Lecture One
Outline:
Our industrial, market oriented way of making our living is quite unique and new. Most of the world’s population has (at least during recorded history) lived as farmers, tilling the land for nearly all of the things the consumed. Our modern economy only a few hundred years old, the industrial revolution being generally regarded as beginning around the middle of the 18th century (1700’s).
For history’s farming folk, it really made no sense to talk about and “economy” or “economics” as we understand these things. Where we face such things as business cycles, unemployment and inflation which seem to occur for reasons difficult to understand, the subsistence farmer knew exactly why “economic” things occurred. Crops could fail for lack of rain or disease, a plague could decimate “economic life” or marauding bands could destroy crops, steal animals and kill. There was no need for a scientific account of the agricultural economy—things were obvious.
Early, particularly medieval, economic writing had to do with ethics. Since no one was going to advance economically or socially, medieval life [during the period between the fall of Rome, about 450ad and the Renaissance, around the mid 1400’s] centered around issues of faith and salvation. St. Thomas Aquinas wrote about “economic” issues, and his advice was somewhat cautionary. The church (at that time the Catholic Church was the only significant Christian body) regarded commerce as necessary, but risky. Aquinas spoke of the price a merchant or craftsman could properly charge. This was the “Just Price”, a figure that would allow the seller to live in the style of life customary for those in his trade or craft. Advertising was not to be done. Sellers were cautioned to always tell customers about any hidden defects in that being sold. Lending money at interest was strictly forbidden.
The medieval social structure, called Feudalism, arose from the need for defense after the collapse of Rome. People came under the protection of the leaders of warriors. These Feudal lords (the emerging nobility of Europe) provided protection to the peasants in exchange for food from the peasants’ fields, or peasant labor on the lord’s fields. While there were towns and commerce, both we small in scale. The Feudal lords were owed allegiance by their peasants, and in turn owed allegiance to other, greater lords. Eventually, the greatest of the lords would fight one for the title of king—but this occurred later in the medieval period. Feudalism was a logical response to the need for protection, and the gathering of peasants on the lords’ lands (or Manor) was a logical productive mechanism. The grouping of peasants into large farming units split into peasant and the Lord’s fields and the till of both areas by the peasants was called the Manorial System. It endured for over 1,000 years.
Eventually forces emerged which changed Europe from a stagnant, agricultural region into a dynamic commercial force. Among these forces were the Crusades, renewed interest in classical learning, growth in population and improvements in navigation and the rise of science.
The Crusades showed Europeans products and crafts that were prized. Spices, silks and china intrigued European tastes and palettes. More of these products were wanted, and more were brought at great expense from the East.
Population growth spurred the size of towns and increased the pace and scope of commerce.
Improvements in navigation allowed the Europeans to sail forth in search of the spices and other products which they had to purchase at great cost from those who brought them overland from the East.
Increasingly, scientific methods were applied to the processes of production. As a result, new techniques and products were developed. These techniques, such as the mechanical spinning and weaving of cotton, formed the basis of emerging industries.
International trade in spices and other products from the east began well in advance of the rise of industry. The spice trade allowed people to amass great fortunes—something that was nearly impossible in the medieval world. Governments became interested in this trade because it was seen as a source of gold, which was considered wealth; and was necessary to mobilize military forces.
Early writers, called mercantilists, argued that trade was the primary source of wealth and power. To them, it was desirable to sell goods to other countries, but not to buy goods from them. By selling more than the country bought, gold would, on balance, flow into the country. Since the world’s gold was fixed, more gold for our country meant less gold for the others. By successfully trading, the nation would make itself better off, wealthier and more powerful than it’s neighbors.
As industry developed, it began to become clear that trade wasn’t the source of wealth, manufacturing was. As this realization spread, the first serious work on economic theories began.