Abstract
The purpose of the following chapter is to trace the historical origins of our present-day concept of wealth, by examining how human perceptions of wealth have evolved over previous eras. These changing perceptions are important to understanding our present predicament — which is to “undervalue” the contribution of nature to our economies. This misalignment between our exploitation of nature and the creation of wealth is fundamental to the structural imbalance in modern economies. In subsequent chapters, we explore the causes and consequences of this imbalance.
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Notes
Thomas Piketty (2014) Capital in the Twenty-First Century. Cambridge, MA: Harvard University Press, p. 46.
Raymond W. Goldsmith (1985) Comparative National Balance Sheets: A Study of Twenty Countries, 1688–1978. Chicago: University of Chicago Press.
Thus, in the system of national income accounts of economies, it is assumed that the financial balance of an economy, i.e., the net acquisition of financial assets (new assets acquired less new liabilities) should be zero. The rationale behind this assumption is explained by Dudley Jackson (1982) Introduction to Economics: Theory and Data. London: The Macmillan Press, p. 543: “… it appears to make common sense that the sum of all the sectors’ financial balances must in principle sum to zero because a financial asset (a claim on someone) cannot be acquired without a corresponding acceptance of a financial liability by someone else: for the system as a whole the total of — new — financial assets acquired (plus) and total — new — financial liabilities accepted (minus) must in principle match each other exactly, so that their algebraic total is zero.” As Jackson further explains (p. 85), this assumption of a zero financial balance between new assets and new liabilities in an economy is essential to the economic principle that all investments in an economy must equal all savings: “Thus any system of financial balance equations can be rearranged to show the equivalence of the total flow of saving to the total flow of investment. To subtract total investment from total saving, as does the equation for the sum of financial balances, must therefore give a total of zero.” Of course, including net foreign-owned assets in the aggregate financial assets of an economy is important. For example, if new domestic-owned assets exceed new domestic-owned liabilities in an economy, then a person or enterprise in the economy is clearly accumulating foreign assets abroad (accepting a financial liability incurred by someone located overseas). Conversely, if new liabilities exceed new assets in the domestic economy, then someone is clearly borrowing overseas; i.e., foreign residents or enterprises are accumulating domestic financial assets.
“Free exchange: the real wealth of nations.” The Economist, 30 June 2012. Available at http://www.economist.com/node/21557732. See also United Nations University (UNU)-International Human Dimensions Programme (IHDP) on Global Environmental Change and United Nations Environment Programme (UNEP) (2012) Inclusive Wealth Report 2012. Measuring Progress Toward Sustainability. Cambridge: Cambridge University Press,
Edward B. Barbier (2011) Capitalizing on Nature: Ecosystems as Natural Assets. Cambridge: Cambridge University Press.
See Eric Alden Smith, et al. (2010) “Wealth Transmission and Inequality among Hunter-Gatherers”, Current Anthropology, 51(1): 19–34. This article is one of a series of papers appearing in a special section of Current Anthropology from a detailed and comprehensive study of the transmission of wealth and inequality in prehistoric societies, including hunter-gatherer and early agricultural societies.
The classic treatise on the domestication of animal and plant societies and its impact on early human society is Jared Diamond (1997) Guns, Germs, and Steel: The Fates of Human Societies. New York: WW Norton & Co.
See also Peter Bellwood (2005) First Farmers: The Origins of Agricultural Societies. Oxford: Blackwell Publishing.
