The Estate System
I'm taking a bit of a liberty here with the medieval feudal system, expanding it by a few thousand years, and describing it from the point of view of the monetized economy. When viewed this way, the social structures of the ancient Greek and Etruscan civilizations look pretty much identical to western Europe in the 10th century. Also, there are strong suggestions in the archaeology and fragmentary records of earlier old world, and perhaps some new world, civilizations which strongly suggests that they were structured in nearly identical ways as well.
From roughly the beginning of the Bronze Age and prior to the Industrial Revolution, most people lived close to the land in rural settings. They were hunters, farmers, and semi-specialists who were associated with farming, such as woodsmen and metal workers. They lived almost exclusively in a barter economy. And while they were not exactly slaves, from the point of view of people with titles and the merchant class, from the time of the earliest ascendance of royalty, the rural folk were effectively bound to the estates that were the property of whomever it was the king had given title to the land on which they lived.
I use the word property here in a somewhat non-exclusive way. Most post-Neolithic rural people were not property in the sense that they were bought and sold in slave markets. Nor were they stripped of their personal dignity in most of the ways that we typically associate with being a slave. But, they were in a sort of economic prison that had no walls, but which had very distinct boundaries. And it was next to impossible to escape from a life within those boundaries. They were effectively bound to the land and subservient to whatever legal outrages were imposed upon them.
Ownership of land was basically assumed by the kings because they could get away with it. They owned the legal process and declared that whatever noble or clergy was designated as the owner of an estate was automatically the lord and master of whomever lived and worked there. These estate "owners" were basically the owners of the people and their property who lived and worked within their domain. It would not be unfair to describe it as a relaxed form of slavery. If this structure strikes you as looking a lot like a classic criminal protection racket, you are not alone.
This is decidedly different from the way the feudal system is presented in history books and the standard online references sources such as Wikipedia. While the facts presented are the same, the kleptocratic and violent coercive origins are typically avoided in the standard reference texts. To be sure, the details of the theft of land ownership by conquering kings is well described as apart of the histories of war, but the two perspectives are virtually never combined in a single paragraph or chapter.
Another misleading aspect of virtually all standard histories of the feudal system give it a date range that starts several centuries after the fall of the Roman Empire, often starting during the Carolingian Empire in ninth century western Europe, and lasting no later than the mid nineteenth century. This of course, overlooks its nearly identical antecedents and the long tails into the present day with people being effectively bound to the land where they live and work, but not being acknowledged as the legal owners of the land, or in many cases, even the homes in which they live. Even today many royal families retain ownership of significant estates that were purloined by their ancestors many centuries earlier.
The inferred social conditions with respect to slavery in the Neolithic and earlier is also fraught with a huge amount of modern cultural bias. It is extremely tempting to view and judge early humans from our biases of ethics and morality. It is uncomfortable to apply the scientific method to infer our basline assumptions about stone age culture. But when we step back and observe that the archaeological evidence is reasonably consistent on a global basis, the inter-tribal brutality of those earlier times tends to make feudal life look rather attractive.
Whether we are considering the cave paintings in Spain of Neolithic war, or the wounds of Otzi the iceman of the Alps, or historical records of violence among Native Americans well into the late 19th century, or similar well documented occurrences in Australia and Africa, the application of Occam's Razor to the construction of a standard model for Neolithic and earlier cultures must be one of brutality that is unpleasant for us to even contemplate, let alone read or hear about. Steven Pinker's observations in his book "The Better Angels of our Nature" seem valid, even allowing for what seem to have been our more barbaric episodes of modern warfare. We have been getting better at being decent to each other, even if we still have a ways to go on that front.
Here I must insert an curious digression that ties the 21st century to cultural norms that most of us like to think died out centuries ago. A fascinating omission in standard histories of the feudal system is the very curious history of the Isle of Sark, one of the smaller Channel Islands between the U.K and France. The people of Sark made a move to leap forward from their medieval political structure in 2008. You read that right. It was in that year that an election put an end to the 1565 letters of patent granted by Elizabeth I to one Helier de Carteret, giving him the curious title of "Seigneur of Sark. The young monarch granted him the equivalency of being a baron and overlord of the island and her subjects on the island in perpetuity. His only requirements were see that the island's population never fell below 40, which it has not, and to keep the island free of pirates. However, despite the fact that since 2008 Sark has been ... this is not exactly clear. It's not exactly a royal fiefdom, and yet it isn't quite not a royal fiefdom yet either. its population is not represented in the U.K. Parliament. The 2008 change of the island's government snuffed out the last vestige of people owing allegiance of a medieval overlord in Europe but left several interesting questions unanswered. The status of Sark is still in motion.
