Summary States versus Markets Schwartz chapter 1, 3, 4 & 5 (Political Economy midterm 2019)
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Political Economy
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Universiteit Van Amsterdam (UvA)
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States Versus Markets
This is a summary of chapter 1, 3, 4 and 5 of 'States versus Markets' by Herman M. Schwartz. These chapters are part of the required readings for the course Political Economy (that is part of the bachelor Political Science) at the Univeristy of Amsterdam.
uva university of amsterdam eelke heemskerk political economy political economics political economics states versus markets schwartz states veruss markets schwartz pe verdoorn kaldor ricardo adam smith smith economy
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Schwartz Chapter 1: The Rise of the Modern State: From Street Gangs to
Mafias
States and markets in the 1500s
● The modern state and the modern global market emerged together and are
inextricably intertwined
● Globalisering was a consequence of efforts by emerging absolutist states to
subordinate the nobility and achieve an unmediated relationship with peasants and
merchants
● European states’ ‘comparative advantage’ initially in the use of organised violence
● Mercantilism=an externally oriented policy through which states tried to create inflows
of bullion (specie or metallic money)
end: the creation of a homogeneous, monetized internal economy, dominated by a
central authority capable of defining property rights.
Agricultural limits on state formation
● Tot eind 19e eeuw: pre-railroad agricultural economy. Graan werd niet naar heel ver
getransporteerd (niet meer dan 20 miles).
● Von Thünen: Maar wat als we paard en wagen hebben? Kan het graan dan niet
verder getransporteerd worden?
● All economic, social and political life took place in microeconomies centered on
market towns surrounded by an agricultural hinterland of about 20 miles
● Adam Smith: division of labour → productivity → more income. Maar bij Smith was
population of the microeconomy klein want niet iedereen kon zich veroorloven om te
specialiseren. Dus: a small division of labour limited productivity
● Although microeconomies all nestles together, they trade only a little with their
neighbouring microeconomies and virtually nothing with more distant ones.
● Limit daarna ongeveer 50 miles maar er waren three exceptions:
○ water and wind power could be directly harnassed through mills
○ grain and other commodities could be transported by water
○ money and other precious items could be moved long distances
The nobility and the acceptance of limits
● Nobles controlled the first exception (wind and water mills)
● They went to where the grain was (dus niet grain zelf verplaatsen)
● Nobles extracted a surplus from peasants through a mixture of custom and coercion
(biker gang)(rents and payments)
● Nobles had little need directly to monetize their local economy
● The nobility constructed a society based on mobile people controlling an immobile
surplus
● What nobles lacked was anything that could not be locally produced, dus: luxuries
● Nobles resisted the monetisation of their local economies above and beyond the
minimum amount of money. Although monetisation might help them attack and
conquer their neighbours, it exposed them to the possibility that the rents they
charged peasants could be fixed in money terms. Also: inflation
, ● Kings sought to monetise the microeconomics in order to shift part of the peasants’
surplus away from the nobles and toward themselves
Absolute monarchs, internal markets, and external enemies
● Kings wanted to connect all the microeconomies together with a vertical bureaucracy
● Kings’ authority was weakened by the nobility’s legal claims to land, by their
autonomous military power and by the web of mutual obligation linking king to vassal
● King’s weakness reflected Europe’s considerable administrative backwardness
relative to empire elsewhere
● Kings were originally nominated leaders of the bands of brigands from which the
nobility emerged, merely princes, or first among the equal society of nobles
● Kings tried to retain control over the new nobility by retaining the right to confirm the
inheritance of fiefs. Technically, kings retained landownership but exchanged use of
the land for the nobility’s loyal military service. But once they dispersed their armies,
kings both lost their ability to subdue rivals and created a host of new rivals.
● Two reasons for kings to monetise microeconomics as much as possible:
○ 1. Monetisation gave them access to a greater volume of resources in any
given area
○ 2. It allowed kings to extract resources without having to go through the
nobility
● To monetise they microeconomies kings also had to find some source of real money
(bv goud) to put into circulation in the microeconomies. → zochten naar support van
merchants against nobles
● Kings faced a second threat to their authority, what forced them to look back to
nobles for support. Kings could only increase their wealth by taking away land from
other kings and nobles. Wars with other kings forced kings to deploy increasingly
larger and better organised armies, raising the amount of cash needed for success.
● Conflict with other kings also limited king’s efforts to subordinate nobles. No king
could risk fighting both externally and internally
Merchants and the wider maritime world
● Merchants fall into two categories depending on whether they were oriented more
toward long-distance trade or local trade:
○ Inland trade, in particular the trade of the market towns in each
microeconomy.
○ Long-distance trade
■ Network based on contractual obligation
■ They linked communities on the coast and navigable rivers through
flows of money and goods
■ Water transportation undid the limits on the division of labour imposed
by local food supplies
● Merchants wanted to be left alone to make money unhampered by either nobles or
kings, both of whom had an annoying habit of stealing from merchants. The best way
to gain this interdependence was to construct a network of armed trading cities
● Merchants benefited from the king’s ability to deploy violence on their behalf against
competing merchants and predatory nobles and kings
● Merchants and nobility common interest in seeing that kings did not become too
powerful
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