Download Feudalism

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Economic History
Scott Carson, Ph.D.
The study of economic history is perhaps the most diverse of all economic
methodologies. Traditional price theory models economic events by maximizing a constrained or
unconstrained objective function. Game theory considers the strategic interaction among
economic outcomes to establish possible equilibriums. Econometrics uses historical data to
“validate” economic theories, generally established through price theory. The New Economic
History uses some form of the above models to assess economic outcomes and what caused these
economic events.
In recent years, the study of economic history has experienced a barrage of
methodological criticisms. Game and price theorists claim that there is no underlying theory;
thus, historical economics fails to provide testable hypothesis. However, such criticisms fail to
consider 1993 Nobel prize winner in economics, Robert W. Fogel’s, insight that all economics
contain testable hypothesis whether or not there is an explicit objective function. Many
practicing econometricians would criticize historical economics with the charge that historical
economics lacks relevance because the events occurred so long ago as to leave irrelevant
historical outcomes. These criticisms fail to consider the fact that all econometric exercises are,
by definition, historical. Any attempts to demarcate a period in which economic studies are
relevant and are not relevant prove to be ad hoc, the antithesis of theoretical economics. To
suggest that historical economics is somehow less relevant than other economic methodologies
flies in the face of 1974 Nobel prize winner in economics, F. A. Hayek’s, advice that we can’t
arbitrarily choose which methodologies will or will not prove fruitful simply because we lack the
information to predict which methodologies will and will not be successful. Economics simply
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hasn’t arrived at a “universally” accepted methodology, thus, methodological criticism is
tantamount to claiming to have arrived at truth, independently of what other scholars maintain.
Historical economics is also under attack from the social historians. Traditional
historians suggest that it is the New Economic Historians who are the arrogant ones. Perhaps
this stems from the fact that the New Economic Historians rely on both quantitative and archival
evidence. Few history departments actively seek economic historians, and economic historians
currently on the faculty of history departments are seen as the department’s black sheep. On the
other hand, Marxian economists vehemently oppose the New Economic historian's reliance on
traditional neoclassical economics' price theory and the belief that historical processes are
evolutionary rather than revolutionary.
A brief foray into Marxian philosophy and economics proves useful. Karl Marx thought
that Wilhelm Hegel’s idealistic dialectic was inappropriate. Hegel’s dialectic is thesis, antithesis
and synthesis. The thesis (new idea) is proposed. It encounters its antithesis (competing existing
ideas), afterwhich, the thesis and antithesis merge into a new idea to form the synthesis. Marx
turned Hegel on his head and suggested that Hegel had it all wrong. The dialectic was not
idealistic (existence in ideas) but materialistic (existence is matter). To understand Marx as an
economist it is absolutely necessary to understand Marx as a philosopher. Marxian economics
suggests that the Beurguase (upper class) suppress the proletariat (working classes). I was in a
Marxian graduate program where one of the Marxian professors stood in front of a class of
graduate students and pronounced that one of the stylized facts was that “the upper classes
supress the lower classes.” Physical modes of production (how we put things together) are
disrupted when some new technology is introduced. The result in that the old physical and social
(relationships between labor and capital holders) modes of production are disrupted and the
result is REVOLUTION. Marxian historians love to point to the decline of feudalism and the
rise of capitalism as validity of Marx’s theory. To them the next step in social and economic
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development is socialism. New Economic historians think this line of thinking is way off the
mark. Who says that this transformation from capitalism to socialism has to happen? While
there may be physical and social modes of production, New Economic historians believe that
such a rigid adherence to such a dogmatic theory is unwarranted. Political revolutions may occur
in large discrete steps, but economic revolutions are hard to come by. Even the heralded
industrial revolution was not a revolution as we think of them in the political sense. As evidence,
those living during the era of the industrial revolution hardly new that there was a “revolution”
occurring. New Economic historians believe that history proceeds over a continuous time
horizon. The discrete jumps that Marxians would have us believe occurred lack sufficient
evidence to bank an economic theory.
Having established the relevance of historical economics, a definition proves necessary.
Historical economics is simply the methodology whereby economic theories are assessed.
Accepting this definition suggests that all empirical economics is merely a sub-field of historical
economics. I certainly feel comfortable with this definition. However, this definition is not
complete. Historical economics considers how previous economies and cultures dealt with the
ultimate reality of scarcity. Finally, and perhaps most importantly, historical economics is the
contextual side of growth theory. That is, historical economics considers how we think
economies developed.
Growth and Development
I think Joseph Schumpeter proposed the best definition of growth. Schumpeter was a
professor at Harvard in the first half of the 20th century. Two figures who influenced
Schumpeter deeply were Leon Walras and that fascist bastard, Karl Marx. Both felt capitalism
would eventually fail. Where Marx was nearly gleeful at the prospect, Schumpeter thought it
would come as a great regret. One area in which Schumpeter thought Marx was correct was in
his understanding in the process of economic change, i.e. the materialist dialectic. In 1947, he
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wrote that “only in very rare cases” is economic growth explained by “causal factors such as an
increase in population or the supply of capital.” Growth occurs when economic agents succeed
in doing something more. This doing something more can not be understood before or even
during the fact (think of the industrial revolution). Schumpeter identified this doing this
“something more” as the “creative response of history” and eventually to entrepreneurial activity.
It is the human vitality of an entire group, firm, or economy that sets into play the “creative
response of history.” I like this description of growth and believe it particularly relevant in our
study of economic and business history with our focus on entrepreneurship.
Schumpeter was certainly not the only economist who thought about growth and
development. Adam Smith, the patron saint of economics, was among the first to approach
economic growth from a systematic perspective. Smith thought that growth was brought about
by market extension. Market extension is accompanied with greater labor specialization which,
in turn, leads to changes in technology. This technology leads to greater outputs per units of
inputs, in other words growth. This is Smithian growth. So, growth comes about by population
concentration. This concentration can occur because of reproduction or migration. If, for some
reason, people start having more babies, the population increases which extends the market and
leads to labor specialization and growth. Alternatively, population can increase because people
decide to migrate to a central location, which extends the market and leads to Smithian growth.
Migration immediately extends the market where reproduction lags behind for a generation. So,
we’ve learned at least one thing from economic history that is applicable to current issues. If
there is a boat out in the Atlantic ocean filled with immigrants, do we let them enter based solely
on economic arguments? Over the relevant range, we let them enter to extend the market,
allowing labor specialization. This is what happened during the feudal period when cities and
universities arose. Serfs moved from the countryside to the city where labor specialization
followed. If we don’t like that example, consider a current application. Ceteris peribus, where
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do you think growth is most likely to occur, Crane, Texas or Los Angeles, California? Since the
labor market is more specialized in LA, we’d expect growth to occur in LA. Afterall, workers
are so specialized in LA that they know their jobs inside and out. In Crane, labor isn’t nearly as
specialized, and we wouldn’t think that each worker knows a specific task well enough to bring
about significant innovation. Crane workers might have a variety of tasks requiring a degree of
competence in many different areas. We wouldn’t expect the same degree of innovation per
worker in Crane as in LA.
There is an interesting integration between Schumpeterian and Smithian growth. If we
accept that growth occurs when a group, society or economy shares a “creative response to
history,” (Schumpeterian growth) then growth can, but does not necessarily have to, occur when
populations expand and the market extends. However, if population increases, it does not
necessarily follow that there will be this “creative response to history.” So, may I submit that an
important engine to this “creative response” is an increase in intellectual capacity. This certainly
can account for periods such as the industrial revolution stemming from the enlightenment and
can even account for much of the growth in the 1990s. The creative response to history in the
90s may have been the increase in individuals brought about in the 60s. In the 1960s, a new
wave of intellectual thought swept our culture called the sexual revolution. No matter what you
think of the social and religious implications of the sexual revolution, this new wave of strict
individualism combined with the advent of the computer may led to the computer and the
acceptance of the personal computer and the internet. These technologies and a desire to be an
autonomous economic and social agent may have promoted that drive to these technologies
which are a big part of the engine to our current economic expansion.