The history of the political condition of the Isle of Sark highlights another aspect of monetary history - one which we also saw in the several thousand years of very gradual evolution of the monetary and legal systems of the region we now call ancient Sumer. People can become accustomed to a pattern of life. It doesn't take that long after an instance of institutional outrage, for people to become largely accepting of it, or at least not spend much effort on a daily basis trying to gain some form of justice outside of the unfair "legal" processes that have been imposed upon them. When an elite is abusing the poor, occasionally a figure such as Robin Hood, Jan de Lichte, or Jean Lafitte will emerge, but often their justice serving exploits end up being more mythical than rooted in reality. Subservience to legal inequities is the norm, not the exception.
The key economic points are that social status barriers were erected very early on. The idea of money evolved on one side of those barriers and not the other. Ownership of the law by the group who were on the monetized side of the barrier, and who wielded their law as a weapon to disadvantage those on the other side of it, has been a common attribute of the law ever since the concept of the rule of law was invented. The rule of law is still better than the alternative, but it is far from perfect. Understanding that there are fundamental unresolved structural issues in any system of law is important to gaining a solid understanding of money and the history of monetization. Much of any legal system is about issues of property and fairness in everyday life.
One additional point is worth noting regarding the early history of the legal aspects of money and monetization. Without those social barriers which had the effect of limiting the spread of monetization to a very small percentage of the population as a whole, displacing barter economics with a monetized system would have been much more challenging due to the challenges we covered in the chapter on limitations. The emergence of first paper money and later networked computerized accounting made universal monetization much more feasible, and the emergence of these technologies could not have happened without the rise of cities and their role in the enablement of individual human specialization.
When studying the history of money and economics, the history of the ownership of land and the implied or effective ownership of the people who lived on it is important to understand. The idea that land, which was already occupied by people scattered across the countryside, somehow belonged to some king or chieftain who in turn had the power to say that it was now the property of some soldier, or wealthy supporter, or cleric who had done them some service was really quite the outrageous assumption. And yet, it happened everywhere that people lived, on every continent. It also explains the roots of the modern political challenges associated with taxation. Taxation in the Neolithic may have been completely voluntary, but from the time of the emergence of the first glimmers of royalty up until the Age of Revolution, taxation had a foundation of the rich and powerful stealing from everyone else. We may live in a time in which most taxation is the result of free people choosing to tax themselves, but this only came about after many thousands of years of something quite different. That a great deal of mistrust and skepticism would remain is to be expected.
The history of taxation and urbanization tracked together. The percentage of the population that was urbanized started to change under the Romans. The Greeks had built a lot of cities, especially on the islands and coastal areas that were key stops on their trade routes, but urbanization in their time was barely noise level when viewed as a percentage of the total population. The Romans also built a lot of cities as their empire grew, many more than the Greeks did. As a result, the urbanization percentage during Roman times started to pickup - at least it did until they ran out of money.
Cities require a working concept of money in order to exist. Thus, one of the critical tasks associated with the building of the Roman empire was to greatly expand the availability of money as they understood it, and as the people they ruled were willing to accept. The only thing that was widely understood and accepted as truly meaningful money during the time of the Romans was gold and silver coinage. This reality meant that the Romans had to greatly expand the mining of heavy metals and the production of coins made from them. No precise data is available, but it would not be unreasonable to suggest that the percentage of people living in towns and cities at the height of the empire had risen to as much as five percent of the total population of the empire, and perhaps a tad more. But in the third century CE, the mines started to give out. The demand for money was continuing to grow and the supply was shrinking.
The shift away from Roman cities was slow at first. The archaeological record is clear on the process. Cities stopped growing. No new ones were built. And, the buildings associated with Roman estates or villas started going through a transformation. They became much larger and more luxurious. Wealthy people were relocating their lives to the estates they "owned." In other cases, former members of the legion who had managed to survive until retirement, and having earned full Roman citizenship, were building country estates of their own, often staffed by a healthy percentage of slaves. Also, many of the better off peoples in the territories the Romans had conquered, who also managed to somehow survive being conquered, did so by becoming Romanized. They too were living on estates in ever fancier villas..
