In his magisterial work, The Great Transformation, Karl Polanyi describes how before the origin of the state, there were no such things as "markets" or "prices" as we know them today. Instead ancient economies were run by either reciprocity, redistribution, or household production. Reciprocity and redistribution were governed by the principles of symmetry and centricity. Prices, haggling and the urge to "truck, barter and exchange, were nonexistent. There was no expectation of coming out ahead in a transaction, although there were elites who mainly fulfilled administrative or distributive roles. Markets were places were disparate cultures came together to trade with foreigners, and only within these very circumscribed areas was barter conducted. Even here, the goal was mutually beneficial exchange instead of unfair advantage or profit.
The outstanding discovery of recent historical and anthropological research is that man's economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only in so far as they serve this end. Neither the process of production nor that of distribution is linked to specific economic interests attached to the possession of goods; but every single step in that process is geared to a number of social interests which eventually ensure that the required step be taken. These interests will be very different in a small hunting fishing community from those in a vast despotic society, but in either case the economic system will be run on noneconomic motives.
The explanation, in terms of survival, is simple. Take the case of a tribal society. The individual's economic interest is rarely paramount, for the community keeps all its members from starving unless it is itself borne down by catastrophe, in which case interests are again threatened collectively, not individually. The maintenance of social ties, on the other hand, is crucial. First, because by disregarding the accepted code of honor, or generosity, the individual cuts himself off from the community and becomes an outcast; second, because, in the long run, all social obligations are reciprocal, and their fulfillment serves also the individual's give-and-take interests best. Such a situation must exert a continuous pressure on the individual to eliminate economic self-interest from his consciousness to the point of making him unable, in many cases (but by no means in all), even to comprehend the implications of his own actions in terms of such an interest. This attitude is reinforced by the frequency of communal activities such as partaking of food from the common catch or sharing in the results of some far-flung and and dangerous tribal expedition. The premium set on generosity is so great when measured in terms of social prestige as to make any other behavior than that of utter self-forgetfulness simply not pay. Personal character has little to do with the matter...
...For it is on this one negative point that modem ethnographers agree: the absence of the motive of gain; the absence of the principle of laboring for remuneration; the absence of the principle of least effort; and. especially, the absence of any separate and distinct institution based on economic motives. But how, then, is order in production and distribution ensured?
The answer is provided in the main by two principles of behavior not primarily associated with economics: reciprocity and redistribution. With the Trobriand Islanders of Western Melanesia, who serve as an illustration of this type of economy, reciprocity works mainly in regard to the sexual organization of society, that is, family and kinship; redistribution is mainly effective in respect to ail those who arc under a common chief and is, therefore, of a territorial character. Let us take these principles separately.
The sustenance of the family—the female and the children—is the obligation of their matrilineal relatives. The male, who provides for his sister and her family by delivering the finest specimens of his crop, will mainly earn the credit due to his good behavior, but will reap little immediate material benefit in exchange; if he is slack, it is first and foremost his reputation that will suffer. It is for the benefit of his wife and her children that the principle of reciprocity will work, and thus compensate him economically for his acts of civic virtue. Ceremonial display of 0th in his own garden and before the recipient's storehouse will ensure that the high quality of his gardening be known to all. It is apparent that the economy of garden and household here forms part of the social relations connected with good husbandry and fine citizenship. The broad principle of reciprocity helps to safeguard both production and family sustenance.
The principle of redistribution is no less effective. A substantial part of all the produce of the island is delivered by the village headmen to the chief who keeps it in storage. But as all communal activity centers around the feasts, dances, and other occasions when the islanders entertain one another as well as their neighbors from other islands (at which the results of long distance trading are handed out, gifts are given and reciprocated according to the rules of etiquette, and the chief distributes the customary presents to all), the overwhelming importance of the storage system becomes apparent. Economically, it is an essential part of the existing system of division of labor, of foreign trading, of taxation for public purposes, of defense provisions. But these functions of an economic system proper are completely absorbed r the intensely vivid experiences which offer superabundant noneconomic motivation for every act performed in the frame of the social system as a whole.
Reciprocity and redistribution are able to ensure the working of an economic system without the help of without the help of written records and elaborate administration only because the organization of the societies in question meets the requirements of such a solution with the help of patterns such as symmetry and centricity.
Symmetry and centricity will meet halfway the needs of reciprocity and redistribution; institutional patterns and principles of behavior are mutually adjusted. As long as social organization runs in its ruts, no individual economic motives need come into play; no shirking of personal effort need be feared; division of labor will automatically be ensured; economic obligations will be duly discharged; and, above all, the material means for an exuberant display of abundance at all public festivals will be provided. In such a community the idea of profit is barred; higgling and haggling is decried; giving freely is acclaimed as virtue; the supposed propensity to barter, truck, and exchange does not appear. The economic system is, in effect, a mere function of social organization.
