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Natural phenomena are something that occurs or manifests without human input. In the economical context, it is the improvement and changing of the economy without state intervention – in other words a self-regulating economy. The question arises whether the economy is or is not a natural phenomenon and what could be the historical and cultural underpinnings of economy. This is essay is focused on discussing this claim. First, I use the theories of Adam Smith to give the understanding of how self-regulating market could work. Then, I use the texts written by Taussing, Hutchinson, Malinowski, Ferguson and Gregory to show the cultural and historical underpinnings of economy.
What is Economy?
To begin with discussing about the claim whether economy is a natural phenomenon it is important to explain what it is and where did it start. The word economy originally derived from the Greek concept of household. Economy is a concept that covers many different but overlapping themes such as order, management, efficient conservation of resources, practical affairs, money and wealth, and the market (as discussed in lecture). According to the Merriam-Webster dictionary economy is the structure or conditions of the production, distribution, and consumption of goods and services in a country, area, or period.
The meaning of economy has shifted over the centuries. Polanyi (1944) mentioned that the economic systems were actually based on combinations of reciprocity, redistribution and house-holding, since the economy controlled by markets only became a thing until recently. Thomas Aquinas was certain that the aim of economy was the preservation of society. An economic thinker in Cairo in the 11th century Al-Ghazali saw economy as a social utility and he was headed towards ethical behaviour in the market (Hann, Hart, 2011).
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The idea of economy as the western cultures see it started in the 17th century England and was modified in the United States (Hann, Hart, 2011). Western countries claim that the economy is synonyms with the market economy. Market economy implies a self-regulating system of markets, an economy directed by market prices and nothing else (Polanyi, 1944).
There are mainly two opposite schools who argue how is economy understood all around the world. The formalists argue that economy is best understood by the universal structures, and being part of an economy it is something that everybody does. One famous formalist figure Adam Smith believed that what drives economical behaviour is same in all cultures can be explained and understood via market and the selfish man (Hann, Hart, 2011).
The substantivists on the other hand have the idea that what drives economical behaviour is different in all countries and to understand how it works one should consider cultural and social aspects as well. Economic choices are not individual and are guided by social institutions (Hann, Hart). For example, Marx argued that only an accurate knowledge of the “economical structure of nations” can provide the key to understanding economic activity (as cited in Gregory, 1982).
Economy as a Natural Phenomenon
The foundational assumptions of neoliberals is that markets occur naturally or organically, from the bottom up, and the governments can get in the way of their operation. Free markets lead to growth, prosperity and ‘human fulfilment’ (as discussed in lecture). Individuals in a neoclassical world are assumed to maximize utility and subject to budget constraints (Gregory, 1982).
Classical economists believe in self-regulating economy. Self-regulating economy is a term for market economy. As already mentioned a market economy is an economy directed by market prices and nothing else and supply and demand regulate the market. Adam Smith (1776) believed that the tendency to enter exchange is fundamental of being human. He also started with the idea of wealth distribution – the idea when a person cannot consume all people will start exchanging to achieve a more comfortable life, which is the foundation of a self-regulating market.
In the self-regulating economy markets occur naturally or organically, from the ‘bottom up’ (as discussed in lecture). What would make the markets occur naturally is the principle that in European countries and supposedly all around the world wealth assumes the form of an accumulation of commodities. Smith argued that commodity exchange was the defining characteristic of people. “It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any other species of contracts” (as cited in Gregory, 1982). Emphasizing the argument that commodity exchange is common to all men, this should conclude that in all around the world all men want to participate in commodity exchange for the means of gain. Therefore, the economic growth would depend on this.
Economy with Historical Underpinnings
In the 18th century political economy was introduced – the idea that all value came from the land. It arose because there were too many farmers and too little buyers which created migration to the cities and division of labour between rural and urban areas (Hann, Hart, 2011). A defining characteristic of the political economy approach is the picture of production and consumption as a circular process – production of commodities by means of commodities (Gregory, 1982).
Yet only a century later, Marx and Engels implied that economy is above all production and only labour can add value. Which was also noted in Africa, while political contestation in Europe was largely about controlling land, in much of Africa land was abundant, and political power derived from controlling ‘wealth in people’ (Ferguson, 2013)
Economy as a natural phenomenon should occur without the intervention of the state but after the World Wars the world was so chaotic that government intervention was necessary to regulate the chaos and intervene with the market and economy. (Hann, Hart, 2011)
Economy and economic growth has a lot of historical underpinnings even in the western cultures, but as Taussing (1980) puts it historically induced amnesia and cultural stupefaction helps people to ignore the past and remake mistakes. To understand world labour and economics it is important to look at the Third World, whose culture resists such rationalization.
It was only after the Second World War, as the political movements for decolonization gathered force, and the cry for “economic development” began to be heard, that attention turned to the analysis of the noncapitalist non-European economies. This immediately posed the theoretical problem of having to distinguish between different types of economic systems, and economics responded to this challenge, first, by asserting its own universality and, secondly, by developing a theory of “distortions” to explain the non-European economies (Gregory, 1982).
Sharon Hutchinson (1992) gives an overview of how the money became accepted in society of Nuer. In the Nuer society, the most important commodity is cattle. When a man has cattle he can marry, but this made the society extremely hierarchical because only older and richer men who had had time could marry. What made it harder was that in the late 19th century wage-labour amongst the Nuer people was seen as slavery and the money accumulated from the labour was not clean enough for buying cattle.
