Friday, 31 October 2008

Byways and Tribal Capitalism

I have been indulging in leisure again. For nine days I backpacked along the ancient Ridgeway, the superhighway of Neolithic Britain and a trade route into the modern era. Starting about 6,000 years ago, (roughly the time Sarah Palin imagines Adam and Eve holding hands in a newly wrought Eden) the Britons occupying the plains either side of the Ridgeway were settling the river valleys to raise crops and herd animals. As the crops and herds increased, and the Iron Age and Bronze Age opened trading opportunities in new technologies, these Britons took strides that set them and their heirs on the road to market capitalism.

The road they followed is the road I walked – the Ridgeway Trail.

The Ridgeway is a geographic feature of Jurassic and Corallian limestone, an 87 mile long spine of rocky downs running through Southern England from Ivinghoe Beacon in Buckinghamshire to Overton Hill, near Avebury in Wiltshire. It was linked by other routes to ports in the South and on the Channel. The Ridgeway was admirably suited as a commercial highway in early times because the limestone was porous, draining rain away from the high pathway to the plains below. When the tracks below were impassable mires of mud for man and beast, the Ridgeway remained a quick and easy road from one region to another. Being high, with excellent views down the slopes and over the plains, it was also possible to detect and defend against brigands who might beset unwary travellers, with ring forts provided to secure travellers and goods along the route.

Neolithic Britons were secure enough to form large agrarian tribes, planting and harvesting grains and herding sheep. They were prosperous enough to have excess grain and sheep to trade for iron and bronze tools and gold jewellery and other valuable trade goods. They were economically advanced enough to have specialisation, with certain tribes and regions known for their skill in producing iron or bronze or pottery. They were politically advanced enough to have organised militias, with a ‘warrior aristocracy’. They were wise enough to promote collective security and agree byways for safe passage with neighbouring tribes to enable commerce along the Ridgeway.

The Ridgeway reminded me every day we walked along that it is infrastructure, transparency and mutually-enforced rules which secure and grow markets for productive capitalism. Infrastructure provides a common framework for trade to take place. Transparency allows those trading in markets to evaluate each other’s wares and defend against brigands who might wish to ambush the unwary. Rules of safe conduct and fair dealing promote the confidence which encourages those with excess production to bring it to market to trade for their present and future needs. Mutual enforcement ensures that the temptation of any tribe to loot its neighbours is curbed by the risk of finding itself precluded from the trade routes and from access to markets.

I imagine that like many small, agrarian, tribal states, England of the pre-Roman period was organised into settlements relying on militias with only small dedicated military elites. This arrangement, as exists in modern Switzerland, allows the civilian militia to contribute most of its energies under secure conditions to increasing production, growing the surplus which sustains collective prosperity. Although a professional military or ‘warrior aristocracy’ can be useful in providing skilled leadership, if that military gets too large, or the aristocrats too greedy, the incentive to produce a surplus is removed and tribes tend to weaken, grow poor and fail. Prosperity and security require a delicate balance in the social contract.

The Ridgeway also reminded me that prosperity invites looting by aggressors. By the Roman era, England was producing a large enough surplus to be exporting across the Channel, with trade goods from as far afield as the Mediterranean. This has been substantiated by findings of pottery, jewellery, coins and other goods in early Celtic settlements.

It was the prosperity of England as a grain exporter that led Julius Ceasar to covet it for the Roman Empire.

A professional military demands a large production surplus from the civilian population to sustain it. The state expropriates the surplus production and provides it to the military. If the military can secure more resources and more production to the state, the expropriation can increase prosperity of its tribe – or at least the elite that commands it. But if the military fails to secure more resources, then the expropriation from those producing a surplus will gradually erode the incentive to produce a surplus – leading to decline and increasing poverty and political strife.

Ceasar understood that securing the large agricultural surplus of England to finance and feed his armies would help underpin the military strength of the Roman Empire. Naturally, the Romans secured and settled the most prosperous agricultural regions. As a result, there are Roman traces along the Ridgeway – improvements to the roads, the forts, and the commercial links to market towns and ports on the coasts. We walked Roman roads last week too - straight, raised and solid even 2,000 years later.

Following the Romans, the Danes, the Angles, the Saxons and the Normans invaded and occupied the same lands. Throughout the changing political and ethnic mix of tribes and elites, the Ridgeway continued to function as a trade route through prosperous middle England.

