The Self-Regulating Market and the Fictitious Commodities [ 73 ]
political system; its status and function were determined by legal and
customary rules. Whether its possession was transferable or not, and
if so, to whom and under what restrictions; what the rights of property
entailed; to what uses some types of land might be put—all these
questions were removed from the organization of buying and selling,
and subjected to an entirely different set of institutional regulations.
The same was true of the organization of labor. Under the guild
system, as under every other economic system in previous history, the
motives and circumstances of productive activities were embedded in
the general organization of society. The relations of master, journey-
man, and apprentice; the terms of the craft; the number of appren-
tices; the wages of the workers were all regulated by the custom and
rule of the guild and the town. What the mercantile system did was
merely to unify these conditions either through statute as in England,
or through the "nationalization" of the guilds as in France. As to land,
its feudal status was abolished only insofar as it was linked with pro-
vincial privileges; for the rest, land remained extra commercium, in
England as in France. Up to the time of the Great Revolution of 1789,
landed estate remained the source of social privilege in France, and
even after that time in England Common Law on land was essentially
medieval. Mercantilism, with all its tendency toward commercializa-
tion, never attacked the safeguards which protected these two basic el-
ements of production—labor and land—from becoming the objects
of commerce. In England the "nationalization" of labor legislation
through the Statute of Artificers (1563) and the Poor Law (1601) re-
moved labor from the danger zone, and the anti-enclosure policy of
the Tudors and early Stuarts was one consistent protest against the
principle of the gainful use of landed property.
That mercantilism, however emphatically it insisted on commer-
cialization as a national policy, thought of markets in a way exactly
contrary to market economy, is best shown by its vast extension of
state intervention in industry. On this point there was no difference
between mercantilists and feudalists, between crowned planners and
vested interests, between centralizing bureaucrats and conservative
particularists. They disagreed only on the methods of regulation:
guilds, towns, and provinces appealed to the force of custom and tra-
dition, while the new state authority favored statute and ordinance.
But they were all equally averse to the idea of commercializing labor
and land—the precondition of market economy. Craft guilds and feu-
[ 74 ] The Great Transformation
dal privileges were abolished in France only in 1790; in England the
Statute of Artificers was repealed only in 1813-14, the Elizabethan Poor
Law in 1834. Not before the last decade of the eighteenth century was,
in either country, the establishment of a free labor market even dis-
cussed; and the idea of the self-regulation of economic life was utterly
beyond the horizon of the age. The mercantilist was concerned with
the development of the resources of the country, including full em-
ployment, through trade and commerce; the traditional organization
of land and labor he took for granted. He was in this respect as far re-
moved from modern concepts as he was in the realm of politics, where
his belief in the absolute powers of an enlightened despot was tem-
pered by no intimations of democracy. And just as the transition to a
democratic system and representative politics involved a complete re-
versal of the trend of the age, the change from regulated to self-
regulating markets at the end of the eighteenth century represented a
complete transformation in the structure of society.
A self-regulating market demands nothing less than the institu-
tional separation of society into an economic and a political sphere.
Such a dichotomy is, in effect, merely the restatement, from the point
of view of society as a whole, of the existence of a self-regulating mar-
ket. It might be argued that the separateness of the two spheres obtains
in every type of society at all times. Such an inference, however, would
be based on a fallacy. True, no society can exist without a system of
some kind which ensures order in the production and distribution of
goods. But that does not imply the existence of separate economic in-
stitutions; normally, the economic order is merely a function of the
social order. Neither under tribal nor under feudal nor under mercan-
tile conditions was there, as we saw, a separate economic system in so-
ciety. Nineteenth-century society, in which economic activity was iso-
lated and imputed to a distinctive economic motive, was a singular
departure.
Such an institutional pattern could not have functioned unless so-
ciety was somehow subordinated to its requirements. A market econ-
omy can exist only in a market society. We reached this conclusion on
general grounds in our analysis of the market pattern. We can now
specify the reasons for this assertion. A market economy must com-
prise all elements of industry, including labor, land, and money. (In a
market economy money also is an essential element of industrial life
and its inclusion in the market mechanism has, as we will see, far-
The Self-Regulating Market and the Fictitious Commodities [ 75 ]
reaching institutional consequences.) But labor and land are no other
than the human beings themselves of which every society consists and
the natural surroundings in which it exists. To include them in the
market mechanism means to subordinate the substance of society it-
self to the laws of the market.
We are now in the position to develop in a more concrete form the
institutional nature of a market economy, and the perils to society
which it involves. We will, first, describe the methods by which the
market mechanism is enabled to control and direct the actual ele-
ments of industrial life; secondly, we will try to gauge the nature of the
effects of such a mechanism on the society which is subjected to its
action.
It is with the help of the commodity concept that the mechanism
of the market is geared to the various elements of industrial life. Com-
modities are here empirically defined as objects produced for sale on
the market; markets, again, are empirically defined as actual contacts
between buyers and sellers. Accordingly, every element of industry is
regarded as having been produced for sale, as then and then only will
it be subject to the supply-and-demand mechanism interacting with
price. In practice this means that there must be markets for every ele-
ment of industry; that in these markets each of these elements is orga-
nized into a supply and a demand group; and that each element has a
price which interacts with demand and supply. These markets—and
they are numberless—are interconnected and form One Big Market.*
The crucial point is this: labor, land, and money are essential ele-
ments of industry; they also must be organized in markets; in fact,
these markets form an absolutely vital part of the economic system.
But labor, land, and money are obviously not commodities; the postu-
late that anything that is bought and sold must have been produced for
sale is emphatically untrue in regard to them. In other words, ac-
cording to the empirical definition of a commodity they are not com-
modities. Labor is only another name for a human activity which goes
with life itself, which in its turn is not produced for sale but for entirely
different reasons, nor can that activity be detached from the rest of life,
be stored or mobilized; land is only another name for nature, which is
not produced by man; actual money, finally, is merely a token of pur-
chasing power which, as a rule, is not produced at all, but comes into
* Hawtrey, G. R., op. cit. Its function is seen by Hawtrey in making "the relative
market values of all commodities mutually consistent."
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