Synthesis Paper 04/28/2013
The concept of a self-regulating market or a “free market” in today’s vernacular refers to a system in which market prices will be regulated by market activity and that interferences on the part of the state or otherwise outside institution is merely a hindrance. This ideal of a self-regulating market is an abstract concept that has historically never existed. By understanding the history of the market economy, we can both better understand its inevitable failures as a concept as well as the sometimes disastrous implications of these failures. We will begin by creating a distinction between two similar but distinctly different terms that will be used throughout the paper. “Market(s)” as an independent term refers to trade, generally in reference to commodities. Markets, in the sense of trade, have existed nearly as long as agriculture, and if we are to consider international trade the basis of a global market, then markets have existed globally as early as the 1400s if not previously. “Market Economy” refers to an economy that is dominated by commodity trade for profit, in that the economy is entirely oriented around trade and the profit generated from it. To quote Karl Polanyi from The Great Transformation “Market economy implies a self-regulating system of markets; in slightly more technical terms, it is an economy directed by market prices and nothing but market prices” (45). A market economy in this sense is truly unique to Capitalism, for even as Mercantilist society’s economic policies were largely oriented towards the generation of wealth through trade, their primary mode of production remained a tributary one, not yet oriented to the creation of capital for the sake of creating more wealth. Prior to the emergence of Capitalism in the British 1800s the majority of the world was organized into either tributary modes of production, as was the case in the majority of medieval Europe and China, or kinship modes of production, as was the case of what might be considered more tribal civilizations such as the Iroquois confederation (though they notably centralized in response to the colonial involvement of the English and French) and a number civilizations of western and central Africa. As previously mentioned, the lack of a capitalist mode of production does not mean markets did not exist globally, as even prior to the rise of Mercantilism in Europe, most civilizations of the world interacted with one another exchanging commodities in some form, ranging from textile goods and raw materials to slaves and stimulants. As markets have existed alongside tributary modes of production for centuries, so has mercantile activity existed among kinship and tributary modes of production, although not to the great extent of Mercantilism, existing in prominence with the expansion of the market (most notably in slaves and luxury commodities) in the 1400s. Mercantilism denoted a concerted focus on behalf of the polities to greatly increase their wealth through trade, where as former mercantile activities were far more periphery to their respective polities. Mercantilism is not a mode of production, and was rather more of a focus of economic policy. Indeed a hallmark of the Mercantilist system was an inability to use wealth to generate capital. For this reason a great amount of the wealth obtained by dominant Mercantilist nations like Spain and Portugal was relatively quickly transferred via the market to other nations of Europe, helping both to incentivize an increase in global trade, and to amass the wealth in Great Britain that would eventually help it to make the shift to the Capitalist mode of production and a market economy. While it is important to note a global markets existence prior to the rise of Mercantilism, it is vital to understand that market was not just expanded under Mercantilism, but that the modes of production in some parts of the world came to be significantly altered...
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