Modern markets could usefully reflect on the durable Ridgeway model of market infrastructure. Transparency of assets – whether sheep or shares or CDOs – is critical to the effective function of markets for price discovery and investment. Those who have secured a surplus are unlikely to risk taking their wealth to a market where assets are not open to inspection and proper valuation. Security of trade routes and market towns for merchants and traders is essential to encourage those with a surplus to bring it forward, promoting effective allocation of assets and underpinning growth in production. Mutually-enforced rules of conduct, fair dealing and safe passage are key to building a reputation that attracts both buyers and sellers and ensures a sustained market prosperity.

The modern ‘warrior aristocracy’ could usefully reflect on the fate of societies that deplete the incentives to surplus production and fail to secure commensurate returns from a costly military. Whether a Neolithic tribe, a Celtic settlement, the mighty Roman Empire or the Soviet Union, history proves that a tendency to excess expropriation by the state undermines any incentive to investment and surplus production. Excess expropriation will ultimately weaken the economy supporting the elites and the professional military that secures their privileges and interests.

As the global elites meet in the coming weeks to address the current economic crisis, they could do worse than contemplate the lessons I gleaned from the Ridgeway. Those who provided poor transparency, promoted dishonest market practices, looked the other way or collaborated in the robbing of passing merchants and investors, and otherwise violated the precepts embodied in the Ridgeway model should be held accountable for their failings. The global model going forward must return to the principles embodied in the ancient stone backbone of English commerce.


The Ridgeway (Wikipedia)

The Ridgeway National Trail

Neolithic, Iron Age and Bronze Age Britain (BBC)


Congratulations to Rich H (Miss America) who was to cover for me last Friday and instead secured his own position in the RGE blogroll.


yoyomo said...

I left you a link on the previous comment thread but it never got posted; moderator approval was activated, it would have been #35.

tb said...

Most historians would not call the pre-Roman tribes of Britain Celts, it is akin to calling the Irish, English.

"The ill-armed militias of the Picts and Celts offered little challenge to the mighty Roman Army that Caesar led into Britain"

Those ill-armed militias repelled Ceasar, it was another 100 years before Claudius conquered south Britain.

London Banker said...

@ yoyomo
I've been away from blog access for most of the past two weeks. I've just approved all the pending comments. Apologies for the delay. I should probably just suspend moderation and risk the occasional inflamatory comment.

Thanks for the historical details. My grasp of ancient Britain is superficial, as you rightly suggest. One of the joys of blogging is getting instant feedback from those who have detailed knowledge or different perspectives.

yoyomo said...

So LB,
Do you have an opinion on 100% reserve banking as suggested by Paul Craig Roberts and practiced (in theory at least) by Sharia-compliant banks? Do you think it would be workable? If so, it might greatly reduce the turbulence of the credit cycle. At least it would constrain the ability of banksters to manipulate the money supply up and down as Thomas Jefferson feared in order to expropriate the economy's real assets. I'm truly curious if the current crisis might not provide the impetus for a radical restructuring of the financial system.

Herman D. HugeLoad IV said...

Welcome Back! You were missed around these parts.....

This was an epic and memorable post. You constantly exceed your own self-imposed standards week after week.

In fact, I don't think this was even a post, it was something akin to a moral signpost on your Ridgeway Trail.

dearieme said...

How does using an anti-terrorism Act agin' Iceland fit into your picture?

Drake said...

Fantastic post and wonderfully clear allegory. Made me stop several times to contemplate the history and also the teachings that you drew from there. Thank you.

To Herman d.H. the western civilization is built upon the model, where banks only have the 8 pct minimum capital requirement. That has allowed the amount of money to grow in such a staggering way. 100 pct capital requirement would collapse this house of cards in a way that no one will ever wish to witness.

Anonymous said...

Gosh London Banker! Being a banker sounds like a much leisure time!

You are a lucky man, very lucky - as others work away 50-60-70 hours a week all year long you take lengthy vacations and indulge in leisurely activities...lucky man!

I guess all of your 'hard work' has paid off!

Anonymous said...

LB, to quote Lewis Carroll, “If you don't know where you are going, any road will get you there.”

Loved reading about the Ridgeway Trail. Can't help but see (as Drake posed in his post) the allegory of your journey to this period of antithesis in our financial world.


yoyomo said...

@ Drake

The full reserve requirement would be phased in gradually; there would be no need for a sudden collapse in the money supply.

dearieme said...