The Romans themselves may not have been fully aware of the macro-economic forces that were forcing them to adapt to a different lifestyle, nor even that a demographic shift was happening. They were clearly quite keenly aware that there was an extreme shortage in the money supply. But the demographic shifts may have been seen as independent choices being made by a lot of people instead of a terminal disease of the very concept of a Roman city, especially early on. Country living was becoming a thing. The fact that it was the path of least resistance, because it didn't require money to put food on the table of the villa, may not have been all that obvious. Regardless of level of awareness that the Roman's had of the forces that were at work changing their world, the very clear economic lesson for us in process of the decay and eventual fall of the Roman Empire, is that cities cannot exist without money.
We cannot know exactly what was the mix was in the Roman world of semi-free peasants who "belonged" to the estates versus outright slaves, but the difference in their lives was probably not that great. Much would have depended upon the attitudes and behavior of the residents of each the villa who controlled a given estate or territory and the people who lived and worked there. The owners of villas who treated the peasantry well probably treated their slaves well too. Conversely, those who treated their slaves in the most abusive manner were almost certainly tyrannical overlords as well.
As the empire declined, the distribution of population gradually returned to something similar to what it had been prior to its rise. Urban dwellers may have accounted for around 1% of the total population of the area formerly controlled by the empire by the end of the fifth century CE. It is also safe to assume that for many people, the areas beyond the shrinking boundaries of the empire would have been perceived as great places to escape the conditions of servitude on the less pleasant estates. There is a strong hint, that the island of Great Britain was seen as such a refuge in the years immediately following the Roman withdrawal from it in 409 CE. As the Romans moved out, other people from the shrinking border areas of the empire were moving in.
During the days of the empire, estate ownership was deemed to be necessary for anyone who was anybody, and there weren't many anybodies in terms of the total population of the empire. The key point in terms of the way the economy worked, is that the lord of a manor did not have to purchase what was already his, thus the portion of the productivity of the people working the land that was taken by the lord was not considered to be a tax, which it obviously was. Taxes were something that the lords paid to higher ranking nobility, usually the king or emperor in the case of the Romans, but sometimes there was another tier or two of nobility in the middle. People in the religion business also found ways to extract "contributions" or taxes by suggesting a tie between finding favor with whatever deity they represented, and the contributor. Clerical domains waxed and waned, but it was not uncommon by the early medieval times for clerical organizations to own substantial estates populated and worked by a lot more than the pious inhabitants of the abbey. And even though the economics of ecclesiastical estates was basically identical to those of the landed gentry, servitude of the ecclesiastical estates may have been perceived buy their underclass as being less burdensome. Giving something tangible to god or the clerics in the hope that prayers would be more favorably received is something humans have been drawn to do for many thousands of years - and perhaps a couple hundred thousand. It has been part of what makes us unique creatures on this earth.
Despite all of this taxing and tithing, there were instances in which it was deemed appropriate for a member of the upper classes to pay the working folks for some service. By the time of the high middle ages, roughly from the end of the Crusades and before the great plague(s) in the middle of the 14th century, inns that were not owned by a nearby estate for travelers had sprung up along trade routes. Small denomination hard currencies similar to what the Romans had used in the last two centuries of their empire had begun to be used once again to pay for services. Money was once again leaking into the lower classes. It wasn't much, but it was enough to start a trend that would make the money supply problem quite dramatically worse over time.
As curious as it may sound, it was not until the 1970s that economists began to study the percentage of the population of a country that uses money for most of their transactions outside of their homes and extended families, or among other tenants of the same estate. Economic historians have also basically ignored this topic as not being of interest. But it is critical to understand historical demographics of monetized and non-monetized economies to discover the roots of the modern problem of friction and inequity in the distribution of money. Central banks create money, and it passes down through a lot of slice taking hands before it ends up in the accounts of individual wage earners. Understanding how we got to where we are is critical to figuring out ways in which we might do things better.
Setting aside the derogatory context in which Thomas Carlyle first used the phrase in 1849, until quite recently the study of economics really has been a science with many dismal aspects.
