The evolution of economies

At the heart of Marxist theory lies a Darwinian theory of evolution that leads inevitably to communism. Marx saw an early economic system based on slavery giving way to one based on serfdom which laid the basis for capitalism. For Marx the internal contradictions of capitalism leads to the revolution of the proletariat that would institute communism as the final stage of human development, just as man represented the pinnacle of evolution.

Marx correctly recognizes the reality of evolution in economic history but grossly oversimplifies its effect. Evolution occurs, not at the “system” level, but in the manner in which individuals conduct ordinary business transactions on a daily basis. Scholars search in vain to find the date and place in which feudalism evolved into capitalism, since neither feudalism nor capitalism ever existed in the sense that Marxism uses the terms. People produce and trade within the context of the particular circumstances of the society, not within one of the rigid “systems” envisaged by Marx.

As Adam Smith correctly recognized, human nature has a “propensity to truck, barter, and exchange one thing for another.” (An Enquiry into the Nature and Causes of the Wealth of Nations, 1776, Book I, Chapter 2) The particular products being produced and traded as well as the circumstances of the period greatly impact how people deal with such issues as the allocation of risk and transaction costs inherent in all economic relationships. Changes in the historical circumstances lead people to develop new means of dealing with those circumstances.

For example, the manor system adopted in some regions of medieval Europe responded rationally to the risks and transaction costs of the period. The manor provided the knight with arms, horses and the opportunity to train in their use in order to protect the manor’s inhabitants and provide justice for them. Risks of poor harvests and the expense of supervision led the lord to provide land to the peasants as compensation for their work on land he held for himself.

Increasing security in medieval society allowed for greater trade within regions and between regions; this permitted increased specialization. Medieval trade differed only in volume and products from what came before and what would come centuries later. As the values of products and the distances between trading centers increased greatly over time, trade required increasing amounts of capital and resulted in greater risk taking. This led Marx and his followers to assume that some fundamental change in society occurred that he labeled “capitalism.”

In reality, “capitalism” existed throughout history. Capital supported production of products and their transportation and trade, involving the risk of loss as well as the potential for profit, for centuries before any supposed transition to capitalism envisaged by Marxists. The transition to capitalism noted by Marx constituted only a matter of degree rather than substance.