I learnt a good lesson once by happening across passages in two different books. The first was about Roman Britain: villages sprang up along the Roman Roads because roads meant trade, which meant prosperity. The second book was about Dark Ages Britain. Villages flourished only at some distance from the old Roman Roads, because roads meant armies, which meant robbery and murder.

Drake said...

I do understand that it would not have to be complete switch all at once into 100 pct capital requirement system. But I am sorry, still do not think that it could be done.

The current western capitalistic system has been found on an idea of constantly increasing amount of money, with credit equalling money. Not money supply, but rather the way how banks create money by lending it out against fractional reserves.

The collapse into which we are (in my opinion) still headed was caused by bad credits hurting banks capital, and thus limiting the amount that they were able to lend out(by multiple of 10). And to fix that the massive rescue operations are targeted. And that is what has got Ben and boys so panicking.

Knute Rife said...

I agree with drake that a 100% reserve system would require a complete remake of the Western economic system because everything, financing, production, purchasing, is based on leverage. I would also note that even the Sharia outfits, at least the ones I've had contact with here in the US, aren't really 100%, instead using smoke and mirrors to maintain the appearance of scriptural compliance.

Yes to Claudius accomplishing the conquest, but the tribal names depends. Bronze Age, not Celts, but from the iron Age on there was a growing Celtic influx, and by the Roman era, Britain was Celtic.

The difference in village location comes down to one of LB's points, the rule of law. When law collapses, commerce collapses along with everything supported by it. Makes you wonder just how extensive the damage caused by the US's behavior over the last several years is. The UK's behavior, too, which leads directly back to your question about the frankly illegal actions toward Iceland.

Sackerson said...

@Dearieme: most interesting, that about the Roman roads. As you know, I've been planning to get us out of the city, for similar reasons.

yoyomo said...

Drake & Knute,
With the world at its ecological limits to growth in commerce there is no longer the need for the exponential growth of credit and money supply. As the world delevers and consumes less per capita, reserve requirements can be ratcheted up and the money supply stablized to reflect the stock of real wealth in the world.

Any insights you'd like to share?

Did you see my note to you a while back on the state of education and the article by John Taylor Gatto, "Against School" Harper's Sept03. Does his thesis comport with your evaluation of the quality of education.

Anonymous said...

Like the Ridgeway, it seems most of physical nature exists in a bog or morass with only a small part providing sound bottom and structure to support meaningful growth. As we tread on "shoulders of giants" maintaining western culture and production and enlarging upon it, it seems the creatures of the bog have gained ascendancy and used access to power and money to obliterate our ancient backbone of commerce.
What will it take to keep our millenial trade from rotting and disappearing? How to keep a season's locusts from consuming so much that no further harvest will come? Time will tell if the thiefdoms of America rival the fiefdoms of ancient Europe in vanquishing human hope and enterprise.

BTW, Ridgeway reminds me of Matthew Ridgeway. Dropped onto the continent breaking an ankle, but still commanding a force behind enemy lines. An early military wave of another emerging Rome, it was. But this army, in their naivete', truly believed in a just cause and in man's right to self determination.

Only a generation later and such youthful innocence is crushed in the studied malevolence of careful plunder, as a new army has arisen in business suits. Salesmen and market hawkers who collectively threaten the world's resources. These are, whose contributions have come to be known as net withdrawals of exponential proportion.

dearieme said...

Ah, Sackers, I forgot to say - we live on a Roman Road.

Drake said...

That is a beautiful thought, but as I am unfortunately (for me, that is) already well past my days of youth and have gathered cynicism enough for one, I do not think that west (or even the east) is ready to cut down in such way as such change would require.

I rather think that our elected leaders will continue to obey the will of the electorate and drive this system at full tilt right over the cliff. Any corrections will be minor and not really change anything on the long run. And we are not there quite yet, even if I quite agree that the coming years will be most painful in many economies of this world.

Knute Rife said...

We're Uhmurkins, and we don't care 'bout no stinkin' ecological limits. You can have our SUVs when you can pry them off our cold, dead asses.

Seriously, a societal scaling back always requires external forces, and force is, well, forceful. Violent. The change will come, but it won't be pretty. Eggs will be broken to make that omelet.

As for Gatto, I must disclose up front that I got over being a libertarian when I got over being 13, which I consider the libertarian age. When I read Gatto, my first reaction is, "Duh!" That's also my second, third, and all subsequent reactions. So the US adopted Dewey over Hutchins; this is not news, and in my not-so-humble opinion, it isn't even a bad thing.

