws of supply and demand, thus it becomes self-regulating. The natural economy is founded upon the survival of the group. The individual’s economic activity is to support social standing within the community. Because in all noncapitalist economies, the economy is integrated into noneconomic social concerns, the health and well-being of the community and all its members take precedence over the personal economic gain of the individual.
Every step in the production process must meet some social claim to other members of the community. These social claims are the basis of the economic philosophy and the motivations around which people organize their labor. All social obligations are reciprocal in the long run. Within this system, economic self-interest is incomprehensible. Generosity and social prestige are very closely linked. Traditionally, the economy is immersed in other, more important social relations, and most people are concerned with larger issues in the community if they are to maintain their social standing. In times of extreme need, a welfare system is put in place. This welfare is always cloaked in terms other than economic aid. The maintenance of social ties is framed in terms of kinship concerns, religious obligation, and honor. All social obligation is reciprocal. There is always social pressure to eliminate open economic self-interest. Reciprocity protects the family, governing both the production and distribution needs. Sharing within the family goes without saying, but sharing with other closely related families is the benefactors’ own social security.
Redistribution needs a broker of some sort who is a distinguished individual that others in the group trust; this individual receives, stores, and distributes the supplies as needed. The economy behind this system of storage and distribution is socially defined outside of any purely economic motives. The motivation is not defined as wealth in material affluence. Sharing and mutuality of reciprocity is further supplemented by the welfare of redistribution with any economic system of record keeping for the overall estimated expenditures. Through a social organization of unity and incorporation of all into a larger social entity with economic motives of cost versus benefits, material gain need not play an important role in the daily operations of the society. Interdependence between the exploited and the exploiter is a social arrangement based upon a moral and not an economic explanation of the relationship in peasant society.
Before capitalism of the free-market type, stratification was explained as a mutual relationship ordained by honor and obligation and was the noneconomic organization of redistribution. The approach is that all economic systems before a market economy of capitalism were some combination of a household economy producing for use, reciprocity, or redistribution, with the market a very minor and carefully controlled aspect. Even in the mercantile economy of Europe after 1500, markets were the main concern of government and were always carefully run by the government. Under mercantile capitalism, markets were too important not to be strictly controlled. The notion of a self-regulating market was not present.
The idea of a self-regulating economy controlled only by market processes would have been a very dangerous thing to even think about in the medieval European economy. The market was carefully regulated in all societies to either a very minor role or was prevented from controlling the necessary subsistence resources. The substantive environmental factor for survival remained under social control at all times. The economy was immersed in other social relations.
Production and distribution remained closely tied to the larger social ethic. The preservation of the social connections was acute. There was compelling pressure on individuals to get rid of their own economic self-interest. With the coming of the Industrial Revolution in the 1800s, tools of production were marvelously improved.
The farmer buys land to produce crops to sell on the market. Prices regulate themselves. The change to a market economy means a change in the psychology of the people of the society from being concerned with making a larger social obligation, social prestige, and social standing in the community to individual responsibility, individual merit, and personal gain in material items. All transactions are turned into money transactions. Mass production requires that the market can be reasonably understood only if all the factors going into production, like land, labor, and other needed resources, are sold on the market without any other social restrictions. The self-regulating market controlled by market prices is the central organization of a market society.
Economic anthropology is constantly asking why cross-cultural similarities and differences have occurred, making formal economics too cumbersome to work with beyond the most superficial level. Formal economics cannot work as a historical model because it assumes a stability of preferences. These change over time; the classical theories of formal economics are not historical, or at best have a very short historical scope. The primary flaw is that this model assumes institutional patterns and hierarchies of values, and what is assumed cannot be explained.
Human needs and basic human nature are socially fabricated or transformed; human nature is also, at its core, universal. Marxist anthropologists have come to believe that formal economic theory is next to useless in explaining historical transformation from precapitalist to capitalist economic systems, political domination, state formation, ideological systems that legitimize exploitation, or how dominant beliefs evolve jointly with changes in economic social relations of society. Over long periods of time, there are conflicts inherent within society, and because of these conflicts, all societies are changing.
Property relations are social relations and as such have socially defined rights. These rights are distributed among groups and individuals, and at the same time, these rights limit access to productive resources.
A social system also interacts with other social systems. The result is that the environment of a social system is altered because of the interaction between these two social systems. Expansion of the market economy of Europe until it consolidated the entire earth into an integrated world economy is such a case. The development of capitalism on a world scale brings even the most remote people under the control of a market economy, creating areas of relative wealth and other areas of increasing poverty.
