Adam Smith, anthropology, C.R.E.A.M., Encyclopedia, heterodox economics, Ilana E. Strauss, money, neoclassical economics, social formation, The Atlantic, The Myth of the Barter Economy, The Wealth of Nations, Wu-Tang Clan
LUMPENPROLETARIAT—Cash rules everything around me/C.R.E.A.M. get the money/dolla, dolla bill ya’ll, was the popular refrain from the Wu-Tang Clan, as many others before and since. Such an observation conveys a sentiment borne from an awareness that there’s a certain cutthroat reality about how money permeates contemporary human existence. As long as one has money, however it may have been obtained, one can take comfort in life’s comforts and pleasures. Without money, regardless of the lack of jobs or opportunities, one very quickly becomes persona non grata.
Money is a peculiar convention, which conceals complex social relations imbedded within our money-based society. Looking at the nature and origins of money from an academic perspective, we’ve likely been taught that money developed as an alternative to the inconvenience of barter, which, we are told by uncritical economics textbooks and uncritical educators, preceded the use of money for people to exchange the daily necessaries of life. But, as anthropologists, such as David Graeber, point out, this narrative of barter preceding money is proving to be a myth. And it seems to be more than an innocent mistake of a crude pedagogical device or tautological simplification, as David Graeber argues in Debt: The First 5,000 Years, because this myth “makes it possible to imagine a world that is nothing more than a series of cold-blooded calculations.”
In a new article for The Atlantic, which explores actual anthropological evidence of various indigenous societies toward sussing out pre-money social formations , Ilana E. Strauss writes :
“But the harm may go deeper than a mistaken view of human psychology. According to Graeber, once one assigns specific values to objects, as one does in a money-based economy, it becomes all too easy to assign value to people, perhaps not creating but at least enabling institutions such as slavery (in which people can be bought) and imperialism (which is made possible by a system that can feed and pay soldiers fighting far from their homes).”
THE ATLANTIC—[26 FEB 2016] The Myth of the Barter Economy
Adam Smith said that quid-pro-quo exchange systems preceded economies based on currency, but there’s no evidence that he was right.
Imagine life before money. Say, you made bread but you needed meat.
But what if the town butcher didn’t want your bread? You’d have to find someone who did, trading until you eventually got some meat.
You can see how this gets incredibly complicated and inefficient, which is why humans invented money: to make it easier to exchange goods. Right?
This historical world of barter sounds quite inconvenient. It also may be completely made up.
The man who arguably founded modern economic theory, the 18th-century Scottish philosopher Adam Smith, popularized the idea that barter was a precursor to money. In The Wealth of Nations, he describes an imaginary scenario in which a baker living before the invention of money wanted a butcher’s meat but had nothing the butcher wanted.“No exchange can, in this case, be made between them,” Smith wrote.
This sort of scenario was so undesirable that societies must have created money to facilitate trade, argues Smith. Aristotle had similar ideas, and they’re by now a fixture in just about every introductory economics textbook. “In simple, early economies, people engaged in barter,” reads one. (“The American Indian with a pony to dispose of had to wait until he met another Indian who wanted a pony and at the same time was able and willing to give for it a blanket or other commodity that he himself desired,” read an earlier one.)
But various anthropologists have pointed out that this barter economy has never been witnessed as researchers have traveled to undeveloped parts of the globe. “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money,” wrote the Cambridge anthropology professor Caroline Humphrey in a 1985 paper. “All available ethnography suggests that there never has been such a thing.”
Humphrey isn’t alone. Other academics, including the French sociologist Marcel Mauss, and the Cambridge political economist Geoffrey Ingham have long espoused similar arguments.
When barter has appeared, it wasn’t as part of a purely barter economy, and money didn’t emerge from it—rather, it emerged from money. After Rome fell, for instance, Europeans used barter as a substitute for the Roman currency people had gotten used to. “In most of the cases we know about, [barter] takes place between people who are familiar with the use of money, but for one reason or another, don’t have a lot of it around,” explains David Graeber, an anthropology professor at the London School of Economics.
So if barter never existed, what did? Anthropologists describe a wide variety of methods of exchange—none of which are of the “two-cows-for-10-bushels-of-wheat” variety.