In chapter 2 of my book, Edward B. Barbier (2011) Scarcity and Frontiers: How Economies Have Developed Throug h Natural Resource Exploitation. Cambridge and New York: Cambridge University Press, I document the role of natural resource scarcity, innovation and the availability of new “farming” frontiers in explaining the Agricultural Transition. That is, natural resource scarcity and frontier land expansion played a pivotal role in both the development of early agriculture and its spread from the primary areas of origin to other regions in the world. Climate change, the extinction of large prey, and population pressure may have confined populations of hunter-gatherers to isolated but resource-rich ecological zones near rivers, lakes and other aquatic systems. These populations were the first to try early farming. The development and spread to other regions was facilitated both by trade and the migration and settlement of farmers into nearby sparsely populated or unpopulated territories with suitable soils, rainfall and other environmental conditions for agriculture. The availability of such land in neighboring regions was clearly an important “pull factor”. One important “push factor” was population pressure and environmental degradation in previously cultivated and grazed areas. A second “push factor” was the evolution of farming technologies and agro-pastoral systems that made the early farmers more mobile and allowed them to transfer these systems to new lands and regions. In favorable areas such as the rich and productive floodplains of Southwest Asia, new agronomic techniques, irrigation and the development of new agricultural commodities created food and raw material surpluses that were instrumental to urbanization, manufacturing and trade, and of course, the basis of the creation and accumulation of wealth.
Samuel Bowles, Eric Alden Smith and Monique Borgerfhoff Mulder (2010) “The Emergence and Persistence of Inequality in Premodern Societies: Introduction to the Special Section”, Current Anthropology, 51(1): 7–17.
Herbert Kaufman (1988) “The Collapse of Ancient States and Civilizations as an Organizational Problem”, in Norman Yoffee and George L. Cowgill (eds), The Collapse of Ancient States and Civilizations. Tucson, Arizona: University of Arizona Press, chapter 9, p. 231.
J. J. Spengler (1980) Origins of Economic Thought and Justice. Carbondale, IL: Southern Illinois University Press, p. 40.
Gordon V. Childe (1950) “The Urban Revolution”, Town Planning Review, 21(1): 3–17. There is no doubt that, once launched circa 3000 BC, the process of urbanization has continued unabated globally ever since. For example, in his study of the emergence of important world cities over the past 5000 years,
George Modelski (2003) World Cities — 3000 to 2000. Washington DC: Faros 2000,.p. 111, concludes that “the human experience of the past 5000 years” with urbanization “can be understood in a unitary perspective as one continuous process, with considerable ups and downs but one that can be portrayed and understood in one uninterrupted sequence.”
See, for example, Azar Gat (2002) “Why City-States Existed? Riddles and Clues of Urbanization and Fortifications”, in Mogens H. Hansen (ed.) A Comparative Study of Six City-State Cultures. Copenhagen: The Danish Royal Academy, pp. 125–138. The author does acknowledge that that fortification for defense was not a principal factor in the cities of Ancient Egypt, although Gat (p. 130) suggests that the geographical isolation of the kingdom may have been a possible explanation why: “Finally, where the defensive motive barely existed at all, as in the kingdom of Egypt, which had been unified on a grand scale very early in the development of civilization in the Nile Valley and which was largely sheltered by geography, the peasants continued to live in the countryside and around un-walled market towns, whereas cities were few and functioned as ‘consumptive’ metropolitan administrative and religious centers.”
Rondo Cameron and Larry Neal (2003) A Concise Economic History of the World: From Paleolithic Times to the Present. Oxford: Oxford University Press, pp. 26–28;
Gat (2002) “Why City-States Existed? Riddles and Clues of Urbanization and Fortifications”, in Mogens H. Hansen (ed.), A Comparative Study of Six City-State Cultures. Copenhagen: The Danish Royal Academy, pp. 125–138;
George Modelski (1999) “Ancient World Cities 4000–1000 BC: Centre-Hinterland in the World Systems”, Global Society, 13(4): 383–392;
and George Modelski (2003) World Cities — 3000 to 2000. Washington DC: Faros 2000, chapter 2.
William Easterly, Diego Comin and Erick Gong (2007) “Was the Wealth of Nations Determined in 1000 BC?”, Global Economy and Development Working Paper #10. Washington, DC: The Brookings Institute, September 2007.