Lenin’s theory at first looks at the older form of capitalism when free competition prevailed and the export of manufactured goods was the core of Europe’s economic relations with the less developed parts of the world. Then, Lenin examines modern capitalism, when monopolies dominate and the export of capital has become the typical feature.
According to Lenin, the competitive capitalism of the early 19th century became increasingly centralized (fewer competitive firms) and concentrated (larger firms). This centralization was accomplished through combines (the grouping together of related or dependent industries), cartels (large firms cooperating in the same industries and dividing up territories), and trusts (many firms operating as a single firm).
Monopoly capitalism, when a few highly centralized firms effectively dominate the economy, creates imperialism out of its own needs. To find continued profits in an already overly developed economy at home, investments flow to less developed areas of the world where the capitalist economy has not reached a saturation point, therefore making profits much higher. Export of capital is the fundamental principle of imperialism. The export of capital greatly influences and hastens the growth of capitalism in those countries to which it is exported. Monopoly capitalism and imperialism are a stage of capitalism, which reaches a point that is the beginning of a complete international socialization of production. Production becomes social, but the seizing of the profits remains the private property of the capitalists.
Luxemburg saw that capital had to be expanded outward to survive, until the whole world would become a single capitalist system. Lenin saw imperialism as a necessity only under the conditions of monopoly capitalism; the Luxemburg model shares the point in common with the dependency theorists, that imperialism is as old as capitalism. According to Luxemburg, imperialism is the political manifestation of the accumulation of capital. The less developed parts of the world remain attractive sources of future profits, because accumulation in the earlier capitalist nations reached a point where profitable markets became saturated, and capital must move into the less developed regions in order to take advantage of greater profits. This movement of capital helps speed up capitalist development in the less developed areas. With the expanded economic development of the capitalist countries and their heightening of extreme competition in gaining control over noncapitalist areas, imperialism increases in its tone of strife and savageness. Capitalism grows both in its aggression toward the less developed areas of the world and in its continuous struggle among competing capitalist countries. The more violently, ruthlessly, and thoroughly imperialism brings about the disintegration of noncapitalist nations and peoples, the more speedily it undermines the very basis for capitalist accumulation. Imperialism is a major strategy for prolonging the life of international capitalism, but it also destroys the very foundation of capitalism. Capitalism needs non-capitalist social structures as a market for its surplus value, as a reservoir of supply of raw materials for its means of production, and as a source of labor power for its wage system. For each of these requirements, modes of production grounded in a natural economy are useless to capital. In all modes of production where natural economy predominates, relations of production are basically in reply to domestic necessity or production for use; therefore, there is very little desire for foreign goods and even less local production for market exchange.
A natural economy resists the demands of capitalism with uncompromising barriers. Capitalism must confront traditional modes of production with a struggle of subjugation, opposing any natural economy that it meets. The cardinal process in these conflicts remains political coercion. In Europe, there were revolutions opposing feudalism; in the non-European nations, this capitalist development presupposes the formula of colonial policy.
The second condition of importance for acquiring means of production and realizing the surplus value is that commodity exchange and the commodity economy become accustomed to economic activity in societies based on natural economy as soon as their independence have been abolished. In the course of this disruptive process of coming under the control of a world economy, natural economies become dominated by capitalism. Capital growth requires the ability to buy the products of and sell its commodities to all noncapitalist strata and societies.
To Andre Gunder Frank, the problem is under-development, brought about by the export of capital from the poor countries to the rich ones, which allows for the economic overdevelopment of the rich and the increasing economic underdevelopment of the poor. Underdevelopment is the inevitable outcome of over 400 years of capitalist expansion and of the inherent contradictions of capitalism itself. The capitalist system is separated into a metropolitan core and peripheral satellites in the rest of the world. There is the perpetuation of the essential organization and inherent contradictions of the capitalist world economy throughout the history of the development of capitalism and its exaggerated growth. Capitalism’s continuity is due to the reproduction of these contradictions throughout the world in modern history. These capitalist contradictions and the historical development of the capitalist system have given birth to underdevelopment in the peripheral satellites, whose economic surplus is expropriated and used to produce economic development in the metropolitan centers, which appropriate that surplus.
The first contradiction is what is called “the expropriation and appropriation of a poor country’s economic surplus.” This is an extension of Marx’s labor theory of value, in which the capitalist expropriates the surplus that is created by the worker.
