This section is from the "Elementary Principles of Economics" book, by Richard T. Ely and George Ray Wicker. Also available from Amazon: Elementary Principles Of Economics: Together With A Short Sketch Of Economic History
General Characterization. We have said on an earlier page that real material civilization begins with making things; it is with the stages in which men make things that we have now to deal. Speaking very generally, we may say that men make things in either of two ways : by the hands directly, sometimes assisted by simple tools; or by the hands indirectly, through the mediation of machinery, generally propelled by other than man's power. As was natural, man in his progress came first to make things with his hands directly, learning later to quicken and improve his work by the use of machinery and the employment of power produced by animals or wind or steam. The very word " manufacture," which we use to represent the idea of making things, meant in earlier days making things by hand, as the Latin words from which the longer word is formed indicate. As the word has since had an extension of meaning, we may say that there are two kinds of manufacture: (1) hand manufacture, and (2) power manufacture. Hand manufacture is the foundation of the fourth stage.
It goes without saying that labor and capital the fruit of past labor used for increasing the product of the labor of the day now become more important than ever before. Man by his skill transforms raw materials: he learns to weave fabrics and to fashion things in wood and metal; to use inanimate, as well as animate, nature. The chief results of this will be more clearly seen as we discuss them under separate headings. coming of manufacture, therefore, self-interest leads men to specialize so far as the needs and circumstances of the time will permit them to do so with profit. Hence, in this stage, we find division of occupations, whereby some men become blacksmiths, some shoemakers, some weavers, etc. Many surnames, such as Smith, Baker, Joyner, Taylor, owe their origin to a time when such specialization was more remarked upon than at present.
2. Commerce. We have more than once mentioned the fact that there can be little commerce so long as men are mostly engaged in the same kind of business. But when communities become larger; when their wants grow more various and their goods consequently of greater extent and diversity; when, finally, it becomes possible for men to specialize in their occupations, commerce becomes not so much a result as a necessary incident. When each man has his trade and makes articles of only one kind, he will neither want all the things that he makes, nor make all the things that he wants. He must make exchanges. And so, whenever manufacture develops, we find trade growing up with it as a necessity. We cannot say that manufacture results in commerce, nor that commerce results in manufacture. We must rather look upon the two as mutually causing each other, their joint cause lying in the growing culture and wants of mankind. This stage, on account of the appearance of commerce, is frequently designated as the trades and commerce stage, but it may also be designated more simply as the handicraft stage, inasmuch as it is dominated by handicrafts, and commerce has in this stage far less significance than in modern times. With the growth of commerce, some men find it profitable to spend all their time in exchanging goods which other men make, earning their compensation by saving the makers the greater time and trouble which direct exchanges would necessarily involve. Moreover, different countries also find an advantage in exchanging their respective products, and here again men of special training are needed to carry on the work of exchange. Such commerce as grows up during this stage between different countries or communities is much handicapped by the inadequate means of communication; but where goods can be carried by water, commerce, even in bulky commodities, takes on considerable proportions.
3. Money. Of course, for such a general system of exchange, barter was entirely inadequate. Among primitive peoples barter is the only mode of effecting exchanges, and travellers among savage tribes tell amusing stories of the difficulties experienced in securing goods by such a system. We cannot here enter into a full discussion of the limitations of barter, but we may speak of one of the chief requisites for any exchange by barter, the need of what one writer has called coincidence of desire. By this expression it is meant that before an exchange can take place by barter, the man who has a superfluity of one good and wants another must find a second person whose superfluity and want are reciprocal to his own. The rarity of such coincidence is itself sufficient to prevent barter from serving as an efficient method of exchange. In the course of time, as men bartered one with another, it was found that certain things were more generally acceptable than others, and that some one thing or some few things were most generally acceptable. These generally acceptable goods have varied in different stages of economic develop--ment and in different places. Among primitive peoples, articles of adornment have usually held such a place. As people grew to learn that such articles were generally acceptable, they would use them more and more in their exchanges, and the frequency of use would in turn increase the recognized utility of possessing them. Without going further with our explanation, we may say that, spontaneously and in large part by unconscious processes, there has always grown up among every people some one generally accepted and recognized medium of exchange or some few things that have been so recognized. As this medium grew in acceptability and cognizability, it took on more and more the character of what we know as money. It was during the handicraft or trades and commerce stage that gold and silver, already much used for this purpose, came to have that universal recognition for their desirability in exchanges that made them money.
4. Cities. Among those employed in agricultural pursuits, there is a tendency to form village communities, but in the agricultural stage such communities cannot become populous, because agriculture requires a scattered population. Manufacture, on the other hand, has an opposite tendency. If men are to live by their trades and by exchanging with one another, it is important that they be near one another. Thus cities, situated conveniently for commerce on the coast or on great rivers, develop whenever men learn to manufacture.
5.The Gild System. New forces coming into society do not take care of themselves. So the trades had to organize in order to reduce their business to some kind of order. Each trade had its gild, which specified in detail how the business should be carried on, how many should be admitted to it, and how the trade should be learned. Where, as was usual, the gilds controlled the government of the cities, these rules were early sanctioned by law.
6. Political Freedom. Throughout most of Europe the agricultural stage had culminated in the feudal system. Under that system the feudal lord occupied a commanding position, very like that held by a patriarch in an earlier pastoral state, and owned the land occupied by the tribe or people. The tillers of the soil had become serfs, who, though they could not be sold away from the land, were obliged to stay on the lord's domain and work for him for such reward as he chose to give them, or such as custom and public opinion, powerfully backed up by the Church, had established. Slavery thus gave way before serfdom. The manufacturing cities very naturally became rivals of these great feudal estates. The lords, feeling their power threatened, bitterly opposed the cities. And so there were wars and alliances and treaties, until finally the cities conquered, as they were bound to do in the end. These cities were free cities, and serfs who fled to them were accepted and made free. Thus feudalism began to break down, and in the gradual disappearance of slavery and serfdom, man's progress in the art of getting a living resulted in another great step toward liberty and humanity.
1. Uncivilized man gets his living by hunting or fishing, or by
2. Economic activity in the earliest stage is largely isolated.
3. Hunting tribes differ in character from fishing tribes, owing to the difference in the conditions of their life.
4. The domestication of animals, leading to the pastoral stage, assures subsistence, introduces slavery, and increases wealth.
5.The pastoral stage has little landownership or commerce, and is marked by frequent tribal migrations.
1.What is the economic mark of savagery ? How do hunting and
fishing tribes differ ? Why ?
2.What is the economic mark of semi-civilization? What stages have this as their special character?
3.What other economic changes from the earlier stage are found in the pastoral stage ?
4.What is the fundamental difference between the agricultural stage and the pastoral? What economic results flow from this difference ?
5.What is the economic mark of civilization? What stages have this special character?
6.What is the relation between trades and commerce ?
7.What great economic institutions grew out of trades and commerce?
See references at close of preceding chapter. Also: —
Ashley, W. J.: Introduction to English Economic History and Theory,
Ch. I, § 6. Bücher, C.: Industrial Evolution, p. 154. Cunningham, W.: The Growth of English Industry and Commerce, Ch. IV, § 114.
Early Stages Of Industrial Development Ely, R. T.: Studies in the Evolution of Industrial Society, Part II, Ch. XII. Genesis, Ch. XIII.
Maine, Sir Henry: Early Law and Custom, Ch. VIII. Rogers, J. E. Thorold: Work and Wages, Ch. III, pp. 55-66.