There is still an alternative to Schumpeterian and Smithian growth. This is neo-classical
growth theory and is most closely identified with Robert Solow of the Massachusetts Institute of
Technology.
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History of Economics
There is a difference between historical economics and the history of economics.
Historical economics is a methodology that uses mathematics, statistics and history to arrive at
economics truths. The history of economics is the history of economic ideas, too very different
animals. George Stigler, the 1982 Nobel Prize winner in economics, said that there is too high of
a premium placed on originality in economics. I completely agree. There are really a few
important discoveries in economics by a few economists. It is left to the rest of us to apply these
important ideas. So let’s start with some of the most important economic principles. The first
great economist and economic construct was Adam Smith with his theories of specialization and
exchange. The intellectual environment in which Smith operated was the Mercantilist school or
Colbertism. Mercantilism said that a country's wealth was determined by the amount of gold and
silver that it possessed. Smith came out against this Mercantilist position, saying that the true
wealth of a nation was the amount of goods and services that a country can consume. Of course,
gold and silver are only useful to purchase items of wealth. Mercantilists favored colonization
and monopolization of trade, which means those governments that controlled the rules by which
trade operated granted monopolies to certain firms, such as the British and Dutch East Indies
Companies. They obtained these monopolies by paying royalties to the Crown and being
“friends” with the King. Of course, this reduced national wealth since being friends with the
King doesn’t mean you are the low cost or efficient producer. Furthermore, monopolies
increased prices to European households, thus decreasing consumer welfare.
There were other positions of the Mercantilist school that were later demonstrated
inferior to Smith’s classical liberal ideologies. Smith and the classical liberals excoriated the
strong central government and prohibitive (confiscatory) tax rates advocated by the Mercantilists.
They said that the wealth of a nation was not determined by the amount of gold it possessed but
by the amount of goods and services that a country can consume. A country gained wealth by
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producing goods and services that other people and countries want. Furthermore, a country
produced more output for every unit of input by labor and resource specialization. You may ask
how a country is really wealthy if it specializes only in one commodity and produces no other
goods. Smith said let all countries specialize in the goods they are most efficient. After
countries have specialized, they can trade goods with other countries. Since resources are not
distributed uniformly, counties that aren’t efficient at producing wool, but can produce wine, can
get wool from countries that are good at producing wool. To pay for the wool, the good wine
making country can trade wine for wool. The good wool producing country needs wine and
trades it for its wool. So, Smith says a country is made wealthy through specialization and
exchange. Smith also refutes the prevailing economic positions held by governments that
monopolization and retraint of international trade are optimal. Smith advocates competition, not
monopoly. Competition helps consumers, not ingratiated producers. Since all subjects to the
Crown are consumers and not ingratiated producers, a country is made better off with
competition and free international trade. Smith was truly a revolutionary and his ideas can not be
dismissed.
There were other great economists around the time of Smith. David Ricardo was a
British economist who, like Smith, advocated free international trade. However, where Smith
said a country should specialize and exchange, Ricardo said counties should specialize with who
had the lowest opportunity cost, then they could trade with other countries for the goods they
want. Another important economist from this period was Karl (the fascist bastard) Marx. As
we’ve discussed, Marx thought in terms of social and physical modes of production. He
expanded his analysis to social classes where the upper class (beurguasie) suppressed the lower
classes (proletariat) and extracted the surplus value from their labor. I submit that the two
positions of Smith and Marx are two of the most important positions every set forth, not only in
economics but every social science. In the larger context, Smith and Marx represent
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individualism versus social wholes, which radically effects our interpretations of sociology,
psychology, history, political philosophy as well as economics. In Smith’s world, the individual
is the most important element in society and the economy. To Marx, the individual is merely a
cog in the social machine, i.e., society is the focus. Some view this interpretation of Marx as
incorrect; however, if you take Marx to his conclusion, there is no other interpretation that is
appropriate. You can take this a step further and integrate the Smith/Marx interpretation to the
world’s great religion. The Judeo-Christian ethic is similar to Smith’s view where Marx’s view
is closer to Islam/ Confucianism. Hence, no matter what your belief, the positions of Smith and
Marx can not be taken lightly.
Two important economists in the 20th century were Keynes and Friedman. Keynes was
an economist after the turn of the century who predicted World War II due to the conditions of
the armistice and suggested that during the Great Depression government could alleviate the
mass unemployment by engaging in deficit spending. Prior to Keynes, the field of economics
maintained that the proper role of government was limited to the provision to a narrow range.
The market was efficient, so classical economists thought that any intervention by the
government was destabilizing; hence, if the government intervenes, it is unnecessary as the
market will correct itself. Keynes thought that the market was inefficient and government
expenditures could close the gap between desired and actual output. Keynes further advocated a
use of fiscal policy over monetary policy. Monetary policy is the use of money and interest rates
by a Central Bank to smooth the business cycle. Keynes thought that there were times when
monetary policy failed to be effective as a policy tool. Interest rates could be pushed so low
because the price of bonds were priced too high such that bond traders no longer are willing to
trade their financial instruments. Hence, monetary policy can not correct the business cycle.
Keynes said that it was during these periods that fiscal policy takes center stage and saves the
day by increasing aggregate demand, pulling the economy out of its tailspin. According to
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Keynes, the culprit was investment. Investment was “a flighty bird”, subject to business person’s
“animal spirits” or whatever factors make business leaders want to invest. This decreased
demand led to recessions. Government’s investment steps into bridge the gap between what
actual investment and the amount necessary to bring the economy back to equilibrium. Keynes'
real story is that the market is not stable and will fail to produce equilibrium in the absence of
government’s intervention.
Milton Friedman was an economist at Columbia and the University of Chicago who
thought that Keynes got it all wrong with his deemphasis of monetary policy. When John
Meynard Keynes pointed to the Great Depression as an example of the economy’s inability to
correct itself, Milton Friedman proclaimed in his book A Monetary History of the United States,
1867-1960 that it was not that the economy was inherently unstable, in fact the economy was
stable. Rather, it was the Central Bank’s active role in the economy that was destabilizing. As
evidence, Friedman demonstrates that it was the Federal Reserve’s decrease in the money supply
of 25% that exacerbated the economy’s recession.
Friedman also believes that the proper role of government is limited, a return to the
classical school. He thought that labor fooling causes the business cycles that we observe. That
is, Friedman thinks that cycles are due to imperfect information on the part of workers but good
information on the part of employers. Since workers don’t know the real wage they are working
for (they don’t have the incentive to find the real wage) but employers do (they have the
incentive to know the real value of their product), workers are willing to work for a lower real
wage in the face of an unexpected price shock. So, Friedman thinks cycles are due to imperfect
information between employers and employees.
Smith, Marx, Keynes and Friedman are four of the most well known economists. In
deed, the ideas of Keynes and Friedman are variations on themes set out by Smith and Marx.
Smith and Friedman believe the market is efficient; any deviations from equilibrium are
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aberrations and will quickly disappear because prices change to clear the market. Alternatively,
Marx and Keynes believe that the market is inherently unstable, cycles are caused by this
instability and recessions are prolonged because prices and wages are inflexible. These ideas
were significantly influenced by historical events and in turn have, perhaps above any other
contrasting views, influenced the course of human events in the 20th century.
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Feudalism
The death of the Roman Empire fertilized Europe’s soil for the birth of feudalism. For over a
thousand years, the Empire provides stability and a central government to protect her citizens
from nomadic invaders. However, when Germanic tribes migrate into the region around the
Black Sea in 100 ad., the Empire’s time has drawn to a close. In 337 ad., Diocletian divides the
Empire into east and west. Invasions from Magyars, Vikings and barbarians leads to the rapid
decline of the western empire, and by 400 ad., political ineptitude and warring barbarians have
weakened the eastern empire. However, the east will continue as the Holy Roman Empire yet
without the military strength and leadership provided by Rome. Soon, the trade, scientific
progress and civility fostered by Rome’s leadership denigrates into oblivion. The grandest
Empire the world has known is no more.