The capitalist of the rich metropolitan center expropriates the surplus from the poor peripheral satellite. In both Marx’s and Frank’s theories, the expropriated surplus is saved by the capitalist and reinvested, increasing the power and the wealth of the capitalist. Once established, this exploitative relation extends capitalist relations between the rest of the world and metropolitan centers, with regional centers being an intermediate position. There are firmly established international, national, and local capitalist relations who produce economic development for a small number at each level and underdevelopment for the masses.
Frank’s second contradiction is based upon Marx’s concept of the centralization of the capitalist system. Both are the necessary result of the contradictions that are central to the capitalist system worldwide.
Development and underdevelopment are the products of a single dialectically contradictory economic system of capitalism. The same historical movement of the development of capitalism throughout the world has concurrently created both economic development and underdevelopment.
The third capitalist contradiction is based on the mutual interrelationship of the first two contradictions throughout time. Once established, the capitalist system continues to reproduce itself based upon exploitation, which is the process of expropriation of economic surplus of the poor producers and the appropriation of this surplus by the owners of capital. Historically, what are created are the developed metropolitan centers and the underdeveloped peripheral satellites. This creates a continuity that runs throughout the entire history of capitalism.
Dependency theory sees the world as a single capitalist economy that has increasingly controlled the world since 1500, when Europe began colonizing the Americas and established direct trade routes to Eastern Asia. The dependency theorists claim capitalism is the production for profit maximization in the world market. Capitalism, even though it is a system of dependency, domination, and subordination, is a system of full integration into a worldwide capitalist system. The dominant nation is obliged to protect the markets upon which its internal economy is built. This leads to potential rivalry among capitalist nations and forces them to protect their markets either by annexation of territory or by obtaining economic and political influence over other countries.
This became the major debate between the orthodox Marxist-Leninist and the Marxist dependency theorist. Where Lenin and his followers saw capital flowing from the advanced capitalist nations to the areas now called third world, or less developed nations, and creating distorted capitalist social relations there, the dependency theorist sees capital flowing from the poorer nations to advanced centers of capitalism. Frank claims that what was created in the third world was not distorted capitalist relations, but underdevelopment within capitalism. The distinction between distorted capitalist social relations and underdevelopment is subtle, but important. Underdevelopment means the poor nations provide the surplus for the advanced nations to further their economic development (Frank, Wallerstein, Baran, and Sweezy are the major dependency theorists).
The world capitalist economy, with its own logic, eliminates the competing economic systems from the start, according to the dependency theorist. Profits are controlled by worldwide trends that are dominated by the center of world capitalism. The capitalist owns the means of production (the raw materials and tools necessary, as well as the labor power purchased from the worker). Capitalism becomes production for profits in a market economy.
This, as Fernandez and O’Campo claim, obscures the analysis of the development of social relations of free labor to capital. Dependency theory eliminates the transitional periods from precapitalist to capitalist eras, because they claim capitalism was fully developed at the end of the feudal period. In addition, Marx, as claimed by Fernandez, writes that social relations are the necessary definition of capitalism or any economic system. The worker must be free to sell labor power to the capitalist; also, the capitalist must be able to introduce the past labor of others in the form of the means of production. This is important because the surplus value or the profit created is the driving force of the capitalist economy.
The Leninists claimed that what is central to the Marxist definition of capitalism is the productive relationship of workers owning nothing but their own ability to labor or to sell labor power for a wage. What the worker creates above a wage goes to the capitalist in the form of surplus value. The capitalists control, if not own, the means of production. The means of production is past labor embodied in the raw materials of current production, including land and tools necessary in that production, as well as the labor purchased from the worker. Social relations in production are central to the relationships between people.
Dependency theory, by focusing on the flow of excess profit out of the third world, explains the lack of capital necessary for the poor countries to control their own industrial development directly. In dependency theory, far from being a sign of decadence, imperialism is a part of a market economy and is a sign of the vitality of the capitalist system. What the dependency theorists miss is that in point of fact, subsystems with their own logic exist; however, any subsystem remains dependent on the larger capitalist system. Both dependency theory and Marxist-Leninist theory can supplement each other in a more complete theory of imperialism.
The control over the economy rests with outside major corporations. Profits generated in the less developed nations increase the wealth and power of the major corporations. Profits generated in these poor nations are reinvested anywhere in the world. There is clearly the export of capital from the dominant culture to the less developed nations, creating a strong money-based market economy that is highly stratified, and that affects the very fiber of the everyday life of all people. Traditional social relations, while still present, are weakened and continuously redefined over time.
