Societies and Economic Systems [ 57 ]
between householding and money-making. He excused Aristotle by
conceding that the "subjects of knowledge that are concerned with
man run into one another; and in the age of Aristotle were not easily
distinguished." Aristotle, it is true, did not recognize clearly the impli-
cations of the division of labor and its connection with markets and
money; nor did he realize the uses of money as credit and capital. So
far Jowett's strictures were justified. But it was the Master of Balliol,
not Aristotle, who was impervious to the human implications of
money-making. He failed to see that the distinction between the prin-
ciple of use and that of gain was the key to the utterly different civiliza-
tion the outlines of which Aristotle accurately forecast two thousand
years before its advent out of the bare rudiments of a market economy
available to him, while Jowett, with the full-grown specimen before
him, overlooked its existence. In denouncing the principle of produc-
tion for gain as boundless and limitless, "as not natural to man," Aris-
totle was, in effect, aiming at the crucial point, namely, the divorce of
the economic motive from all concrete social relationships which
would by their very nature set a limit to that motive.
Broadly, the proposition holds that all economic systems known
to us up to the end of feudalism in Western Europe were organized
either on the principle of reciprocity or redistribution, or house-
holding, or some combination of the three. These principles were in-
stitutionalized with the help of a social organization which, inter alia,
made use of the patterns of symmetry, centricity, and autarchy. In this
framework, the orderly production and distribution of goods was se-
cured through a great variety of individual motives disciplined by
general principles of behavior. Among these motives gain was not
prominent. Custom and law, magic and religion cooperated in induc-
ing the individual to comply with rules of behavior which, eventually,
ensured his functioning in the economic system.
The Greco-Roman period, in spite of its highly developed trade,
represented no break in this respect; it was characterized by the grand
scale on which redistribution of grain was practiced by the Roman ad-
ministration in an otherwise householding economy, and it formed
no exception to the rule that up to the end of the Middle Ages, markets
played no important part in the economic system; other institutional
patterns prevailed.
From the sixteenth century onward markets were both numerous
and important. Under the mercantile system they became, in effect, a
[ 58 ] The Great Transformation
main concern of government; yet there was still no sign of the coming
control of markets over human society. On the contrary. Regulation
and regimentation were stricter than ever; the very idea of a self-
regulating market was absent. To comprehend the sudden changeover
to an utterly new type of economy in the nineteenth century, we must
now turn to the history of the market, an institution we were able
practically to neglect in our review of the economic systems of the
past.
C H A P T E R F I V E
Evolution of
the Market Pattern
T
he dominating part played by markets in capitalist economy to-
gether with the basic significance of the principle of barter or ex-
change in this economy calls for a careful inquiry into the nature and
origin of markets, if the economic superstitions of the nineteenth cen-
tury are to be discarded.*
Barter, truck, and exchange is a principle of economic behavior de-
pendent for its effectiveness upon the market pattern. A market is a
meeting place for the purpose of barter or buying and selling. Unless
such a pattern is present, at least in patches, the propensity to barter
will find but insufficient scope: it cannot produce prices.
1
" For just as
reciprocity is aided by a symmetrical pattern of organization, as re-
distribution is made easier by some measure of centralization, and
householding must be based on autarchy, so also the principle of bar-
ter depends for its effectiveness on the market pattern. But in the same
manner in which either reciprocity, redistribution, or householding
may occur in a society without being prevalent in it, the principle of
barter also may take a subordinate place in a society in which other
principles are in the ascendant.
However, in some other respects the principle of barter is not on a
strict parity with the three other principles. The market pattern, with
which it is associated, is more specific than either symmetry, centric -
ity, or autarchy—which, in contrast to the market pattern, are mere
"traits," and do not create institutions designed for one function only.
Symmetry is no more than a sociological arrangement, which gives
* Cf. Notes on Sources, p. 280.
t Hawtrey, G. R., The Economic Problem, 1925, p. 13. "The practical application of
the principle of individualism is entirely dependent on the practice of exchange." Haw-
trey, however, was mistaken in assuming that the existence of markets simply followed
from the practice of exchange.
[59]
[ 60 ] The Great Transformation
rise to no separate institutions, but merely patterns out existing ones
(whether a tribe or a village is symmetrically patterned or not involves
no distinctive institution). Centricity, though frequently creating
distinctive institutions, implies no motive that would single out the
resulting institution for a single specific function (the headman of a
village or another central official might assume, for instance, a variety
of political, military, religious, or economic functions, indiscrimi-
nately). Economic autarchy, finally, is only an accessory trait of an ex-
isting closed group.
The market pattern, on the other hand, being related to a peculiar
motive of its own, the motive of truck or barter, is capable of creating
a specific institution, namely, the market. Ultimately, that is why the
control of the economic system by the market is of overwhelming con-
sequence to the whole organization of society: it means no less than
the running of society as an adjunct to the market. Instead of economy
being embedded in social relations, social relations are embedded in
the economic system. The vital importance of the economic factor to
the existence of society precludes any other result. For once the eco-
nomic system is organized in separate institutions, based on specific
motives and conferring a special status, society must be shaped in such
a manner as to allow that system to function according to its own laws.
This is the meaning of the familiar assertion that a market economy
can function only in a market society.
The step which makes isolated markets into a market economy,
regulated markets into a self-regulating market, is indeed crucial. The
nineteenth century—whether hailing the fact as the apex of civiliza-
tion or deploring it as a cancerous growth—naively imagined that
such a development was the natural outcome of the spreading of
markets. It was not realized that the gearing of markets into a self-
regulating system of tremendous power was not the result of any in-
herent tendency of markets toward excrescence, but rather the effect of
highly artificial stimulants administered to the body social in order to
meet a situation which was created by the no less artificial phenome-
non of the machine. The limited and unexpanding nature of the mar-
ket pattern, as such, was not recognized; and yet it is this fact which
emerges with convincing clarity from modern research.
"Markets are not found everywhere; their absence, while indi-
cating a certain isolation and a tendency to seclusion, is not associated
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