Communities of Iroquois Native Americans, for instance, stockpiled their goods in longhouses. Female councils then allocated the goods, explains Graeber. Other indigenous communities relied on “gift economies,” which went something like this: If you were a baker who needed meat, you didn’t offer your bagels for the butcher’s steaks. Instead, you got your wife to hint to the butcher’s wife that you two were low on iron, and she’d say something like “Oh really? Have a hamburger, we’ve got plenty!” Down the line, the butcher might want a birthday cake, or help moving to a new apartment, and you’d help him out.
Learn more at THE ATLANTIC.
 For a useful article on the Marxian concept of social formation, see:
ENCYCLOPEDIA—Social formation is a Marxist concept referring to the concrete, historical articulation between the capitalist mode of production, persisting precapitalist modes of production, and the institutional context of the economy. The theory of the capitalist mode of production—its elements, functioning at the enterprise level and the level of market relations among enterprises (e.g., processes of competition, concentration, and centralization), and its contradictions, tendencies, and laws of motion—can be found in
Karl Marx’s Capital ( 1967) The capitalist mode of production as such is an abstraction, accessible to research only through social formations; that is, through its concrete, historically specific manifestations in nation states, regions within nations (e.g., the South), or regions encompassing nations (e.g., the European Union). Though Marx (1818–1883) did not define this concept, its meaning and significance can be inferred from his work, particularly from this statement:
The specific economic form, in which unpaid surplus-labor is pumped out of direct producers, determines the relationship of rulers and ruled … and, in turn, reacts upon it as a determining element. Upon this, however, is founded the entire foundation of the economic community which grows out of the production relations themselves, thereby simultaneously its specific political form. It is always the direct relationship between the owners of the conditions of production to the direct producers.… which reveals the innermost secret, the hidden basis of the entire social structure, and … the corresponding specific form of the state. This does not prevent the same economic basis—the same from the standpoint of its main conditions—due to innumerable different empirical circumstances, natural environment, racial relations, external historical influences, etc., from showing infinite variations and gradations in appearance, which can be ascertained only by analysis of the empirically given circumstances. (Marx  1967, vol. 3, pp. 791–792)
Marx postulates here a necessary, dialectical interrelation between relations of exploitation and political relations, between economic and social systems, a point previously made as follows: “The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness” (Marx  1970, p. 20). The historical specificity of the relations of production is crucial for understanding the social formation in its universality (i.e., as a capitalist social formation) and in its particularity because, empirically, “the same economic basis” (i.e., the capitalist mode of production) will show “infinite variations” due to a social formation’s unique characteristics among which, the presence and persistence of precapitalist modes of production are of key importance. This is why the study of social formations entails the investigation of the articulation of modes of production; that is, the specific ways in which the capitalist mode of production affects precapitalist modes of production, altering them, modifying them, and even destroying them (Wolpe 1980, p. 2).
The relationship between the capitalist mode of production, social formations, and social change has been interpreted in determinist and dialectical ways. Literal, atheoretical readings of the work of Marx and Friedrich Engels (1820–1895) reduce their views to technological and economic determinism, a result produced also by sophisticated but undialectical readings (e.g., Cohen 1978) that ignore the dialectical nature of Marx’s thought. Marxist concepts are essentially material and social; for example, a machine, in itself, is a physical object that becomes a means of production or a productive force when it enters the production process in the context of historically specific relations of production. Changes in the forces of production occur, it follows, always in the context of political struggles. Cohen, on the other hand, attributes to the productive forces a primary, determinant role in historical change, and he radically divides the social (e.g., relations of production) from the material or extrasocial (i.e., nature, humans, forces of production). Cohen’s undialectical materialism and determinism has to rely, unavoidably, upon transhistorical sources of change: a universal tendency of the productive forces to develop and a “somewhat rational” human nature capable of coping with scarcity (Cohen 1978, pp. 132–160). From this standpoint, then, historical changes are the effect of changes in the forces of production, undialectically understood as mere technological change. Class struggles play no role in historical change for political actors are reduced to rationally adapting to the effects of changing circumstances.