See, for example, Stephen Mithin (2003) After the Ice: A Global Human History: 20,000–5,000 BC. Cambridge, MA: Harvard University Press;
Andrew Sherratt (1997) Economy and Society in Prehistoric Europe: Changing Perspectives. Princeton, NJ: Princeton University Press.
For further discussion of core-periphery trade in Ancient Egypt, see Jerry H. Bentley (1993) Old World Encounters: Cross-Cultural Contacts and Exchanges in Pre-Modern Times. Oxford: Oxford University Press; Rondo Cameron and Larry Neal (2003), op. cit.;
Donald J. Hughes (2001) An Environmental History of the World: Humankind’s Changing Role in the Community of Life. London: Routledge;
and Peter Temin (2005) “Mediterranean Trade in Biblical Times”, in Ronald Findlay, Rolf G. H. Henriksson, Håkan Lindgren and Mats Lundahl (eds) Eli Heckscher, International Trade, and Economic History, Cambridge, MA: MIT Press, chapter 6, pp. 141–156.
See Patrick T. Culbert (1988) “The Collapse of Classic Maya Civilization”, in Norman Yoffee and George L. Cowgill (eds), The Collapse of Ancient States and Civilizations. Tucson, Arizona: University of Arizona Press, chapter 4, pp. 69–101; Donald J. Hughes (2001), op. cit.;
and Kevin J. Johnson (2003) “The Intensification of Pre-Industrial Cereal Agriculture in the Tropics: Boserup, Cultivation Lengthening, and the Classic Maya”, Journal of Anthropological Archaeology, 22: 126–161.
See Justin Jennings (2006) “Core, Peripheries and Regional Realities in Middle Horizon Peru”, Journal of Anthropological Archaeology, 25: 346–370
and Darrell La Lone (2000) “Rise, Fall, and Semi-Peripheral Development in the Andean World-System”, Journal of World-Systems Research, 6(1): 67–98.
For further discussion of the global expansion and significance of the Silk Road trade routes, see Jerry H. Bentley, (1993) op. cit.; Christopher K. Chase-Dunn and Thomas D. Hall (1997) Rise and Demise: Comparing World-Systems. Boulder, Colorado: Westview Press;
David Christian (2000) “Silk Roads or Steppe Roads? The Silk Roads in World History”, Journal of World History, 11(1): 1–26;
Philip D. Curtin (1984) Cross-Cultural Trade in World History. Cambridge: Cambridge University Press;
and Liu Xinru (1995) “Silks and Religions in Eurasia: c. A.D. 600–1200”, Journal of World History, 6: 25–48. Although many commodities were ultimately traded through these routes, silk (in exchange for gold and silver) was the principal and most important good, and the de facto medium of exchange. This is highlighted by Chase-Dunn and Hall (1997, p. 164), op. cit.: “Silk did not travel directly from China to Rome. Rather, it passed through several stages. At the eastern end of the trade many local lords, either nomad leaders or rulers of the ‘Western countries’ acquired more silk than they could consume, either themselves or as ‘gifts’ to followers or payment for other goods or services. Hence many local states and nomad leaders acquired a great deal of surplus silk, and they actively sought new markets for it. Indeed, silk was so common, it was often used for money… Silk was often processed, including unraveling and reweaving, in Syria or on the borderlands between the Parthian Empire and the Roman Empire.”
The growth in international trade during 1000–1500 may have heralded the emergence of a world economy, but full integration of world markets, or “globalization”, would be a process that would take many centuries to occur. See Kevin H. O’Rourke and Jeffery G. Williamson (2002) “When Did Globalisation Begin?”, European Review of Economic History, 6: 23–50.
A similar sentiment is expressed by Janet Abu-Lughod (1989) Before European Hegemony: The World System A.D. 1250–1350. New York: Oxford University Press, pp. 352–353, who refers to the rise of “an incipient world system” over 1250–1350. She notes that “although it was not a global system, since it did not include the still-isolated continental masses of the Americas and Australia, it represented a substantially larger system than the world had previously known. It had newly integrated an impressive set of interlinked subsystems in Europe, the Middle East (including the Northern portion of Africa), and Asia (coastal and steppe zones).”