Among some tribes, however, there is an intermediary in the person of the headman or other prominent member of the group; it is he who receives and distributes the supplies, especially if they need to be stored. This is redistribution proper. Obviously, the social consequences of such a method of distribution may be far reaching, since not all societies are as democratic as the primitive hunters. Whether the redistributing is performed by an influential family or an outstanding individual, a ruling aristocracy or a group of bureaucrats, they will often attempt to increase their political power by the manner in which they redistribute the goods. In the potlatch of the Kwakiutl it is a point of honor with the chief to display his wealth of hides and to distribute them; but he does this also in order to place the recipients under an obligation, to make them his debtors, and ultimately, his retainers.
All large-scale economies in kind were run with the help of the principle of redistribution. The kingdom of Hammurabi in Babylonia and, in particular, the New Kingdom of Egypt were centralized despotisms of a bureaucratic type founded on such an economy. The household of the patriarchal family was reproduced here on an enormously enlarged scale, while its "communistic" distribution was graded, involving sharply differentiated rations. A vast number of storehouses was ready to receive the produce of the peasant's activity, whether he was cattle breeder, hunter, baker, brewer, potter, weaver, or whatever else. The produce was minutely registered and, in so far as it was not consumed locally, transferred from smaller to larger storehouses until it reached the central administration situated at the court of the Pharaoh. There were separate treasure houses for cloth, works of art, ornamental objects, cosmetics, silverware, the royal wardrobe; there were huge grain stores, arsenals, and wine cellars.
But redistribution on the scale practiced by the pyramid builders was not restricted to economies which knew not money. Indeed, all archaic kingdoms made use of metal currencies for the payment of taxes and salaries, but relied for the rest on payments in kind from granaries and warehouses of every description, from which they distributed the most varied goods for use and consumption mainly to the nonproducing part of the population, that is, to the officials, the military, and the leisure class. This was the system practiced in ancient China, in the empire of the Incas, in the kingdoms of India, and also in Babylonia. In these, and many other civilizations of vast economic achievement, an elaborate division of labor was worked by the mechanism of redistribution.
These instances show that redistribution also tends to enmesh the economic system proper in social relationships. We find, as a rule, the process of redistribution forming part of the prevailing political regime, whether it be that of tribe, city-state, despotism, or feudalism of cattle or land. The production and distribution of goods is organized in the main through collection, storage, and redistribution, the pattern being focused on the chief, the temple, the despot, or the lord. Since the relations of the leading group to the led are different according to the foundation on which political power rests, the principle of redistribution will involve individual motives as different as the voluntary sharing of the game by hunters and the dread of punishment which urges the fellaheen to deliver his taxes in kind.
The third principle, which was destined to play a big role in history and which we will call the principle of householding, consists in production for one's own use. The Greeks called it oeconomia, the etymon of the word "economy." As far as ethnographical records are concerned, we should not assume that production for a person's or group's own sake is more ancient than reciprocity or redistribution. The individualistic savage collecting food and hunting on his own or for his family has never existed. Indeed, the practice of catering for the needs of one's household becomes a feature of economic life only on a more advanced level of agriculture; however, even then it has nothing in common either with the motive of gain or with the institution of markets. Its pattern is the closed group. Whether the very different entities of the family or the settlement or the manor formed the self-sufficient unit, the principle was invariably the same, namely, that of producing and storing for the satisfaction of the wants of the members of the group. The nature of the institutional nucleus is indifferent: it may be sex as with the patriarchal family, locality as with the village settlement, or political power as with the seigneurial manor. Nor does the internal organization of the group matter. It may be as despotic as the Roman familia or as democratic as the South Slav zadruga; as large as the great domains of the Carolingian magnates or as small as the average peasant holding of Western Europe. The need for trade or markets is no greater than in the case of reciprocity or redistribution.
Broadly, the proposition holds that all economic systems known to us up to the end of feudalism in Western Europe were organized either on the principles of reciprocity or redistribution, or householding, or some combination of the three. These principles were institutionalized with the help of a social organization which, inter alia, made use of the patterns of symmetry, centricity, and autarchy. In this framework, the orderly production and distribution of goods was secured through a great variety of individual motives disciplined by general principles of behavior. Among these motives gain was not prominent. Custom and law, magic and religion co-operated in inducing the individual to comply with rules of behavior which, eventually, ensured his functioning in the economic system.
From the sixteenth century onwards markets were both numerous and important. Under the mercantile system they became, in effect, a main concern of government; yet there was still no sign of the coming control of markets over human society. On the contrary. Regulation and regimentation were stricter than ever; the very idea of a self-regulating market was absent.From "The Great Transformation," Chapter 4.