This paper examines the circumstances and environmental factors leading to the decline of the
Roman and its eventual replacement with feudalism and its subsequent transformation into
capitalism. Section one provides the setting for feudalism’s rise and domination over European
economic, political and social life. Section two examines feudalism in its full expanse across
Europe’s social class and political boundaries. However, the most weight is given to section
three where feudalism’s demise and subsequent transformation into capitalism is examined. The
debate concerning the transformation from feudalism into capitalism is addressed in section four.
I.
The Rise of Feudalism
Rome’s decline brings to Europe a military chaos and political void to Europe that has not
existed for over a thousand years. Highways leading to her market places and military outposts
are left desolate in testament to her retreat. Throughout her history, Rome’s Mediterranean home
has provided the base, both military and economic, that has united east and west in their endless
search for foreign goods and material wealth. But the most important element of Rome’s fall is
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the disappearance of its central power that has held barbarians and warring tribes in check. Her
demise creates a void no power will replicate. Not until 771 ad. will Europe see another empire
that can conquer the barbarians and prevent the chaos that is brought in the wake of Rome’s fall.
From 400 to 768 ad., Europe is inhabited with peoples unfamiliar with civilized society.
Europe’s countryside is sparsely populated in the face of constant threat of wandering
conquerors. The lack of Rome’s rule has created chaos such that economic development is no
longer feasible in an environment where the law is survival, the culture, civility and government
established under Roman Rule are long since memories. Only the Christian church has hidden
Rome’s culture and administrative capacity away for the future.
However, in 768 ad., Charlamagne takes over the crown of his father, Pippin III. Determined to
restore civility to Europe, Charlamagne institutionalizes education in his palace-school at
Aachen. Students from the school jet across Europe educating the nobility and reestablishing the
base of knowledge such that noble rule may return to Europe. However, from 768-805 ad.,
Charlamagne must sub-due Europe’s barbarians and bring them under civilized rule. In order to
raise his required force, he establishes the precursor to the vassal system when he grants lands
from his empire to those mercenary knights who will fight on his behalf. His force is soon
daunting, subduing barbarian tribes in his sweep across Europe. During one particularly bloody
campaign against the Saxon’s, Charlamagne is convinced of their utter savagery and believes
their only hope of civility is in Christianity. Hence, he begins his policy to convert the
vanquished to his Christian religion. The result is that the church is ingratiated under his
direction, and his policies are accommodating to the clergy. There is little wonder that after the
decline of his kingdom and Europe’s return to a leaderless vacuum that the only vestige of order
is once again the church. Meanwhile, the once great Mediterranean seat of European society
shifts north to Charlamagne’s Frankish abode.
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But the Carloginian Empire is not to endure. As early as 787 ad., Viking warriors begin to attack
his kingdom. Upon his death in 814 ad., his Empire transfers to Louis the Pious only to be
divided among Charlamagne’s grandsons Lothair, Louis the German and Charles the Bald in 843
ad.. His once majestic empire suffers Rome’s fate at the hands of Viking, Magyar and Muslim
invasions at some time prior to 900 ad. Europe is again without a strong military power.
However, unlike Rome’s fall, the birth and subsequent decline of the Carolginian Empire
provides the vassal institution that will grow into feudalism.
Feudalism’s propagation as the primary economic and social structure proceeds throughout
Europe in discontinuous steps. By 900 ad., the majority of western Europe has embraced
feudalism’s manorial lifestyle. France is a major factor in its spread. During the tenth century,
the king of France inhabits a small, narrow strip of land near Paris. His vast hinterland outside
Paris is divided amongst his lords. However, several of these large tracks are incapable of peace
as barbarians are still a threat in the countryside. Despite this constant intimidation, the lords at
Anjou, Flanders and Normandy bring peace to their feudal estate. In 1,066 ad., the French lord,
William the Conqueror, leads his host against the Anglo-Saxons where his 5,000 soldiers
pummel the Saxons into submission. A late comer to European feudalism, Britain is introduced
to manorial life and soon converges with the rest of western Europe in employing feudalism as
the building block of European society in the Middle Ages. The stage is set for feudalism to
reign over Europe as the dominant social and economic system for the next six centuries.
II.
Life Under Feudalism
The destruction of Charlamagne’s empire tilts the balance of military power in favor of nomadic
barbarians and invading Norsemen. It appears Europe is about to drift into the chaos that exists
prior to Charlamagne’s rise. However, his reign has solidified institutions that will prevent this
ruinous slide. During feudalism’s evolution, four social institutions arise that come to play major
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social, political and economic roles that prevent Europe’s decay into lawlessness. They are the
landed lords who oversee the manor’s operations, the vassal knights, working peasants and the
Christian church. In conjunction, they will prevent Europe’s decline into pre-Charolingian
anarchy. In cooperation with central kings, the lords will provide and equipped armies who will
combat the invaders. Peasants provide labor, which in turn supports both the manor’s lord and
knights. Given such protection, Europe once again is able to progress in cultural and social
bonds of reciprocity.
Prior to examining the separate institutions of feudalism, we must understand the system upon
which feudalism is predicated. This is the vassal system whereby a landed king or lord invests a
portion of his demesne to a vassal. The following explains the vassal relationships.
The acts constituting the feudal contract were called homage and investiture. The tenant or
vassal knelt before the lord surrounded by his court (curia), placing his folded hands between
those of the lord, and thus became his ‘man’(homme, whence the word homage). He also took
the oath of fealty (fidelitas) of special obligation. This of course was the ancient ceremony of
commendation developed and specialized. The lord in his turn responded by ‘investiture’,
handing to his vassal a banner, a staff, a clod of earth a charter, or other symbol of property or
office conceded, the fief (feodum or Lehn) as it was termed, while the older word benefice went
gradually out of use. This was the free and honorable tenure characterized by military service,
by the peasant, whether free or serf, equally swore a form of fealty and was invested with the
tenement he held of his lord. The feudal nexus thus created essentially involved reciprocity.1
Such is the relationship that exists in manorial life. But as we shall she, feudalism is not merely
a system of ‘contracts’ but a social, cultural and economic institution.
1
Shorter Cambridge Medieval History. p. 418-19.
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First, the landed lords rule the manors. They have control over all that takes place within the
geography of their domain. However, even a lord’s control is not absolute as defense of the
manor from barbarians may require alliance with other manors and a geographical king. Aside
from his warring responsibilities, the lord’s life is spent in supervision, and administration of
manorial detail. Their domicile is the manorial castle that overlooks the domain. Their nights
are spent in the castle’s great hall where they dine, drink and wager with manorial knights while
their ladies serve their every beck and call. The lady’s days are spent supervising domestic detail
and tending to weaving, sewing and spinning.
Essential to each manor is protection offered by the mercenary knights. When called to protect
the manor, knights sweep into battle upon mounted steeds worthy of their armor, battle-ax and
mail. However, away from the battlefield, their lives are spent in relative simplicity. Granted a
fief, their prosperity is tied to what their land yields, and this requires strenuous labor. Their
abode by no means rivals the grandeur of their lord. Indeed, it may be little more than the thatch
roofed hut of the peasant.
The grandeur of the manor rises upon the backs of the lowly peasant. Facing eminent terror
outside the manor’s walls, the peasant is pleased to live under relative security. Yet, security has
its price. In return for protection, peasants work the lord’s demesne in addition to their own.
When construction projects are called for, theirs is the labor that will mix the mud for bricks
from which an edifice will rise. The peasant’s life is spent is squalor. In addition to the thatched
hut, the floor of the peasant’s home, if we can call it such, is strewn with old, mildew-laden
straw. Amidst the stench, we notice rats and vermin that make their home amongst the lowly
peasant.
Lastly, there is the role of the church. During Charlomagne’s reign, the church acquires vast
influence over both believing and savage citizens of Europe. By the high middle ages, the church
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rivals many European kings for civic control because the church has a duel role. It of course has
authority over the spiritual well being of the manor, but it also remains the only institution that
maintains the civic administration fostered by the Romans.