The World Bank was founded in 1944 for the purpose of facilitating the rebuilding of the previously developed world after the war. When that task was more or less complete in the 1960s, except for Eastern Europe, the bank turned its attention to the rest of the world. Organizations like banks need to issue reports on their progress at whatever they are about, and do so on a regular basis. Status or progress reporting requires good metrics, and immediately it was discovered that there weren't any metrics for describing a country's economy relative to what percentage of its population was still primarily embedded in a barter system. In many respects, in 1970, the field of economics was just barely emerging from a kind of medieval myopia or narrowness of vision. By the mid 1970s, the first metrics had been developed; however, they are still quite crude and fraught with inaccuracies.
The best metric we have for describing to what extent a society's economic system has been monetized as of this writing is something called the monetization coefficient. Because of the known issues with this metric, it is probably premature to try to use what data can be gleaned from archaeology and historical records to extend estimates of the monetization coefficient backward in time and generate a nice graph that would be satisfyingly accurate for scholars. Getting some estimates for a given country in a given century could not be guaranteed to be accurate within one, and perhaps not within even two orders of magnitude. For example, if we were to select England in the year 1400 and take a guess at its monetization coefficient, we really couldn't say whether it was close to 1.0 (i.e. 1%) or 0.1, or 0.001, or even 0.0001. On top of the issues with the coefficent calculation identified in the Wikipedia article, there is a huge issue with the fairness of comparative valuations we will touch upon in another page of this history and explanation of money. This may sound hopeless for the purposes of this article, but actually no.
What we can say with a high degree of certainty is that prior to about 1650, and except for that brief blip in ancient Rome and in single Chinese city for a couple hundred years, on there was no place on the planet that had a monetization coefficient greater than 1.0.
Despite its ancient roots, money for the masses is a very modern proposition.
This amazing journey from a world that relied almost exclusively on barter to a world in which there is a general assumption that money is for everyone can be attributed to the combined and inseparable forces that were unleashed by the Industrial Revolution and the Age of Revolution. I tend to push the dawn of this process of change back a century earlier than the Wikipedia article on the Industrial Revolution suggests. This is because it was really put in motion by the idea found in the 1606 Beaumont steam driven pump, even though a successful one was not built right away.
Beaumont's pump was for draining mines that were extracting salt and metal ores. Steam powered anything would put in motion the demand for a better fuel that would lead to coal replacing wood as their primary heat source. This in turn led to mining becoming a much more wide spread activity. Mining for coal and minerals also became a practical source of additional revenue for any estate that sat on top of some rocks that were recognized as being worth the hard work to extract the ore and refine it.
Steam power and mining set the stage for monetizing the economic lives of many people living at the bottom of the feudal or estate system's pyramid of land ownership and taxation. Another contributing factor in this transition was the development of the rural village. Exactly the trend toward village development began is not clear, but at some point, perhaps as early as the Romans and their city building, the owners of estates started to forcibly relocate the people living within their domains away from homes scattered across the countryside, and into small clusters of homes someplace near the manor house and church. Rural folks were moved into villages. We do know that it was the Normans who brought this demographic structural change to the British Isles beginning in 1066. This change did not impact anything economically initially, other than the fact that the Normans tended to be more taxing and tyrannical than the Anglo-Saxon and Norse overlords who preceded them.
The creation of rural villages in the 11th century set the stage for a complete dispossession of the land from the rural folks in the 16th and 17th centuries through the final stages of what came to be called the enclosure process. When the the move into villages began, rural folk still had relatively free access to the land on which they had lived and worked before. They just had a bit further to walk to work and then back home each day. Probably in response to the environmental pressures caused by human population growth, in the 16th century, some overlords began to bar their peasants from accessing some or even all of the areas outside the villages. Hunting became the crime of poaching. Landless rural peasants began to slide into a state of serious poverty unlike anything previously experienced in Europe. The arrival of steam engines promised a way out of this mess.
There are two closely related issues that are worth noting at this point. One is the population theories of Thomas Malthus. The other is the long tail that late Renaissance poverty generated as it spread not just in the rural villages, but also into the cities when factories were built. It was these conditions which inspired Friedrich Engels to write his 1845 book "The Condition of the Working Class in England" and then co-author with Karl Marx in 1848 "The Communist Manifesto." But, that is jumping ahead a bit in our story. We will dig into both of these areas in another chapter.
If we were to take what we know about each instance prior to the Industrial Revolution in which one people conquered another and then set themselves up as the new overlords in the land of the vanquished, we could apply Occam's Razor and suggest a standard model for how this typically went down.