Before we go on, I should point out an alternative theory of state formation. The storable surpluses of farming villages would have made them a tempting target for nomadic raiding and banditry. Bandits could ride in and steal the surpluses from the villages without having to do any work at all. the catalyst for this might be the domestication of the horse, along with the use of the wheel and iron, and the military power and projection of force that this development offered.
In this theory, horsemen charge in and raid the farmers of their crops and goods. Over time, instead of bothering to raid every harvest time, the horsemen may have just swooped in and set themselves up as a ruling class, and demanded tribute from the farmers in "exchange" for peace. This sees them as a sort of "mafia" extorting protection money from the ruled. They would use their monopoly of force to extort money from the peasantry, essentially "farming" the peasants in a sort of sharecropping arrangement. Just like mafia dons today, the bandits would each have their own individual "territory," and would make sure that it was defended from other roving bandits, and that intergroup conflict inside of their territory was minimized. In this way, the bandits would become "stationary bandits" who would become the ruling class and act as a proto-government. Farmers may have even accepted this deal in order to safeguard their stores from raids.
The evidence for this is that in many Eurasian cultures, ownership of horses is the marker of high or aristocratic status. The word for "noble" or "gentleman" in most European languages is the same as that for "horseman" (ritter, chevalier, caballero). In the Roman class system, equites, or "knights" were the owners of horses and the lower of the two aristocratic classes of ancient Rome, below patricians. These formed much of the Roman landowning/ministerial/administrative class of the empire, as well as providing the cavalry.
Because it takes a large amount of land and property of raise and maintain horses, horse ownership was the distinguishing characteristic of the upper class for thousands of years. These "knights" supplied the cavalry, which was the definitive shock weapon of ancient times. Medieval knights, freed from the serf's burden of tending the land, were able to attend to the discipline of war full-time. It was expected that they would be the defenders of the lands over which they were granted the vassalage of by the good graces of the king. This was their obligation as nonproductive elites under the feudal system. They were essentially the descendants of warlords.
In this view, then, the horsemen sweep into the "civilized" farming cultures from out of the steppe frontier and and set themselves up as the permanent ruling class due to their superior ability to project force. They become an elite "warrior" caste defending their territory in return for "taxes" supplied by the people whose lands they protect and administer.
An alternate theory holds that it is the repeated conflict with nomadic bandits which causes the state to form as a kind of self-defense measure. In this view, the warchiefs of the farming villages are not so much as offensive as defensive, and the need for warriors and strong leaders to defend the surpluses from raiding bandits drives and the formation of a ruling class to organize the defense of the farmers' territories. The evidence for this is the walled corrals and baileys we see in ancient farming villages in places such as Europe. Furthermore, we see this pattern in history. The domestication of the horse and milk-drinking seems to follow a pattern of conquest as illustrated by linguistic analysis, specifically Indo-European languages.
Many heads must have cracked back in 3500 B.C. during the steep-learning-curve phase of horse domestication. Like Ukraine’s involuntary horse owners today, not everyone in 3500 B.C. would have wanted to climb onto the explosive animals. But those who did gained enormous advantages over everyone else. Pushing other people around was easier from horseback. So was long-distance travel for trading and raiding. The early horse riders weren’t Huns, gathered in vast armies (although the Huns did make lethal use of horses in the 300s A.D.). They were probably more like gangs. And just a few horsemen can wreak havoc on a pedestrian village.
Several weeks’ ride to the west of the Dneiper River is the Danube Basin, where a multitude of culturally sophisticated—but horseless—agricultural societies had been thriving since Mediterranean farmers herding cattle and sheep migrated northeast 8,000 years ago. Collectively termed Old Europe, they had split into a variety of related but distinct cultures by 4000 B.C. The Old Europeans boasted dazzling copper craftsmanship and painted pottery rich with symbols of animals, dancers, abstract whorls, meanders, snakes, and watching eyes. These people helpfully left us scale models of their two-story houses and a multitude of female figurines testifying to the worship of a goddess deity.
They were completely unprepared when Dnieper steppe people penetrated the Danube Basin as early as 4200 B.C. Within a few hundred years, 600 villages were burned and abandoned in what has been called “a catastrophe of colossal scope.” Anthropologist David Anthony argues in his 2007 book, The Horse, The Wheel and Language, that the marauders arrived on horseback, pushing the first riding date even deeper into the past, perhaps as early as 4500 B.C. on the Volga River. Anthony also argues that the first horse riders were the mysterious speakers of proto-Indo-European, the mother tongue of many of the world’s languages, including English. Scholars have been looking for the source of those original speakers since the 18th century, when they discovered the similarities among Sanskrit, Latin, and Greek.
