Exchange lies at the basis of every economic network. We spoke of the exchange of an agricultural surplus. Every general account of the economy of the pre-industrial days should start from the notion that agriculture was by far the most important sector of the economy (it still is, if we do not want to starve, but its contribution to the gross product has decreased enormously in industrial and post-industrial societies). Mining and quarrying could be locally important. Manufacture, trade, and services were always marginal compared to agriculture. But not only were the relative sizes of the economic sectors different, economic thought also differed. Although most of the time making a profit was considered a proper thing to do, this should not lead us to believe that a modern economic rationality was always employed in order to do so. In pre-modern economic thinking, essential concepts of our economic discourse, such as investment, depreciation, amortization, or profit maximization, were all lacking. And it is not only the vocabulary that is lacking: they did not always act in ways that we would consider to make good economic sense. Thus to calculate rationally, for example, by taking into account (!) amortization, is a recent development. This does not imply, of course, that ancient individuals were incapable of rational thought. Only, they never got round to thinking some things that were only thought of at some later date.
The preceding need not lead to an unduly primitivist view of the pre-industrial economy. The agrarian sector did produce for the market, and the manufactures and trade may have Been relatively unimportant, but were crucial for developing monetary economies. The Roman Empire in the first centuries AD is an interesting example of such a monetary economy. Neither should we deny economic life in antiquity all dynamism: we can again point to Rome, which in the 2nd and 3rd centuries had a dynamic and flourishing economy. We can see evidence of this from the number of shipwrecks, the number of coins, or the environmental pollution due to Roman industry, as already mentioned. But the dynamism was restricted in scope: growth (and shrinkage) of the economy took place within very narrow limits. Demography and technology were the main barriers to continued growth, but other factors also played their part. For a start, in every pre-modern economy, the purchasing power was small. The basic necessities swallowed up most or all income, so the supply easily outpaced the demand. Also, there was but little incentive to invest: the near-subsistence levels at which small farmers, craftsmen, and tradesmen lived meant that any profits in fat years tended to be saved for the lean years likely to come, rather than be invested in some dangerous experiment: “money not spent is money earned” and “waste not, want not” were the guiding principles. The rich, who did not need to worry so much, tended to spend their money on consumption rather than investment, because of the importance in ancient societies of conspicuous consumption. Of course, this generated demand, but the rich were few. Non-consumptive expenditure by the rich was usually on the purchase of land: wealth was commonly expressed as land holding in a society in which agriculture was the dominant economic sector.
An impediment to trade was the almost complete absence of deposit money, bonds, bills of exchange, checks, promissory notes, money orders, or whatever would help traders avoid carrying about large sums of money. In the Mesopotamian world and later in Egypt, some moves were made in this direction, but they turned out to be dead ends. One could also say that the restricted amount of money (money in the ancient world is largely precious metal) put a brake on economic growth. Money creation by banks was non-existent; there was no such thing as a central bank either: governments had a marginal role in the economy. They did not try to steer the economy, probably because the notion that one could do so was not there, as one might conclude from the fact that all imports and exports tended to be taxed indiscriminatingly.
Debatable—and much debated—is the role of a supposed “ancient economic mentality.” Agricultural norms and values remained dominant; as just stated, land ownership was considered the most proper form of ownership: the more land, the better. To farm one’s own land as one’s ancestors had been doing for centuries was an ideal that held good for all of the ancient world, even if the rich did not really dirty their hands and had others farm their land for them. At the top of society, we find a land-owning leisure class. Next we have independent farmers, then tenant farmers and all forms of dependent labor: tradesmen, craftsmen, day laborers, all the way down to slaves. It might surprise one to find tradesmen and craftsmen, and all those who work independently for their own account, listed here as dependent labor: but that is how men who need patrons or customers in order to survive were regarded in the ancient world. That the rich were willing to indulge in trade themselves, possibly by way of middlemen, did nothing to change the low esteem in which the trader was held by the elite. The modern notion of industry and trade as the moving forces behind economic growth was lacking; even economic growth, speaking macro-economically, was not something anyone was consciously aware of. There was a prevailing acquisitive mentality, as opposed to the modern productive mentality. This may have hampered technological progress: even where theoretical knowledge was available, technology lagged behind. This has been explained by the number of slaves or other dependent labor: if there is enough cheap labor available, the need for technology to replace labor does not arise. Although this may have been a contributing factor, it cannot be the whole story: there were many periods and places in the ancient world characterized by no, or only a few, slaves, and we should not forget that slaves were expensive, both in terms of their purchase and upkeep. But there were no breakthroughs in technology there either. An unwillingness to change seems to have been the main factor.
If the mentality had been different, some of the aforementioned barriers would have remained in place, as indeed they did until the Industrial Revolution, and the scientific revolutions of the 19th and 20th centuries. There is a technological ceiling: the knowledge of the properties of materials was too rudimentary, so some developments were impossible. Take, for instance, transport, which was slow and expensive, and would largely remain so until the steam engine and the internal combustion engine brought about a revolution indeed. For the Roman world, it has been calculated that, depending on local circumstances, the relationship between the costs of sea, river, and land transport was 1:5:25. That does not mean land transport was too expensive: the cost depended on the kind of goods, their value, the distance over which they had to be transported, and the kind of road. But transport of a bulk commodity such as grain over land would have pushed up its price above what was considered reasonable, which was the price of the grain when it was transported by water. In agriculture, the technological ceiling is evident as well: until the arrival of modern irrigation, fertilizing, and breeding, a large increase in productivity was impossible. Agricultural production could be increased by bringing more land under cultivation (the total productivity goes up), or by a change in strategy, such as intensification (the productivity per hectare goes up). But when all available land was under cultivation, and if all strategies had been employed, the rise in productivity stopped.
World History
