Adam Smith On Exchange

Dr David Graeber (2011) in his book, “Debt the First 5,000 years” (Melville House), made assertions about Adam Smith on the subject of “truck, barter, and exchange on thing for another” in his Wealth Of Nations (WN I.i.1: 25) published in 1776.  Smith’s words were: exchange was “a necessary consequence of the faculties of reason and speech” and linked it to the division of labour. In fact, Dr Graeber reports, somewhat sneeringly, that anthropologists in the 20^th century have not found any evidence of barter among the peoples they had studied in the field.  Maybe, but they certainly have found much on the prevalence of exchange, much as Smith meant it.

Not being a trained anthropologist, I was unable to judge or discuss the fieldwork of scores of professionals, all of whom today are able to access hundreds, if not thousands, of scholarly sources, from their desks via the Internet.  Naturally, I presumed on the basis of David Graeber’s firm convictions that he had sound reasons for being so sure of his assertions, though I was never completely satisfied with his claims the Smith was adamant that 'barter' necessarily preceded  exchange the invention of money.  Exchange certainly preceded both Truck and Barter.

I was not entirely convinced on several grounds that his modern evidence contradicted Smith’s 18^th-century arguments about the social evolution of human societies.  Smith used what limited evidence he had from the historical sources available to him, particularly those written (e.g., by two French Jesuit residents and travellers across Canada) on North American ‘Indian’ natives some 300 years after Columbus got there in 1492. He also had access to Captain Cook’s three late 18^th-century voyages to the Pacific - he had copies in his library - plus his readings from the Hebrew/ Christian Bible, (which covered a period roughly from the 8^th century BC, about the many travails of a bronze-age, Jewish tribe up to early 1^st century AD). 

Smith’s vocabulary provided the words for his famous statement, “truck, barter, and exchange” and conformed to his knowledge their English language meanings. ‘Truck’ is about the payment of ‘wages’ in the form of goods (labour for goods); ‘barter is usually the exchange of goods for goods; and ‘exchange’ describes the process by which anything is given for anything in return between anybody(see the Oxford English Dictionary).  Their meanings in foreign languages and folklore may well be different.

Smith’s ‘exchange’ is often carelessly miss-stated by some authors as general trade (e.g., Polanyi).  While trade can describe many forms of exchange, it does not cover all forms of exchange, including those appertaining to pre-historic times and cultures.    In the early 19^th century, the “Truck Acts” made trucking by employers illegal in the UK. Truck exchanges were around in the early 20^th-century, at least in song, e.g., ‘16-tons’ and ‘another day older and deeper in debt, I owe my soul to the company store’.  Truck was widely used in Smith’s day, and its form persisted informally elsewhere (for example, truck-type exchanges were mentioned by Emile Zola in ‘Germinal” (1895) in reference to the wives of destitute strikers, who were exploited by a shopkeeper – sexual access for provisions).  The word exchange as used by Adam Smith does not need, nor is it limited to, exchange as a monetary exchange.

Smith’s general use of exchange as a legitimate word for what happens goes back to as early as 1761, in his essay, ‘Considerations on the First Formation of Languages’ he notes that  language origination, like the division of labour, was a “necessary consequence of the faculties of reason and speech”, which we know now had evolved over millennia since the speciation of proto-humans from the common ancestor of human and chimpanzee apes. Homo sapiens emerged c.100,000 years ago.

Obviously, no written history is possible for the long period even since the Great Ice Age c.50,000 years ago.  The last glacial maximum occurred c.20,000 years ago as humans moved closer to historical accounts. Accounts of how humans in their societies evolved towards today’s complex, highly populated societies are a fascinating and unsettled subject.  