The Danube invaders...rewarded themselves handsomely for their plunder. Old European copper and fine pottery had great value back in the steppe, as did rustled livestock. Some of the primordial Indo-European myths are about cattle raiding. In addition to wealth, successful raiders and warriors won “fame everlasting” and the honor of starring in their own epic poem. These tales were declaimed by bards at feasts for so many centuries that some endured into historical times, in ancient texts like the Iliad and Rig Veda.
It’s hard to believe today, but naked self-aggrandizement was a new development. We know this in part from graves, which reflect a person’s station in life. For nearly all of prehistory, the graves that have been found were communal and equal. No person stood out. (There are a few exceptions, such as a man and two children buried with thousands of ivory beads near Moscow 24,000 years ago.)
Old Europe didn’t leave many graves, but nearly all of those were collective. Inequalities in life surely existed: Some dwellings had finer pottery and tools than others, for instance. A collection of sumptuous gold burials in Varna, Bulgaria, from about 4300 B.C. demonstrated inequalities in the possession of precious metal. But necessities like land, timber, and labor were evidently freely shared.
The last of the Old European cultures built giant towns on the west bank of the Dnieper River around 3500 B.C., apparently in defense against the horse riders. The towns contained up to 7,000 people—more than any settlements on Earth at the time. But all of the dwellings were the same size. If there were social inequalities, they were downplayed. One theory holds that the Old European goddess religion frowned on displays of personal wealth.
East of the Dnieper, in the steppes, the horse riders’ society evidently demanded the opposite. Flaunting wealth—measured in the quantity of baubles and the size of herds of cattle, sheep, and horses—became de rigueur.Rich chiefs were buried in individual graves, marked with earthen mounds called kurgans and filled with polished stone maces shaped like horse heads, ornaments of tusk and bone, and Old European pottery and copper. (The steppe people had no demand for the Old Europeans’ goddess figurines. Their gods were male.)
The giant towns didn’t prevent Old Europe’s eventual extinction. Bronze Age kurgan makers carried their culture and their Indo-European dialects across Europe and as far as China and India, where rich men were buried alongside horse and cattle sacrifices. Even their wives were sacrificed, in the earliest known examples of the patriarchal practice of suttee.
Anthony speculates that the earliest chiefs kept large herds of livestock to build status by giving away meat at feasts, where the heroic poems were recited and much beer and mead were drunk. They may also have loaned out livestock when someone from the 99 percent needed it for survival, creating one of the earliest forms of debtor relations. Still, he sees a big difference between the 1 percent then and now. “Then, they were supposed to give it away and be generous in proportion to their wealth. Feasting and gift-giving were the paths to power. Now, it’s not done that way.”The First 1 Percent: Horses may be the source of humans’ oldest social stratifications. (Slate)
Most likely, there is some truth to this story as well. It's quite possible that some unequal systems were caused by invaders coming in and setting themselves up as a hereditary overclass based on a monopoly of force. The history of China is replete with a cycle of tough steppe nomads invading the settled farming communities, setting themselves up as tributary rulers, and then adapting the sedentary lifestyle of the farmers. This caused them to grow soft, and another group from beyond the frontier would come in and the cycle would begin again. Ibn Khaldun claimed that the reason invading forces were able to repeatedly conquer settled civilizations was that they had a greater sense of social purpose and cohesion, or asabiyyah. Peter Turchin argues that states tend to form along metaethnic frontiers or "civilizational fault lines." These are places were different cultures (languages, religions) or different lifestyles (sedentary versus nomadic) meet. These divisions between ethnicities create the internal group solidarity that foments the formation of states and drives the expansion of large territorial empires.
It's true that you don't need horses to form states - they formed in the New World where storable grains and tubers were present and where horses were nonexistent. But note that these societies were sort of stuck at the Mesopotamian/Egyptian levels of development, with centralized redistributive networks. The horse may have jumpstarted empires to expand and become larger in the Old World. It's notable that when Old World cavalrymen attacked New World societies, they were able to conquer vast empires and set themselves up as rulers with a relatively small force (of course, they also had "guns, germs, and steel" on their side).
This "conflict" origin of the state tends to be favored by libertarians, who like to portray the government as inserting itself into the "natural" working of the "free" market and "stealing" from the producers. This view delegitimatizes the very concept of government as just a sort of protection racket, with no consent of the governed. It fits in with their contempt of democracy. In their mind, once the state is abolished, then free men will once again transact in the market with a mutually agreed upon medium of exchange such as gold. But as we saw above, this is simply not what happened in history. As we'll see later, "free markets" are entirely a product of war and governments, and money arose from credit/debit relations mediated by the state.