While this system appears to have been a system of mutually advantageous exchange and
contract, closer examination suggests a system of exploitation and dominance. The lord’s vast
estate, while protected by him, is built and maintained by the lord extracting peasant surplus
value. The centralization of manorial protection, law and leadership in the hands of the lord
leads to severe cases of exploitation. Should a serf break a manorial code, he is tried in the
lord’s court. In the absence of checks and balances, this leads to usurpation of peasant rights and
the inevitable abuses that follow.
During Roman rule, trade commerce and towns are relatively safe ventures for a middle class
citizen. However with Rome’s fall, the safety and prosperity enjoyed under the Empire quickly
fades into terror and pillage from barbarian invasions. Yet, with feudalism’s decentralized order
and protection, trade and towns once again begin to flourish. A defining characteristic of these
towns is their provision of centralized urban location. Close proximity to a hinterland in
conjunction with relatively large population leads to the emergence of manufacturing. This
manufacturing base combined with sufficient labor and expanding markets leads to Smith’s
famous, “it is the power of exchanging that gives occasion to the division of labor, so the extent
of this division must always be limited to the extent of that power, or, in other words, by the
extent of the market.”2 The expansion of manufactured goods propagates back to the manor
where demand for city wares rise. Other venues for these city manufactured goods lead to
foreign shores where the reemergence of long distance trade will rock the very foundation of
feudalism. Of course, this division of labor and specialization leads to a new form of labor
2
Smith, Adam. The Wealth of Nations. Oxford University Press. pg. 26.
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exploitation and surplus value. The towns nonetheless bring peasant-migrants flock to them in
droves.
In the face of this renewed form of labor expropriation, the guilds take on a revived importance.
Since the Roman Empire, guilds have existed to regulate and manipulate trade arrangements. To
participate in market activities, it is necessary to join a guild. In feudal Europe, there are two
major guilds: the merchant guild and the artisan guild. While protecting commercial interests of
their members, guilds also have a social role. Comparable to a contemporary fraternity, these
associations not only propagate mutual ties of reciprocity amongst guild members but seek after
one another’s souls. By adopting laws in accord with God’s, the guilds are improving members
lives here on earth but afterwards in Valhalla.
For the most part, life under feudalism creates an environment for its time that is conducive to
economic, social and culture progress. However, the system will not. Indeed, feudalism is
merely one mode of production among others that will exist. One of the last great scholars, Karl
Marx, will examine these modes of production and how their transformations from one mode to
another influences social and economic conditions in their respective spheres. A mode of
production is merely the combination and interaction of the physical means of production (the
tools, inputs and assets required to produce a thing) and the human relationship or social inputs
used in the process of converting resources to useful outputs.3 This relationship between
physical and social means of production always exists without regard to the type of social system
used by a society.
From Mesopotamian Ur to Athens, Greece and Italy’s Rome, the mode of production is slavery.
In this system, the physical means of production is of course a fettered human combined with a
tool. The social means of production is the taskmaster who is omnipresent to punish the slave if
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sufficient work is not forthcoming. With Rome’s decline and the emergence of the Carolingian
Empire, a new mode of production is born in Europe. No longer does the taskmaster legally own
the slave and stand ready to punish, but a lord owns the physical means of production by which
the peasant produces output. And, of course this system has a social means of production where
the landed lord protects the serf from nomadic invaders ready to pillage. This is feudalism, and
Marx traces how the prevailing social means of production come in conflict with the physical
means of production. In other words, the dynamic demands for production leads to the physical
mode of production changing to meet this demand. However, the dynamic physical mode of
production comes into conflict with static social means of production. In other words, landed
nobility is unwilling to accommodate changes that come to Europe. The result is conflict and
revolution. Once again, the mode of production changes. Feudalism becomes capitalism. The
remainder of this paper examines the process by which feudalism becomes capitalism and the
inherent forces by which this transformation occurs.
III.
The Transformation from Feudalism to Capitalism
Of course, the transition from Europe’s feudal order to today’s capitalist economy is not simply
an evolutionary process. In other words, there are what we believe to be causal factors in this
transformation from Europe’s manorial past to today’s contemporary capitalist society. Of the
multiple historical trends that lead to this transformation, there are to factors that appear to
presuppose these trends. The first are the internal factors that produce this transformation from
feudalism to capitalism. These factors include increases in agricultural productivity, expanding
markets with its accompanying division of labor, and population increases. The second set of
factors are external. These include the crusades and black death. Combined, these internal and
3
Oser, Jacob and Stanley L. Brue. The Evolution of Economic Thought. Harcourt, Brace and Jovanovich. p. 171-191.
See also Speigel, Henry William. The Growth of Economic Thought. Prentice-Hall. 1971. p. 455-477.
19
external factors lead to the transformation from feudalism to capitalism. We begin with internal
conditions.
Internal Factors
Basic subsistence is the most fundamental requirements of any individual or society. To this
end, agricultural productivity is a primary concern throughout the middle ages. Early peasant
farmers tend estates with relatively basic tools. The ox, two-wheeled wagon and wooden plow
are standard fare. Fertilization is not yet a recognized means of increasing agricultural
production. But the continued emphasis on agrarian pursuits leads to dramatic changes in output.
Peasants learn agricultural output can be greatly increased by altering their crop rotation from the
open-field or two-field rotation to a three-field rotation. In addition, fertilization becomes a
recognized means of improving agriculture yields. Peasant-farmers learn to increase output by
distributing refuse, animal droppings and refuse from their huts over their fields. Increases in
iron production leads to an iron wedge being placed over the old wooden plow. Oxen are soon
replaced with stronger horses, and the invention of a padded collar for the horse means the horse
can thrust all his power into plowing. In the thirteenth century the old, slow moving twowheeled wagon is replaced with the four-wheeled wagon complete with its rotating front axle.
The former means agriculture distribution is replaced with this superior distribution system.
These changes in agriculture productivity lead to radical changes in agricultural output and trade.
Manors previously to far from the centralized populations of the town are suddenly viable
producers.4 This increase in agriculture technology leads to increased population. More people
are now sustainable with the same inputs. As a result, population increases. As Smith will point
out, increased population allows market expansion and further specialization of labor. This
specialization provides an expanded market for manufactured goods. However, by itself,
4
Mckay, John, Bennett Hill and John Bucler. A History of World Societies. Houghton-Mifflin Company. 1988. p.
358-383.
20
increased agriculture output is insufficient to catapult European society from the feudal mode of
production to a capitalist mode of production.
Increases in agricultural productivity and population growth leads to radical transformations in
the way trade is conducted. After Rome’s decline, trade is at best an unstable proposition.
However, with the rise of towns, agriculture output and population growth expand. The path is
cobbled for an increase in long distance trade. This expansion has dramatic changes upon the
feudal order. Maurice DOB suggests:
The revival of commerce in Western Europe after 1,100 AD and its disruptive effect on feudal
society is a sufficiently familiar story. How the growth of trade carried in its wake the trader and
the trading community, which nourished itself like an alien body within the pores or feudal
society; how with exchange came an increasing percolation of money into the self-sufficiency of
manorial economy; how the presence of the merchant encouraged a growing inclination to barter
surplus products for the market.5
This growing dependence upon the market leads to the abandonment of the social order of
mutual esteem and respect. Money relationships replace previous relationships of reciprocal
reliance and cohesion.
External Factors
In addition to these internal “percolations”, there are external factors nibbling away at the
foundation of feudalism. These two external factors to European society are the infamous
crusades and the grim reaper’s black plague. In the case of the Crusades, Europe experiences a
culture shock on an unprecedented scale. The devastation spread by the Plague decimates
5
DOB, Maurice. Studies in the Development of Capitalism. International Publishers. 1947. p. 37.
21
European social order first by reducing the peasant population, secondly by introducing social
targets of blame for the Plague’s destruction.