Articulation of Modes of Production
The interrelationship between local modes of production and the dominant economic logic is an ongoing historical process, changing constantly in an interactive relationship. According to Rey’s model, the first contact between capitalism and other modes of production begins with commercial exchange where the needs of the larger capitalist system reinforce the precapitalist modes of production. This is followed by capitalism becoming firmly established, subordinating the precapitalist modes but still making use of them. Finally, in Rey’s model, there is total incorporation into the world capitalist system with the complete disappearance of all precapitalist modes of production. Rey closely follows Marx’s study of British colonial relations over India. Marx claims that at the first stage, trade is in luxury items benefiting the capitalist of a richer country because of an unequal exchange. With industrialization in the advanced nation, the colonial nations serve as markets for the manufactured goods coming from the industrialized centers. This has a devastating effect on the local social structure and modes of production in the nonindustrialized areas. The precapitalist modes of production are then transformed to meet the needs of the capitalist centers. Up until now, in the nondeveloped areas of the world, exploitation has been primarily an unequal exchange, followed by unequal exchange and markets for manufactured goods. In the expansion of the Industrial Revolution, British investors controlled the extractive industries, which resulted in the beginning of a wage labor force to work in these industries, that is, the beginning of capitalist social relations.
Rey’s first stage of incorporation into a worldwide capitalist system is the initial link with capitalism through commercial exchange. The second stage is the subordination of precapitalist modes of production to the needs of international capitalism, which have already happened in most third-world countries. The third stage is the total disappearance of all precapitalist modes.
Francisconi claims there is a constant restructuring of existing noncapitalist modes of production to meet the conditions of trade and to withstand the impact of direct capitalist investments. Corresponding to this restructuring of existing modes of production is a continual reinterpretation of local tradition. Through this restructuring and readjustment, there is a continuous adjustment and resistance to the expanding capitalist penetration into the local political economy. The reproduction of the noncapitalist modes of production is the result of capitalist expansion into local economies. The above is equally important in understanding the history of articulation of modes of production, as a functional explanation of capitalist exploitation as well as local resistance to capitalist expansion.
The incorporation of the world into a single world capitalist system develops through tensions and contradictions that are inherent in the logic of the capitalist system itself. Wars, conquest, imperialism, and neocolonialism are deadly necessities for the continuing expansion of industrial markets. All small nations come under the control of more powerful capitalist centers. The ruin of noncapitalist nations begins with the first contact of commercial trade. The carefully manipulated use of symbols of self-determination, by preserving precapitalist modes of production and traditional ideology, have been used by colonial administrations to continue the power of international capitalism.
The neo-Marxist modes of production theorists investigate the structure of economic relationships of local communities. The dependency theorists study the world economy of international power relations. In both these theories, social relations become something that is neither fully capitalist, nor are they traditional. Capitalist social relations remain underdeveloped.
The Nature of the Informal and Formal Economy
Because of the incomplete development of capitalist social relations in the less developed nations, there has developed a second economy called the “informal sector,” unregulated and largely untaxed. This second economy is a mixture of advanced capitalism and traditional kinship economies. Self-employment is growing faster than wage labor in many places in the world and is a result of increasingly restricted opportunities for wage labor. The rapid growth of the informal economy is a direct result of the independent self-employment on a world scale, which meets the needs of corporate capitalism.
The informal economy has grown rapidly with the increasing disenfranchisement of labor. With the decline of the power of organized labor and labor parties around the world, corporate capitalism actually benefits from this increase in the unregulated labor supply to provide needed goods and services.
The public sector, welfare organizations, and labor groups all have been dramatically weakened around the world. Flexibility of production has increased and the cost of production dramatically lowered.
By the 1990s, the informal economy had become an integral part of the total economic system. The close network that ties formal and informal frees the economic system from rigid controls, to the benefit of capitalism as a whole.
The main question that economic anthropologists struggle with is, how much can anthropologists borrow from formal academic economic theory in studying people in different historical and cultural settings? Marxist and substantivist anthropologists define economic as providing for the material necessities of life, while formal economics looks at economic choices in how societies and individuals invest their resources. Marxist economics concentrates on production, while formal and substantivist economics look at distribution as more central to their studies. Finally, how much of the precapitalist and noncapitalist behaviors survive in local communities dominated by a global capitalist economy? Thus, it must be asked, how much of price theory, marginal utility, and other major concepts is relevant to anthropology?
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