A determinist understanding of Marx would lead social scientists to expect that the penetration of the capitalist mode of production in social formations where precapitalist modes of production are widespread would soon produce qualitative changes in their economic system (e.g., modification or destruction of the precapitalist modes of production) and their superstructure (e.g., culture, legal, and political institutions). Determinist perspectives, however, underestimate the resilience of the noneconomic characteristics of social formations and the extent to which production is a thoroughly social activity that requires social and cultural conditions of possibility that cannot be instituted by decree. Despite appearances, for example, the drastic economic changes introduced in Russia after 1917 and in Eastern Europe after World War II (1939–1945) were, to some extent, superficial, for those countries quickly reverted to capitalism. There are many complex economic and political reasons why revolutionary change did not produce deep and qualitative superstructural changes, but reliance on the determinant and automatic effects of changing the mode of production must have contributed in important ways.
The literature on social formations subject to the penetration of the capitalist mode of production through gradual, nonrevolutionary processes indicates that forms of articulation between the capitalist mode of production and precapitalist modes of production cannot be logically deduced from Marx’s theory of the capitalist mode of production. The notion of articulation refers to “the relationship between the reproduction of the capitalist economy on the one hand and the reproduction of productive units organized according to pre-capitalist relations and forces of production on the other” (Wolpe 1980, p. 41). How these processes actually interact varies a great deal from one social formation to another, thus leading to the construction of conflicting perspectives about the nature of social formations: (1) Social formations lack a necessary structure; one mode of production may dominate or several modes of production may be articulated with or without one dominant mode; (2) A social formation’s necessary structure may be formed by a dominant mode of production and its conditions of existence, which might include elements of precapitalist modes of production, or it may simply be the effect of the articulation of any number of modes and their respective conditions of existence; (3) Given a dominant mode (e.g., the capitalist mode of production) in any social formation, all other modes will be subordinate to its structures and processes so that they are reduced to mere “forms of existence” of the dominant mode (Wolpe 1980, p. 34).
These and other perspectives entail different implications depending on whether the mode of production is defined in a restricted sense, as a combination of relations and forces of production, or in an extended sense, encompassing linkages among enterprises as well as other economic and political/cultural elements constitutive of the mode of production and conducive to its reproduction over time (e.g., distribution, circulation, exchange, the state) (Wolpe 1980, p. 40; Marx  1970, pp. 188–199). Because modes of articulation are unique to specific social formations (e.g., in South Africa, racial ideology reproduced and sustained capitalist relations of production [Wolpe 1980, p. 317]; in Peru, agrarian reform contributed to the proletarianization of Indian communities [Bradby 1980, p. 120]), it could be erroneously concluded that social formation and articulation are useless concepts, for their use in research is unlikely to yield testable empirical generalizations.
These concepts are exceedingly important, for they contribute to the adjudication of an important issue in Marxist theory: the extent to which Marx is or is not an economic determinist. The historical and empirical variability in the conditions of reproduction of the capitalist mode of production that is documented through research in social formations and modes of articulation demonstrates the nondeterminist nature of Marx’s theories.
While the structure, processes, contradictions, and tendencies of the capitalist mode of production remain the same, thus constituting the “innermost secret” of the economic and political structures in social formations where the capitalist mode of production is dominant, the historical conditions for the reproduction of the capitalist mode of production vary historically and cross-culturally in the terrain of social formations, where political struggles carried under a variety of banners (class, race, religion, and nationalism) shape the different and spacialized outcomes of capitalism’s never-ending expansionary tendencies.
Dialectically considered, social formations are the unity between the universal (the capitalist mode of production) and the particular, the concrete conditions within which the capitalist mode of production operates. The concept of social formation, unlike the abstract non-Marxist concept of “society,” opens up the possibility of a realistic and historical understanding of social reality, based not on inferences from transhistorical tendencies, functional prerequisites, or concepts of human nature, but upon the historical specificity of the social formations within which capitalism operates.
“Formation, Social.” International Encyclopedia of the Social Sciences. 2008. Retrieved March 03, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-3045300847.html
Learn more at ENCYCLOPEDIA.
 “The Myth of the Barter Economy” by Ilana E. Strauss, The Atlantic, 26 FEB 2016: http://www.theatlantic.com/business/archive/2016/02/barter-society-myth/471051/
Published (online) by The Atlantic
[3 MAR 2016]
[Last modified 3 MAR 2016 14:45 PDT]
[Thanks to Dr. John Henry for running Dr. Lee’s UMKC-LEE ECONGRAD Announcement List.]