Charlamagne’s propagation of Christian ideals upon barbarians becomes a permanent part of the
Christian world. However, in 1054 ad, a serious theological disagreement between the church
occurs between Roman and Greek leadership. The church fails to reconcile and splits into the
Roman Catholic and Greek Orthodox churches. Meanwhile, a new relationship begins to evolve
between the military knight’s role in European feudal society. Recognizing the need for military
influence, the church blurs the distinction between fighting for political ends and warring for
Christ:
At around the turn of the millennium, the attitude of the church toward the military class
underwent a significant change. The contrast between militia Christi and militia saeclularis was
overcome and just as rulership earlier had been Christianized . . . , so now was the military
profession; it acquired a direct ecclesiastical purpose, for war in the service of the church or for
the weak came to be regarded as holy and was declared to be a religious duty not only for the
king but for every individual knight.6
Given this ability, the pope reasserts his power by calling for the crusades. The Holy Land has
fallen into the hands of the infidel and must be reclaimed.
Europe in all her Christian zealotry prepares for the confrontation. Manorial lords prepare and
equip armies of knights. Knights are readied for the battle and in this age of chivalry, their ladies
weep with their parting. But upon their arrival in the Holy Land, these once isolated warriors
experience a world here to unknown. Their small thatched roof huts are dwarfed by the grandeur
of their foes lifestyle. Accustomed to subsistence existence in their northern Europe abodes,
6
Erdmann, C. The Origin of the Idea of the Crusade, translated by Baldwin and Goffart. Princeton University Press.
1977. p. 57.
22
where trade is a small part of their life, the knights experience the riches of their commerce
driven enemies. Upon their victorious return, these knights have experienced a world their
manorial community will never know, but they can not forget.
Returning to their previous role as the manorial defender in an isolated community proves
impossible for these experienced warriors. However, not only have they changed, but the
community they defended is no more. Where the knight’s role as defender had been viewed as
part of the manor’s social structure, he now returns to a world where his military excursion in far
away lands yields him a premium among the common folk and the ladies he left behind. He is
seen as experienced and some how ennobled by his travels, apart from manorial society in both
his mind and theirs. This begins a social change within the manor where the knight does not
merely maintain his role as defender, but he now enjoys the pleasures brought about by his
experience. No longer do the same bonds of relation exist. The culture shock brought with the
crusades has permanently changed feudal society.
The second factor is the terrible black plague. The reemergence of long distance trade in the
twelfth century leads to increased interaction between eastern and western worlds. Shortly after
1300 ad, Italian merchants adopt the three sailed merchant vessel. Prior to this adaptation,
merchants use the single mast vessel which is slower on the seas and increases the time merchant
vessels can operate to one half year. These new ships decrease sailing duration and increase the
shipping season to a year round operation. But this new shipping era also means more ships and
their deadly cargo of flea infested vermin. Meanwhile in 1,331ad, China experiences a deadly
outbreak of bubonic plague. Over the following fifteen years, the long distance trade route
between east and west route slowly transports her deadly cargo through sailing vessels or
merchant caravans to the Crimea in southern Russia in 1,346 ad. From there, it is a short season
until the Pale Horse gallops west in 1,347 ad. Europe’s grim reaper has arrived.
23
Predictably , the poor die in greater number than the developing Bourgeoisie. The upper crust
always enjoys superior health. The death and destruction brought by the plague terrorizes
western Europe unmercifully in 1,347 ad. While it is impossible to obtain accurate numbers,
estimates of the death rate range between 25 and 40%. Anywhere between one and one half to
three million people perish. Facing such losses, Europe understandably searches for the cause,
the medicinal golden fleece that will purge her people from this affliction. Finding none,
Europeans search for a target on to which they can divert God’s wrath. Intensifying their
zealotry, some religious extremists join flagellants who wonder collectively through towns
whipping and gnashing themselves as penance in their effort to avert God’s punishment of
human wickedness. At the other extreme, some seek carnal pleasures in uncontrolled and wild
orgies before the Pale Horse bids them a turn. Both are dealing with mortal uncertainty. Such
uncertainty leads to scapegoating and its acidic influence on social relationships.
Confronting such radical population shifts, feudal Europe is forever changed. As the peasant
population is hardest hit, fewer serfs remain to work the earth. The reduced supply of peasants
initiates a sharp rise in peasant wages. Landed lords find themselves on the defensive. Serfs
now enjoy rising wealth and greater mobility. But in the mode of production struggle between
physical means of production and social relations of production, the lords seek for and obtain
when England passes the English Statute of Laborers of 1,351 ad. The Statute attempts to freeze
labor costs at pre-1,347 levels. However, like most price restrictions, the statute is unsuccessful
and serfs continue to enjoy a higher standard of living. This increased wealth of course comes at
the expense of landlords. A permanent line in the sand is drawn between serfs and lords. Thus,
Europe experiences her radical social transformation from binds of veneration between lords and
his manorial knights and peasants to individualized self-interest without regard to the social
whole. However, the crusades and the Plague are not enough to complete the transformation
24
from feudalism to capitalism. The transformation from feudalism to capitalism is completed
with the commutation of labor services and the rise of the Bourgeoisie capital.
Labor Commutation and Primitive accumulation
After the devastation wrought by the black plague, economic relationships are forever
altered between lords and serfs. However, one still needs the other. The rise of the manufacture
sector in conjunction with the development of towns
leads to many cottage industries where
members of the merchant guild contract out for a serf to spin, build or repair in the serf’s cottage
shop. The merchant owns the physical inputs and brings them to the worker’s shop where the
worker owns the tools and his own labor. These are the economic relationships prior to the
putting-out system. However, the system changes when peasant wages rise following the Black
Death. Lord’s, reeling from the social and economic transformation brought about by the
scourge, concentrate manufacturing operations in a physical location such that control over
production is increased. In other words, the emerging owners of capital are able to extract labor
effort by centralizing the production location. Of course, this is examined and espoused in future
centuries with Frederick Taylor’s Scientific management.
The centralization of productive labor has a second consequence in dismantling the
social order. Workers located in a central location must be organized. This leads to multi-level
separation between management and the shop worker who is the source of production. In the
cottage industry there exists the tiered organization of craftsman, journeyman and apprentice. A
young apprentice starts under the tutelage of an experienced craftsman. Given time, the
apprentice moves up the ladder to journeyman and eventually completes his training to become a
craftsman. However, when this seniority system is transplanting into the factories of the matured
putting-out system and its multi-tiered advancement, the craftsman learns to protect his position
by using the hierarchy as a means of excluding the future advance of those under him: the
25
journeyman and apprentice. Such exclusion leads to a permanent distinction between laborers
and management. The transformation from feudalism to capitalism is nearly complete.
Labor commutation and the putting-out system pave the way for the emergence of
primitive accumulation. Given the merchant class’s extraction of surplus value from workers,
profits accumulate to the emerging bourgeoisie. Yet,
The crucial conditions necessary to make investment in industry attractive on any considerable
scale could not be present until the concentration process had progressed sufficiently to bring
about an actual dispossession of previous owners and the creation of substantial class of the
dispossessed.7
By the 16th century, the merchant class attempts to purchase and foreclose the commons.
Predictably, the victim of this enclosure movement is the working class. Worker-peasants are
now foreclosed from the land their families have worked for generations. Thus, worker-peasants
become the class of “disposed, previous owners” to which DOB refers.
With merchant-capitalists’ lunge for surplus value, they are successful in suppressing labor’s
claim to output. Of course, this separation of labor from its labor value comes at a high price for
both peasants, and the bourgeoisie landlords and merchant-capitalists. For over one hundred
years, revolts persist in a particularly bloody way. But the merchant class eventually prevails,
and receive their spoils in higher profits and capital accumulation. This higher rate of profit
form primitive accumulation serves to solidify the distinction between the working labor class
and growing bourgeoisie. Primitive accumulation has served to change the social mode of
production necessary in manufactured goods and private property. The European transformation
from feudalism to capitalism is complete. We now turn to the debate concerning this
transformation.
7
DOB. p. 185.
26
IV.
The Debate over the Transformation from Feudalism to Capitalism
Of course, the institution of feudalism has not escaped the pervasive scrutiny of economists.