Based on Angus Maddison (2003) The World Economy: Historical Statistics. Paris: Organization for Economic Cooperation and Development, tables 8a and 8b.
For economic analysis and overview of the core-periphery, or North–South, trade relationships of the emerging world economy of 1000–1500, see Barbier (2011) Scarcity and Frontiers, op. cit., chapter 4; Ronald Findlay (1998) “The Emergence of the World Economy”, in Daniel Cohen (ed.), Contemporary Economic Issues: Proceedings of the Eleventh World Congress of the International Economics Association, Tunis. Volume 3. Trade Payments and Debt. New York: St Martin’s Press, pp. 82–122;
and Ronald Findlay and Kevin H. O’Rourke (2007) Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton, NJ: Princeton University Press, chapter 3.
Several scholars have noted the relationship between global frontier and economic expansion and the rise of the West. One of the earliest was Walter P. Webb (1964) The Great Frontier. Lincoln: University of Nebraska Press, who suggested (p. 13) that exploitation of the world’s “Great Frontier”, present-day temperate North and South America, Australia, New Zealand and South Africa, was instrumental to the “economic boom” experienced in the “Metropolis”, or modern Europe: “This boom began when Columbus returned from his first voyage, rose slowly, and continued at an ever-accelerating pace until the frontier which fed it was no more. Assuming that the frontier closed in 1890 or 1900, it may be said that the boom lasted about four hundred years.”
See also William H. McNeill. 1982. The Great Frontier: Freedom and Hierarchy in Modern Times. Princeton, NJ: Princeton University Press;
Eric L. Jones (1987) The European Miracle: Environments, Economics and Geopolitics in the History of Europe and Asia, 2nd edn. Cambridge: Cambridge University Press;
and Kenneth Pomeranz (2000) The Great Divergence: Europe, China, and the Making of the Modern World Economy. Princeton, NJ: Princeton University Press.
On the history of coinage and money in relationship to early modern economies and trade, see Fernand Braudel (1967) Capitalism and Material Life 1400–1800. New York: Harper & Row;
and John Kenneth Galbraith (1975) Money: Whence It Came, Where It Went. London: Andre Deutsch.
For the pre-1500 African slavery statistics, see R. A. Austen (1979) “The Trans-Saharan Slave Trade: A Tentative Census”, in H. A. Germany and J. S. Hogendorn (eds) The Uncommon Market: Essays in the Economic History of the Atlantic Slave Trade. New York: Academic Press.
For a discussion of the history of slavery in Africa before 1500, see Christopher Ehret (2002) The Civilizations of Africa: A History to 1800. Charlottesville: University Press of Virginia.
This estimate is from Colin McEvedy and Richard Jones (1978) Atlas of World Population History. London: Penguin Books, p. 215. Note that over this same period, 1500–1810, the authors suggest that the traditional “Arab” supply of African slaves to the Middle East was about 1.2 million. Actual shipping records indicate that Europeans sent almost eight million slaves to the New World between 1500 and 1867.
See David Eltis, Stephen D. Behrendt, David Richardson and Herbert S. Klein (1999) The Trans-Atlantic Slave Trade: A Database on CD-ROM. Cambridge: Cambridge University Press. There was also considerable undocumented and illegal trade in slaves over this period, so historical shipping records are likely to underestimate the true volume of the slave trade and should be considered a minimum number. Thus the estimate of ten million slaves shipped by McEvedy and Jones may be close to the actual trade figures.
As described by Ronald Findlay (1993) “The ‘Triangular Trade’ and the Atlantic Economy of the Eighteenth Century: A Simple General-Equilibrium Model”, in R. Findlay (ed.), Trade, Development and Political Economy: Essays of Ronald Findlay. London: Edward Elgar, p. 322, “the pattern of trade across the Atlantic that prevailed from shortly after the time of the discoveries down to as late as the outbreak of the American Civil War came to be known as the ‘triangular trade’, because it involved the export of slaves from Africa to the New World, where they produced sugar, cotton, and other commodities that were exported to Western Europe to be consumed or embodied in manufactures, and these in turn were partly exported to Africa to pay for slaves.”
