Monday, May 09, 2005

Last Economic History

One of today's biggest questions is how much should the government intervene in a nation's economy. Some prefer that it should do all it can, other say it should keep its hands off. History though seems to have used the former one more often. Why? Because interconnected economies probably aided the rise of politics. Since then, the two have often been intertwined.
This will be the last of the Early Economic History Posts so read on!
We return to our village in a time of great change. It has just come into contact with another village and there has been an exchange of goods. Even this small amount of goods greatly changes the economy, the comodities are rare, and highly prized. Some in the village start to see a possible source of wealth. The other village had seemed to be eager to get their goods. If they could get enough of an exchange, they would be very rich. Therefore, some of these people load up a large amount of native goods, and start travelling to the new village. Only a few actually find their way there. But these soon strike a fortune, they get great amounts of the items that are higly prized at home for a price that seems very reasonable to them. When these return, things really change.

Money brings influence, and influence is politics. The new goods make these first merchants so rich their position in the village skyrockets. They can now buy huge amounts of land and still have enough money to farm it, and enough to buy a new house. These merchants soon become an enormous boon to the village, and they start realizing it. Pretty soon more villages are discovered and a trading system emerges. Merchants could go to several cities in the same trip. As their wealth increases their power does too. They have the wealth needed to make large improvements to their village. They earn respect, and this respect grows. Soon the wealthy merchants form a primitive ruling class, and the modern world is under way.
After this things really begin to become complex. Cultures advance and eventually some become civilizations. A new era in human history starts.


The Sovereign Editor said...

Scriptor said:

"One of today's biggest questions is how much should the government intervene in a nation's economy. Some prefer that it should do all it can, other say it should keep its hands off."

I prefer the libertarian answer: the state should only intervene to prevent the taking of things from people through force or fraud. The tough question, though, is when does economic pressure count as force? When is crushing your business opposition like stealing from them?

For example, the government determined that insider trading is like stealing from the public shareholders, so it is forbidden. Underselling your opponent at a clear loss to yourself is clearly an assault on their business, so that is also forbidden. Being able to produce more widgets more cheaply, however, (unless you are using slave labor or something) is not like stealing from your opponent, even if you put them out of business. Any more intervention by the state than this sort of thing, I think, can led to more problems then it solves.

States like Singapore, however, do very well even though the economy and the state are pretty much integrated.

Sorry, this isn't my best writing, I'm really tired today.

GeoBandy said...

I realize you're using a simplified example here, but be careful of using TOO simple an example and leaping to conclusions from it. In early societies, political influence probably developed earlier among the priestly and/or warrior classes (depending on the society)than among merchants. And the merchant class would have developed subject to some extent to regulation, interference, taxation, etc. by those other elites.

The Sovereign Editor said...

Wow, I was tired. GeoBandy is correct. In feudal Japan, for example, merchants were looked down upon by the Samurai ruling class, and subject to heavy regulation. It has actually been my observation that most of the ancient civilizations rose to power by the enslavement of the farmer by warriors. The United States is one of the few exceptions to this... well, after a certain point anyway. Now I'm simplifying... I thinl I'll just stop now while I'm ahead.