And of course, competing schools interpret its historical role quiet differently. However,
Marxian economists focus on this period most intensely because it provides furtile fields where
Marx’s economic theory blossoms. In this section, we first investigate Henri Pirenne’s thesis
concerning feudalism and its transformation to capitalism. Next, Maurice Dobb’s Studies in the
Development of Capitalism is considered followed by the furious debate his text spawns. In
particular, we examine Sweezy’s, Wallerstien’s and Brennon’s interpretations. We then examine
how neoclassical economists attempt to explain what they think is the political evolution from
manorial life to the city-state. The paper concludes by addressing why western Europe
undergoes this radical transformation from feudalism to capitalism but eastern Europe does not.
While feudalism has received attention prior to Henri Pirenne’s examination, we begin our
examination of the historical debate with Pirenne’s thesis. Prior to Pirenne, the fall of Rome is
viewed in the academic arena as the result of warring Germanic tribes invading the Empire and
pillaging her people. However, Pirenne refutes this notion maintaining that these warring
barbarians do not invade Rome by force but seek to assimilate into her lifestyle such that they
can enjoy the lifestyle that is Rome. His purpose of examining Feudalism is two fold. First, why
feudalism transforms into capitalism. Second, he seeks to explain why Europe’s economic and
political center shifts from the Mediterranean to northern Europe. Indeed, it is this second thesis
he is most concerned with, but as history and academics go, it is the first thesis that receives
greatest scrutiny.
Pirenne’s notion of the transformation from feudalism to capitalism proceeds under the guise that
there is no radical discontinuous jump after Rome’s fall and the emergence of the Carolingian
Empire. Rome falls and Pirenne does not contend the radical political vacuum that results in her
27
demise. However, trade persists and Europe’s relationship with Rome’s Mediterranean world
and western Europe continues. So what causes Pirenne’s transformation from feudalism to
capitalism is two fold. First is the introduction of money into the economy. As Plato, Aristotle
and numerous philosophers elude, money is the acid that dissolves social bonds of reciprocity.
Second is the upheaval brought to Europe by the Islamic invasion of Constantinople. By and
large, what was the eastern half of the Roman Empire is invaded several times at the end of the
tenth century, and it falls on Christian Europe to reclaim the Holy Land. Of course, this
command comes from the Church who has a straggle-hold on much of European politics. This is
Pirenne’s thesis on the transformation from feudalism to capitalism.
By and large, no one accepts Pirenne’s thesis that by itself the introduction of money brings
about the transformation. The result is Maurice Dobb’s Studies in the Development of
Capitalism. There is no doubt Dobb’s Studies revolutionizes the debate regarding the
transformation from feudalism to capitalism. Prior to Dobb’s work, Pirenne’s view permeated
the field of the transformation issue. First, DOB defines feudalism as a mode of production, i.e.
social and physical means of production. Specifically, DOB suggests serfdom, the essential
building block of feudalism, is:
an obligation laid on the producer by force and independently of his own volition to fulfill certain
economic demands of an overlord, whether these demands take the form of services to be
performed or of dues to be paid in money or in kind. . . This coercive force may be that of
military strength, possessed by the feudal superior, or of custom backed by some kind of juridical
procedure or the force of law.8
In other words, the transformation from feudalism to capitalism is over the exploitation of the
working classes. Serfs leave the lords demesne in hordes and converge on the emerging towns.
8
Ibid. p. 35-36.
28
Serfs that remain on the manor are over-worked to maintain the system.9 It was these
developments on the manor, not the emergence of long distance trade, that lead to the decline of
feudalism. Concerning Pirenne’s thesis that the transformation from feudalism to capitalism,
DOB explicitly replies,
To the question whether there is any reason to suppose that the growth of the money economy of
itself should encourage a feudal lord to cancel or relax the traditional obligations of his serfs and
substitute a contractual relationship in their stead, the answer is, I think, bound to be that there is
none.10
What causes the transformation from feudalism to capitalism is the inefficiency of feudalism as a
mode of production. In other words, the static social structure is unable to keep pace with the
dynamic physical means of production. DOB observes,
. . . such evidence as we possess strongly indicates that it was the inefficiency of Feudalism as a
system of production, coupled with the growing needs of the ruling class for revenue, that is
primarily responsible for (feudalism’s) decline; since this need for additional revenue promoted
an increase in the pressure on the producer to a point where this pressure became literally
unendurable.11
The result is revolution. Feudalism becomes capitalism. This is Dobb’s pathbreaking view of
the transformation from feudalism to capitalism. The subsequent fury of debate that ensues in
Dobb’s wake is primarily refinement, mingled with spirited disagreement, of Dobb’s thesis.
Two economists taking up the debate concerning the transformation are Sweezy and Wellerstein.
Sweezy addresses two concerns over Dobb’s transformation conjecture. First, what were the
9
Sweezy, Paul. The Transformation from Feudalism to Capitalism. Edited by Hamilton, Rodney. pg. 37.
10
DOB. p. 41.
11
Ibid. p. 42.
29
factors leading to the ruling class’s increased demand for revenues. Second, DOB must show
that there is an increased flight from the manors. Both factors must be explained by way of
internal pressure12. To the former, Sweezy contends
When we take account of the fact that warfare took its main toll from the upper orders, we may
well doubt whether there was a significant relative growth in the size of the parasitic class. In
the absence of any clear evidence, one way or the other, we would certainly not be justified in
attributing decisive weight to this factor.13
To Dobb’s later point, Sweezy suggests serfs can not just up and leave the manor unless they
have somewhere to go. While the growth of the towns coincides with the emigration of serfs
from manors, the explanation of the emigration needs more. Considering Dobb’s inability to
provide a thorough explanation for these two events, Sweezy suggests Dobb’s theory is an
explanation for the decline in western Europe’s feudalism that is due to the ruling class’s
inability to maintain control over labor power, but not enough to explain the transformation from
feudalism to capitalism.14
Turning to Sweezy’s explanation for the transformation, we see that his explanation is that the
transformation from feudalism to capitalism, like Adam Smith’s, is grounded in the division of
labor. This is due to the separation of agriculture and manufacturing when serfs moved from the
country to developing towns.15 Two positions form the crux of Sweezy’s transformation
argument. First, by incorporating European regions dominated by feudalism into networks of
market activities based on the division of labor makes feudal relations more essentially smallscale capitalist relationships. Secondly, once the division of labor is separated amongst
12
Sweezy. p. 37.
13
Sweezy. p. 38.
14
Ibid. p. 46.
15
Brenner, Robert. “The Origins of Capitalist Development: a Critique of Neo-Smithian Marxism”. p. 33.
30
agriculture and manufacturing into regions of manors and towns, rationalization leads to the
separation from traditional feudalism to capitalist free wage labor.16 In other words, once the
manors are separated from the towns and labor has been divided, capitalism is the result.
A second, related Marxian view is Wallerstien where, like Sweezy, the manor/town
specialization is the transformation from feudalism to capitalism. However, Wallerstein’s
transformation is the separation into agriculture/ manufacturing on a large scale. His
transformation is the division of labor that encompasses the world.
A third view is Brenner’s where he suggests the transformation from feudalism to capitalism is
the result of how feudal property relations are transformed. To address this issue, he proposes
two positions. First, lords and peasants are able to meet implicit objectives to maintain precapitalist property relations. Of course this relationship is the bonds of mutual reciprocity. His
second position can be put in no more eloquent and expository terms than his own:
The initial transition from feudal to capitalist property relations resulted from the attempts by
feudal economic actors, as individuals and collectivities, to follow feudal economic forms or to
reproduce feudal property relations under conditions where, doing so, actually had the effect - for
various reasons - of undermining those relations.17
In sum, Brenner maintains the transformation of feudalism to capitalism is the result of the
dissolution of feudal class relationships. In addition, any attempt to reassert feudal relations after
their transformation results in wholesale slaughter when peasants revolt.
The position most identified with neoclassical economics is that set forth by North and Thomas.
Their position maintains that “serfdom in the western world was essentially not an exploitative
arrangement where lords ‘owned’ labor as in North (American Slavery) . . .”. Rather, it “was
16
Ibid. p. 39.