During the British colonial conquest in 1898-1930 famine started to fuel the grain import and cattle export. The Brits wanted Nuer’s largest and fattest oxen for sale to meat markets in the north. But Nuer were only selling bulls for cow calves and not for money. Even after the administrative efforts to shift the basis of tribute collection in eastern Nuerland from cattle to cash as well as to provide conscripted Nuer labour with a small pecuniary reward the Neur did not agree. Barter continued to dominate the private sector, and government wages remained far too low to permit a ready conversion of coins into cattle.
In the 1940s the government introduced cattle auctions through what young men were able to purchase young cattle and sell old. Through these auctions cash started to be accepted. Money had the means of swapping cattle with the government. In 1950s government again intervened by actively recruiting Nuer men to cotton plantations which gave the men enough money to buy cattle.
After the civil war in 1964 a lot of men were offered government sponsored funds which injected a lot of paper currency into the regional economy. This introduced the idea of trading to the people of Nuer and eventually money was even accepted as bridewealth.
Hutchinson (1992) brings up some historical underpinnings of economy in the Nuer society. When money and waged labour was first introduced it did not have a positive outcome since it was seen dirty and unsuitable for the most important transactions in the society. Due the historical events such as the British colonialism, famine and the civil war the interruption of the state to ensure the economic growth was important.
Economy with cultural underpinnings
To explain the cultural underpinnings of economy in depth the famous Kula exchange in the Trobriand islands could help with that. Bronisław Malinowski (1922) shows with the analysis of the Kula exchange that people’s knowledge of economics is vague. More specifically the word trade in the context of economics. It is defined as an exchange of indispensable or useful articles, done without much ceremony or regulation, under stress of death or need, in spasmodic, irregular intervals – and this done by either direct barter or by some customary arrangement. Kula exchange contradicts all these point by showing a new completely new side to “savage trade”. In Kula all the exchanges are ceremonial, they happen regularly, and there is no stress for need since the valuables are completely useless. The valuables are mainly ornaments, that are used on very rare occasions.
In Kula, to be possess is to be great, but this also means to give, the higher the rank the higher the obligation to share. This is why sometimes people hide their wealth so they would not have to give so much.
A Kula community is a part of Kula circle. Inside the community people have common interests, the exchange and preform rituals. In the community exchange happens often and in the big circle it happens once or twice (internal and external exchange).
Kula exchange is one of the rarities of the world that no one can be absolutely sure what and why does it happen, but there are some assumptions. The society in the Trobriand islands both contradicts but also supports the self-regulating economy. On one hand, Kula people engage in exchange to improve the quality of life, since the exchange creates reciprocity and social relations. On the other, Kula people do not see the Kula valuables as a commodity but rather as a gift that cannot be exchanged for money.
Another anthropologist, James Ferguson (2013), from Stanford University has recognized the cultural underpinnings of economy in the Third World that could help in getting a further understanding of them.
In the 1820s the Ngoni state in southern Africa was a fearsome military machine that terrorized and preyed on its unfortunate neighbours. The bloody raiding was not episodic or occasional, but more or less continuous way of life. What would seem odd and unacceptable for somebody from the western countries is that the neighbouring chiefdoms of Ngoni state voluntarily surrendered to it often travelling miles (Ferguson ,2013).
This could be explained with the belief that the Ngoni state was most fundamentally not about killing its enemies, but about incorporating them. The reward of being part of the Ngoni state was often a quite full-bodied social membership and the possibility to rise in the hierarchy since there was always newcomers.
The Ngoni state is no longer active. New logics about racial domination and the economic logic of capitalism introduced by the western invaders shattered the old social systems and drew the entire subcontinent into a world of wage labour and commoditization, where people continued to be struggled over labour-scarcity economy.
No matter that the Ngoni state was no longer active, people continued to voluntarily travel many hundreds of miles in order to submit themselves to a notoriously violent and oppressive socio-economic system. Kinship-idiomed labour was gradually displaced by the purely commoditized purchase of labour power capitalist agriculture continued to depend on paternalistic relations of authority with deep continuities with the past.
The capitalist economy was not prepared for such migration, which changed the economy from a labour-scarcity to a labour surplus one. Mass unemployment tends to be associated with economic decline, however, in economic growth in South Africa has coexisted with rising numbers of unemployed, many of whom are now locked out of the labour market not temporarily, but more or less permanently (Ferguson, 2013). This means that while the economy is growing, new jobs are not created and unemployment rises.
To help the poor and unemployed the state came up with the BIG grant which would give both social recognition and economic support in a way that would not be tied to labour. In contrast to older forms of ‘welfare’ assistance, the claim is that such grants rely on poor people’s own ability to solve their own problems, without imposing the policing, paternalism, and surveillance of the traditional welfare state. The BIG grant is not in work yet but Ferguson (2013) believes that it would not work since it lacks personal contact and the feeling of being part of a society which is essential for the former Ngoni people. Dealing with their social and moral needs provide only a shallow and impersonal sort of dependence, instead of a richly social one.
Dependency in western countries is seen something shameful and it is often hard to understand how it works in different places of the world. Inequality must be confronted and independence gives freedom and releases from the hierarchy. Yet, the majority of South Africans agree with the fact that ‘People are like children; the government should take care of them like a parent’. Without networks of dependence, you were nobody, they want to be dependent on something.
The discussion that Ferguson (2013) has presented could present a few problems with the self-regulating economy. First, capitalism and waged labour was introduced by an outer source, this means that there was intervention in the process of the economy. Even if it tried to just be an attempt speed up the African economic growth, Ferguson shows that this did not work the way it was intended and how it had worked in other market economies.
Given the freedom after the British colonialism and the possible resources to improve the economy and improve the possibilities for one self, be part of a market society and evolve into one people still seek submission. The accumulation of commodities id not essential as mentioned before. State intervention is culturally inevitable because the people of South Africa expect somebody to take care of them.