The US education system has always been dichotomous: a basic education to train the workers, and a classical education for the elite. With the rise of the land grant institutions and the increasing focus on technology and research, higher education became more democratic. This democratization trickled down through secondary and elementary education, and though the dichotomy remained, it became masked.

After WWII the overhaul of US education began in earnest. The traditional curriculum was attacked and completely revised (Justifiably. Contrary to Hutchins, there is thought from sources other than dead, white, European males.), and people from places other than Kennebunkport were allowed into higher education and the professions, but the schools were also saddled with a lot of social experiments, including the notion that everyone should go to college, which is bunk.

Nevertheless, the US schools gamely attempted to get everyone into college. All this did was cause the colleges to lose their sense of purpose, as remedial classes and flunky majors were piled on. And as with democratization, this loss of purpose drifted down through the levels.

You want to fix US education, I can cut straight through Gatto, and it doesn't include home schooling beyond the responsibility of each citizen for his/her own education. First, decide what you want the schools to do. If you don't give them a goal, how can you expect them to attain anything? As Lewis Carroll wrote, "If you don't know where you're going, any road will get you there."

Second, make the goals a national policy. They can be administered locally, but they can't be set locally. Too many education resources are wasted by local and state school boards with a knowledge of science that begins and ends with Genesis.

Third, nuke every education college in the country to keep the education professors from cocking up points one and two the way they've been cocking up education in general for a half-century.

yoyomo said...

I don't believe that the education professors are cocking anything up, the education curriculum is designed to alienate students from critical thinking. Bore the kids to death and have them slog through school with their brains on auto pilot and they'll believe anything an authority figure tells them, hopefully for the rest of their lives.

Knute Rife said...

A combination of boredom and confusion, and except for a few political hot-buttons, these curricula were generated inside the education colleges. I've been a teacher, my mother is a retired teacher, my father is a retired teacher with a masters in education, and my mother-in-law was a teacher with a doctorate in education, so you've touched a topic I grew up with in a very real sense.

Anonymous said...

The problem with education in America is CULTURE. The country can change curriculum, spend more money, make new rules, but it won't change a thing.

UNTIL it becomes "cool" to be smart, then the kids that are talented in Math and Science will continue to be ostracized and called names. I have hopes that the new President can help to change the "gangsta" culture.

For those of you who have compared America to Rome, I hope you listened well to Mr. Obama last night. He was saying that we are not going down for the count and don't be placing bets against us. We ain't Rome and never forget, America is very good at morphing itself. We've had more makeovers than Madonna.


Anonymous said...

The Rahm Emanuel choice is trivial compared to the points Obama made in his first press conference. There, Obama made four points: 1) Congress needs to pass a stimulus bill, 2) The automotive industry must be revived, 3) Foreclosures need to be delayed, 4) Executive compensation after bailouts needs to be reviewed. These are the issues Americans voted for and I suspect voters liked what they heard.

None of these are good ideas. The last stimulus package failed, why would a second do more? The automotive industry doesn't have manufacturing problems, it has banking problems. GM and Ford have long been making more money financing cars than making cars. Congress and the Fed have proven they can't help banks. Delaying foreclosures, presumably while bankruptcy laws are rewritten, will cause interest rates to rise and we all know what that does to a weak economy. Finally, the problem with bankers helping themselves to a bailout bonus is natural. If you bring in a billion dollar account, you get a bonus. That is how things work. The problem isn't the bonus, it is the bailout itself. Except for the bankers, media outlets and political campaign funds that directly benefit from the cash, Americans will only see a big tax bill..

Despite my lack of enthusiasm for the announced programs, I applaud Obama. He has addressed what his voter base wants

Obama's job is leading, and he can only lead when connecting with the public's view of things. Managing expectations is likely to be the future presidency's primary challenge. Obama is essentially the leader of a youth movement. Good youth movements honor traditions, knowing well they will have many opportunities to change their minds in the future. I say 'relax and let they young folks subvert the system'.

Derek Wall said...

Great blog but to be a bit picky they did not have 'iron' or silver in the neolithic (new stone age), the ridgeway is beautiful and yes the present crisis is ugly.

The very fine Cuban thinker Roberto Perez seems to be one of the few people on the planet with a good economic approach to the mess, check him out if you can.