31
essentially a contractual arrangement where labor services were exchanged for the public good of
protection and justice”.18 Later, North further clarifies his position. The transformation from
feudalism to capitalism has three causes. First, “efficient economic organization is the key to
growth” which “entails the establishment of institutional arrangements and property rights that
create an incentive to channel individual economic effort into activities that bring the private rate
of return close to the social rate of return”.19
Second, and in conjunction with the establishment of property rights, is the rise of the nationstate. Third, the initial factor that begins this transformation is the increase in population.20
These are the factors that begin this transformation from Europe’s manorial life to market
economy.
Western vs. Eastern Feudalism
The conundrum of European economic history is why the west develops into capitalism while the
east remains essentially manorial long after the west adapts to capitalism. Again, different
schools interpret the rate of transformation quite differently. DOB suggests the transformation in
the west is as outlined above. However, labor exploitation persists in the east for centuries after
the west’s fall because both the military strength of sovereign political authorities remains high.21
Thus, feudalism in the east persists long after its decline in the west. Brenner maintains that the
east’s continuation of feudalism depends on the inability of the east’s serf economy to develop
the forces of capitalist production.22 This leads to a decline in eastern labor productivity. The
17
Brenner, Robert. “Feudalism”. New Palgraves Dictionary of Economics. p. 309-315.
18
North, Douglas. “The Rise and Fall of the Manorial System: A Theoretical Model”. Journal of Economic History.
December, 1971. p. 777-803.
19
North, Douglas. Rise of the Western World. Cambridge University Press. 1973. p. 1.
20
Ibid. p. 2
21
DOB. p. 52.
22
Brenner. p. 70.
32
result is that the dynamic physical means of production do not require a change in social means
of production. Therefore, the transformation from feudalism to capitalism is postponed in the
east. North’s explanation is that eastern Europe fails to develop the institutions required for
capitalistic economic growth, i.e. property rights.
V.
Reflections on Feudalism
Hours of fascinating study have brought me to a great appreciation for European economic
history and the transformation from feudalism to capitalism. Interpretations of the
transformation from feudalism to capitalism can be classified into two competing views. The
first is the Smithian view that the transformation is propagated by specialization and division of
labor. This of course leads to segregation between towns and manors. Long distance trade is reestablished. This continues until labor services are commutated and full-blown capitalism is
established.
The second interpretation is that changes in technology and population lead to a change in the
dynamic physical means of production. However, this physical change is not accompanied by
the requisite change in the social means of production. Therefore, Marx’s revolution occurs.
This results in the transformation from feudalism to capitalism.
The third interpretation is the neoclassical. This is the case where the transformation from
feudalism to capitalism is propagated through the establishment of property rights (contractual
relationships), population increase and the rise of the nation-state. Where there is solid evidence
that the change in population leads to the transformation, this explanation fails to tie the
transformation from feudalism to capitalism to the establishment of property rights. As it stands,
the neoclassical position reverts to Pirenne’s theses where contractual-money relationships cause
the transformation from feudalism to capitalism.
33
In sum, the rise and fall of feudalism is a tidal wave that sweeps over Europe. Her continuation
for nearly one thousand years is testament to her import through a historical panorama.
However, her fall leaves Europe ripe for any economic hydra that will rise in the vacuum created
by her demise. In this emptiness, western Europe transforms into a capitalist Leviathan that will
permeate the world. It is for this cause we must understand the transformation from feudalism to
capitalism.
Reading assignment: Rise of the Western World by North and Thomas, 1974. Chapters 1
through 6.
34
Indentured Servitude
Atack and Passell, Chapter 2; p. 26-53.
Galenson, David. "The Rise and Fall of Indentured Servitude." Journal of Economic History.
March, 1984.
The traditional view presented in American history concerning European indentured
servitude is that America was originally populated with convicts and these convicts secured their
freedom by participating in indentured servitude. Noted historian Abbot Emerson Smith
suggests,
Many [indentured servants] were convicts from jails, transported instead of
being hanged; a few were political and military prisoners taken in war and
rebellion. There were rouges, vagabonds, whores, cheats and rabbles of all
description, raked from the gutter and kicked out of the country.
As criminals, these migrants came from the bottom rung of British society and had few, if any,
skills. However, careful examination demonstrates that these servants were not mainly criminals
sent to America because British prisons were full but were frequently skilled workers who
participated in redemption servitude because their wealth in Britain prevented them from
independently to America. This latter interpretation has radically different consequences for the
historical interpretation of the institution of indentured servitude.
I. The Virginia Company and European Indentured Servitude
In 1609, the Virginia Company founded the Jamestown colony made famous through its
association with John Smith and Pocahontas. Confronting the dilemma of supplying laborers to
the colony the company advance credit to workers who had insufficient wealth to cover
migration expenses themselves. In return, migrants promised to pay these migration expenses by
contracting their labor to the company for a specified period. This was the beginning of
redemption servitude in America.
35
The institutions of European indentured servitude went through a series of
transformations during its initial period. Originally, the Virginia Company recruited workers in
England where upon they were sent to the American colonies. Upon arrival, these recruits
worked directly for the company, which had control of the migrant's physical production for the
duration of their life. For the most part, the physical conditions in which workers liver were
difficult. The work they were called upon to bear was arduous and their meals meager. The
company retained the right to extract labor from migrants by means of corporal punishment. Of
course, this system was not popular among indentured servants and translated into lower output.
In addition, some of the servants who had already relocated to the Jamestown Colony escaped
from the system, opting to go it alone or live with American Indians. The Company soon
recognized the disadvantages of this system and revamped its procedures for dealing with
servants. Instead of immigrating workers to work on the colony's plantation, the company
covered migration expenses but turned around and rented servant to colonial planters. However
the Company quickly encountered a dilemma in that planters failed to provide servants with
sufficient physical requisites to keep them in good physical and high moral spirits. As a result,
the Company again revamped the system to its final form where instead of renting recruits out to
planters, the Company outright sold the recruits contracts. Thus the Company was able to
circumvent its principle-agent dilemma that had evolved during its second evolutionary phase. If
this final form of European indentured servitude any resemblance to America's African slavery, it
is merely the result of servitude's preparatory role, which it played in the development of African
slavery. Indeed, wherever black slavery came to play an important role in ante-bellum America,
European indentured servitude had preceded it. We now examine three papers that examine
European indentured servitude.
II.
From Servant to Freeholder: Status, Mobility and Property Accumulation in
Seventeenth Century Maryland
36
Of course, European servitude was implemented outside of the Virginia colony. The
Virginia Company was merely the original institution where Britain's practice of "servants in
husbandry" evolved into the institution of European indentured servitude. As such, European
indentured servitude is the subject of many academic studies. From a historical economic
perspective, scholars such as Joseph Ferrie, Farley Grubb and David Galenson have examined
the institution. We begin our exposition of European servitude with Russell Menard's From
Servant to Freeholder. Menard provides a history of servitude as it was practiced in Maryland
during the 17th century. His purpose is to distinguish trends in the status, mobility and
accumulation of European indentured servants sent to Maryland. To address these trends,
Menard gathers records of 275 servants who entered the Maryland servant Market before 1642.
Of these 275 servants, 158 remained in Maryland and survived to be free men. These 158
servant records are used to address mobility, accumulation and status issues.
There are two types of mobility discussed in Menard: post-contract mobility and mobility
of progeny of indentured servants. First, upon contract completion, servants were generally
without family or without financial reserves to fall back on. As a result, there were three
different tacks former servants took. First, since many of these newly released servants were
without means to independently begin to farm their own land, many resorted to hiring themselves
out to private planters in return for wages. With frugality and luck, these men could acquire the
necessary capital to start and harvest their own farms. Second, former servants could lease land
and raise the staple crop of the 17th century, tobacco. Finally, former servants could negotiate
with landowners to sharecrop on part of owners' land. These three intermediary institutions
allowed the migrant to make the transition from servant to free worker.
The second type of mobility Menard considers is the inter-generational mobility of
former servants' progeny. As we shall she, a decisive factor in the servants' ability to accumulate
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wealth in the time in which the servant entered the servant trade. As such, many first generation
migrants were able to gain a foothold in the accumulation ladder by virtue of their early arrival.