First, a war of conquest is fought.
Most, if not all of the nobility of the losers are slaughtered.
Next the significant leaders during the war on the winning side plus any other key relatives or friends of the new king are declared to be the new nobility.
Then the new king decrees a chunk of the conquered territory as being the new property or fiefdom for each of these newly anointed demi-royals.
Finally, each of these newly appointed overlords goes to their new territory and announces to the people who live there that all of them and everything they have now belong to him, and their job is to carry on and bring some significant portion of their productivity to him for his needs, but first, they need to spend a year or so in slave labor building his new fortified house so he can be protected from them.
This was the basic pattern for thousands of years until a fellow named Beaumont's idea for using steam changed everything.
Native Americans like to point out that their lands were stolen, and this is a very fair assessment, but they were not alone. Virtually all deeded land everywhere was stolen at one time or another. In each case these thefts were made "legal" because the thieves also had enough power to assert ownership of the law.
Nearly a century would pass between Beaumont's Spanish patent and Thomas Savery in England actually making a modern practical implementation of his idea. I use the word modern because archaeologists working in Spain have found the remains of Roman pumps for draining mines, although they were probably driven by human or animal power. But it was Beaumont who got people thinking about the concept which led to Savery finally making one that worked using steam sometime around 1698. By the end of the 18th century, most competitive mines had to have at least one steam driven pump, and that was enough to set people to work adapting steam power to other applications in the 19th century.
As would be the case in every industry in which steam power found an application, machine powered productivity gains would increase the demand for specialized labor. Significant improvements in mining tools and working conditions greatly increased the demand for mine workers who needed to be supported by the food and basic necessities that only the large estates could support. Once mining employment grew beyond what the estates could support, the estates essentially disowned the villages. As the population of non-farm workers began to grow, the need to use money in the markets to buy their necessities of life also grew. There was no obvious way these newly impoverished people obtain what they needed when the mines or other village employment opportunities experienced an economic downturn. Life became a cyclical experience of getting by then things were good, and then to beg, steal, or starve when they were not.
Further, unlike what life had been like when every rural person was part of some overlord's estate, the new work rules at the dawn of the Industrial Revolution did not entitle to a portion of the ore they produced from the mines or other products produced in the shops and factories in which they worked. This was quite different from the way farming on estates had worked for thousands of years. On most farms down through the ages, except for a few examples of extreme tyranny and plantation slavery, the people doing the work were entitled to enough of their own productivity to sustain themselves and their families. This was not the case with the miners and mill workers of the Industrial Revolution. They got meager wages paid with small denominations of money, and that was it. While it was ugly and unfair in the extreme, the notion of money for everyone had arrived and was spreading fast. A very new world of economics was being born.
The cycles of relative prosperity and poverty compared to regular farming and blacksmithing estate tenants, provided the beginnings of our modern concept of rural poverty as a condition distinctly worse than that of being a tenant on an estate in the old feudal or estate system. The idea that the owner of an estate also owned its productivity was not new. But the idea of taking 100% of that productivity and leaving the people who did the actual work of producing it nothing - that was something quite new. It is something that routinely happened down through the centuries as a byproduct of war, but absent a war, a well run estate was always able to feed, clothe, and house its people. Steam assisted mining and mill work changed all of that.
The need for money for the masses slightly changed the nature of money. In a barter economy, there is a very strong relationship between the productive output of human labor and the value assigned to what is produced. In a world of barter economics, the degree of human specialization is quite limited. There are a few skilled trade specialists, but most people need to know how to do any task related to satisfying their needs. This jack of all trades necessity is still an apt description of the people who work on family farms to this day. Describing money as stored work is a useful way of thinking about this relationship.
Another revolutionary macro economic change began with the emergence of machines. It began to appear that an ever growing portion of the value being created should be attributed to the machines and not the people working with them. The number of skilled workers who developed deep, but relatively narrow specialties also began to grow quite quickly. Also, an idea that the Renaissance Italian merchant bankers had invented to balance the books in their double entry accounting system began to take on a much more important role in society as a whole. It really became a new idea about the nature of money. It was called capital. The idea of capital changed everything, and not always for the better. But, before digging into the nature of capital, we should take a look at a valuation fairness issue that must have its roots in the deep history of the Neolithic, many thousands of years ago.