Patrick K. O’Brien and Stanley L. Engerman (1991) “Exports and the Growth of the British Economy from the Glorious Revolution to the Peace of Amiens”, chapter 8 in Barbara L. Solow (ed.), Slavery and the Rise of the Atlantic System. Cambridge: Cambridge University Press, p. 207.
See also Barbier (2011) Scarcity and Frontiers, op. cit., chapter 6; and Joseph E. Inikori (1992) “Slavery and Atlantic Commerce”, American Economic Review, 82(2): 151–157.
See especially Nathan Nunn (2008) “The Long-Term Effects of Africa’s Slave Trades”, Quarterly Journal of Economics, 123(1): 139–176. During the trans-Atlantic slave trade, the three regions where slaves were taken in greatest numbers correspond to a specific group of modern-day African states: the “Slave Coast” (Benin and Nigeria), West Central Africa (Zaire, Congo and Angola), and the “Gold Coast” (Ghana). Nunn finds that the slave trade adversely affected the long-term economic development of these states and others in the interior who supplied slaves for export. In addition, because the African regions that were most severely impacted by the slave trade tended to have the least developed political systems, after independence these countries continued to have weak and unstable states, as well as slower economic growth.
Findlay (1993, p. 342), o p. cit. However, David Eltis and Stanley L. Engerman (2000) “The Importance of Slavery and the Slave Trade to Industrializing Britain”, The Journal of Economic History, 60(1): 123–144, pp. 137–138, note that Britain’s export expansion could have just as much been a result of the Industrial Revolution as a cause of it: “A striking feature of the markets for British goods between 1775 and 1850 is their wide geographic range, suggesting an ability to sellin whatever markets happened to become available. This in turn indicates that the late expansion of the British plantation sector and the subsequent strengthening of connections between the British economy and the world outside its empire are more plausibly seen as results of industrialization than as causes. In short, export expansion should be seen as the result of an outward shift in supply as well as a growth of demand.”
Daron Acemoglu, Simon Johnson and James A. Robinson (2005) “The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth”, American Economic Review, 95(3): 546–579.
See also Daron Acemoglu and Simon Johnson (2012) Why Nations Fail: The Origins of Power, Prosperity and Poverty. New York: Crown Publishers.
See, for example, Ronald Bailey (1992) “The Slave(ry) Trade and the Development of Capitalism in the United States: The Textile Industry in New England”, in Joseph E. Inikori and Stanley L. Engerman (eds), The Atlantic Slave Trade: Effects on Economies, Societies, and Peoples in Africa, the Americas, and Europe. Durham, NC: Duke University Press, chapter 8, pp. 205–246;
Stephen J. Hornsby (2005) British Atlantic, American Frontier: Spaces of Power in Early Modern British America. Hanover and London: University Press of New England;
Donald W. Meinig (1986) The Shaping of America: A Geographical Perspective on 500 Years of History, vol. 1, Atlantic America, 1492–1800. New Haven: Yale University Press;
and Donald W. Meinig (1993) The Shaping of America: A Geographical Perspective on 500 Years of History, vol. 2, Continental America, 1800–1867. New Haven: Yale University Press;
and David Meyer (2003) The Roots of American Industrialization. Baltimore: Johns Hopkins University Press.
See, for example, Peter Temin (1991) “Free Land and Federalism: A Synoptic View of American Economic History”, Journal of Interdisciplinary History, 21(3): 371–383.
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Barbier, E.B. (2015). The Origins of Economic Wealth. In: Nature and Wealth. Palgrave Macmillan, London. https://doi.org/10.1057/9781137403391_2
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