Unfortunately for the progeny of these servants, such rapid assent up the accumulation ladder
was more difficult as the colony expanded and skilled laborers migrated to the colony to compete
away many of the advantages of early parental arrival. Hence, of the 158 linked observations,
only the son of one migrant did substantially better than his first generation father. The majority
of the remaining families found themselves in the same station as their parents. As such, there
were restrictions on the upward mobility of the progeny of indentured servants.
With respect to status, Menard follows the lead of Abbot E. Smith who uses participation
in government as a sign of mobility status. Menard finds a high percentage of the 158 servants
went beyond service in minor posts to positions of authority and status in their communities. A
few rose to serve on provincial counsels, many served jury duty or time in the militia while two
rose to the position of justices. Hence, it is apparent that many servants who arrived early
ascended to positions of status and respectability, a far cry from the traditional assessment that
these servants were from the dregs of British society.
Finally, Menard's examination of wealth accumulation among former servants
demonstrates that the opportunity available to many servants allowed then to accumulate land
holdings. Eventually, fifty percent of Menard's 158 acquired land in Maryland. However, the
holdings of most former servants were small, typically fifty to four hundred acres. For the most
part, these servants-turned-landowners lived simple lives. Their small parcels and acquired
livestock met the requirements of early colonial living. However, through marriage, thrift or
business acumen, there were those who acquired vast tracks of land and wealth. For example
Zachery Wade and Henry Adams acquired large land accumulation. Wade rose to a position
among the top five percent of wealth holders while Adams died with an estate valued at some569
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pounds sterling, a large colonial sum. Hence, like all distributions, servants acquired varying
amounts of real wealth. Some servants-turned-holders acquired large tracts while others settled
with small parcels. Nevertheless, Menard's point is clear. Servants rose to positions of wealth
that were hardly those of unskilled criminals drawn from the lowest segments of British society.
III. The Rise and Fall of Indentured Servitude in the Americas: An Economic Analysis
Among the great contributions to economic history is Galenson’s White Servitude in
Colonial America. In White Servitude, Galenson draws thousands of contracts signed by servants
in their countries of orientation. This data set allows Galenson to construct a composite of factors
that were sought by recruiting agents while they selected migrants to participate in the institution
of indentured servitude. He finds the company was selecting primarily males in their late teens
and early twenties. Like Menard, Galenson also finds that servitude was a system by which
workers without sufficient wealth in their counties of origination could relocate to the American
colonies. Recruits could borrow against their future earning power to pay their costs of
transatlantic migration. It is against this backdrop Galenson presents his Rise & Fall of
Indentured Servitude.
After summarizing the evolution of European servitude, Galenson, like Menard, suggests
the institution develops because the wealth of a potential recruit was insufficient to cover
migration expenses. However, Galenson examines servitude from the perspective of a principalagent dilemma. During the second phase in the evolution of European servitude where planters
would rent servants for a specified period, the Virginia Company quickly realized the perverse
incentives offered the planter concerning the care for servants. To resolve this concern, the
company eliminated the dilemma by selling the contract outright.
A second principal-dilemma Galenson addressed is the incentive structure provided
servants upon arrival at their colonial destinations. The original design of the Virginia Company
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was to provide passage to the colony where the servant was to work for the company until their
debt was repaid. During the initial period, servants worked in a gang overseen by an overseer. If
sufficient work was not forth coming, overseers could resort to corporal punishment, and during
these early years, a few of the servants who attempted to escape from the company were hanged
of shot to death. Where the company originally believed they would enjoy the returns of a
monopsonist, it quickly realized these negative enforcement mechanisms were a disincentive. A
new incentive scheme was instigated that focused on the carrot rather than the stick to overcome
this principal-agent dilemma. As positive incentive schemes, the company altered contractual
obligations (1), provided more food and clothing than subsistence, occasionally offered wages to
servants while under contract and increased freedom dues above the legal requirement. It was
thus planters manipulated incentive schemes presented servants in their employ.
Galenson goes on to examine an additional redemption servitude institution that existed
in the nineteenth century, Chinese contractual labor. Like Europeans in the seventeenth an
eighteenth centuries, Chinese workers lacked sufficient wealth to migrate independently to the
United States. However, advancing credit to Chinese immigrants were Chinese Six companies,
former Chinese immigrants who were willing to bear the risk associated with advancing credit
Chinese workers. A major distinction between Chinese workers and European servants was the
use of explicit contracts in the latter while the use of such contracts is absent in the former. To
ensure repayment, Chinese companies negotiated agreements with Trans-Pacific shippers to not
return Chinese workers unless they were in good credit standing with the Six companies. Hence,
Six companies were able to recover relocation expenses in the absence of legally binding
contract.
In the end, Galenson asserts there was a well functioning market in European servants
and both recruits and planters responded to incentives provided in the servant market. We now
turn to Farley Grubb’s work that not only demonstrates a well functioning market to exogenous
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factors, but also explains the substitution and eventual elimination of servitude for African
slavery.
IV. The Liverpool Emigrant Servant Trade and the Transition to Slave Labor in the Chesapeake,
1697-1797: Market Adjustments to War.
As Galenson points out, everywhere African slavery existed indentured servitude
presupposed it. However, this begs the question of what caused the substitution of black slavery
for European servitude. Farley Grubb addresses this conundrum. There are numerous
explanations why slavery was substituted with slave labor. However, this explanation lacks
staying power in that from 1680 through the 1720s the majority of servants were immigrating to
the Chesapeake. A second hypothesis has it that post servitude opportunities declined in the
colonies while opportunity increased in Britain. Yet this explanation falls apart in that, as
Menard points out, this trend was going on long before the 1690s. Enter Farley Grubb with his
explanation that the substitution away from servants into slavery was the direct result of
exogenous shocks from Kin William’s and Queen Anne’s wars to the servant market. Hence, the
substitution of slaves for servants is the direct result of market forces. This can best be explained
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with Grubb’s comparative statics.
Figure 1 demonstrates the essence of Grubb’s hypothesis: the substitution of African slaves for
European servants was the direct result of King William’s and Queen Anne’s War. Beginning in
the upper left-hand diagram, war brought increase demand for workers in the British labor
markets. Moving right, this translates to a reduced flow of recruits participating in European
redemption servitude during war years. The lower left-hand diagram demonstrates that during
war, the demand for slaves increased due to the reduced flow of servants while the supply of
slaves simultaneously is reduced due to the increase in costs of migrating slaves. The net effect
is that the ratio of servants to slaves falls during war years and rises during peace. Hence, the
substitution of slave labor for servants is the result of war.
To support this conjecture, Grubb demonstrates that servants leaving Liverpool were
going to the Chesapeake. Second, he shows that matured workers who typically possessed skills
demonstrated a shift in between war and peace. During periods of peace, older workers opted to
participate in European servitude while periods of war were characterized by reduced
participation of older workers. Grubb interprets this to mean that war years brought domestic
opportunity providing means by which older workers could prosper domestically. Third, he
addresses the relative magnitudes of the shifts in supply and demand of the servant/slave market.
He does this by measuring servant costs to shippers. He finds that contract lengths fell during
intra-war periods that signify servants were more costly during this period. In conjunction, war
increased the relative value of teenagers to adults. Hence, war years were characterized with
falling servant ages as older migrants were replaced with younger migrants. Finally, Grubb finds
the market among agents changed between war and peace years. During periods of peace, the
market among agents was quite concentrated while periods of war saw a decentralization among
agents. This was the result of increased transatlantic risk. Hence, agents reduced their
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proportional size of the market. The market for servant distribution changed between war and
peace.
In sum, these three articles dispel the traditional view regarding European indentured
servitude. A series of incentive schemes were provided during their periods for indenture that
were both positive and negative, the carrot or the stick. While workers faced difficult
environmental and occupational circumstances, they had the opportunity to rise to status and land
holding. And the selection of who was sent to the colonies was not a conglomeration of criminals
and vagabonds but rather an organized market where buyers and sellers of servants exchanged
rights to future work effort in trade for paying migration expenses. Finally, the end of servitude
and the rise of slavery was also the result of market forces as servants, planters and shippers
sought to deal with external shocks brought on by King William’s and Queen Anne’s wars.