I remain sceptical of Dr David Graeber’s dismissal of Smith’s ‘exchange’ conjectures as a peculiarly human behaviour, to which he attributes rather disreputable purposes behind Wealth Of Nations.  Dr Graeber has firm views about exchange theory as mainly taken from neo-classical economics textbooks that seem to inform his thinking, but which are not shared by myself and many other economists.  Dr Graeber claims that ‘exchange is about equivalence’ (he links it to “gunfire”!) in which each side “is trying to trying to outdo the other” and they “try to break it off when both consider the outcome to be more of less even”, because they really want instead to “seek maximum material advantage” (103).  With such a twisted view of exchange, Dr Graeber is stuck in a conundrum: if each side strives for an equivalence and aim to end up better than the other party, and then they break off when they do not succeed, as the cannot on his concept of trade "equivalence", how does anyone ever exchange anything, let alone the 30 billion exchanges available in New York each day?  Dr Graeber’s contradictory view taken from some elementary textbooks is not very sound.  Both parties, in fact, in exchange make themselves better off than before they exchange.  Each considers what they give up is of less ‘value’ to them than what they get back in return.  They both gain, otherwise they would not exchange! There is no notional equivalence. Smith said “Give me that which I want, and you shall have this which you want’ (WN I.ii.2: 26); the universal bargainers’ conditional proposition.   It is because both sides gain over their pre-trade position that exchange through trade is so widespread and popular.  And nobody "designed" it and once it emerged, "spontaneously" it proved to be a mutually winning behaviour.  Communists tried violently to suppress the behaviour and failed after 70 millions dead.

Smith wrote with the information he had and the plausible conjectures he constructed given the information to which he had access.   David Graeber also uses conjecture, for instance in defining human societies as passing through ‘communism’, using the (tendentious) modern wholly political definition of “from each according to his ability, to each according to his needs’, through to the many millennia of what Graeber calls the ‘human economies’. In them there was not a great deal of humanity practised, especially for the female line, who were sex slaves, through to recent ‘capitalism’, which Dr Graeber accuses of inventing the ‘catastrophe” of the slave trade, even though it had existed for many millennia before the 19^th century and capitalism.  And communism really is about "from each according to his role in the central plan, to each according to his politics".

So, post reading Graeber’s book, I re-looked at some of my books on subjects related to anthropology that I had collected while I was researching my (unpublished) “The Pre-History of Bargaining” (2003-5).  Among them there is Steven Mithen’s, “After the Ice: a global human history 20,000 – 5,000 BC”, Orion, 2004, which at 622 pages pips in length Dr Graeber’s long book and neatly ends where Graeber’s begins. I also re-read a book I had bought more recently, Timothy Baugh and Jonathon Ericson’s, “Pre-historic Exchange Systems in North America,1994, Plenum Press.  Taking just two of the 14 scholarly refereed papers, Jon L. Gibson, “Empirical Characterisation of Exchange Systems in the Lower Mississippi Valley Pre-history’ and Robert H. Lafferty’s paper, ‘Pre-Historic Exchange in the Lower Mississippi Valley”, I was struck by the scientific precision of each paper, both fully referenced from scientific sources from the primary archeolgical literature, based entirely on painstaking field research by the authors, as recorded in the subject’s splendid literature library.

The authors reported on the empirical evidence for trade across several thousand miles of tributary rivers, open land, flood plains, mountains and forests of North America from roughly 10,000BC to 1540AD.  Exchange systems and periods are identified from excavation of burial mounds and nearby detritus belonging to various tribes common to each area.  ‘Beautiful stone ornaments, abstract life-forms, effigy beads; rare (to individual areas of mounds) geological materials (pebbles, flints, lithics, adzes, minerals, pottery, large axes, beads, obsidian, coloured rocks and etc., and much else that are naturally sourced great distances away, suggesting long-standing, long distance exchange relationship and forms of primitive trade.  From graveside offerings and rituals they suggest ceremonialism in more recent periods (160 BC to AD 70).   The association of objects with elite burials leads to suggestions that exchange/trade was mainly of benefit to elites and not widespread bilaterally among populations.   Exchange in objects was political in nature.

As technology developed in water-borne traffic, and in hunting/ warfare weapons, it promoted associated growth of territorial influences and dominance.  With the arrival of Europeans (Spanish and British) trade in animal skins and trinkets grew and the quantity of all exchange goods, both local and imported, across large distances, grew in importance, from the Rockies to the Atlantic.  There is even evidence of mines 20 to 40 feet deep, suggesting knowledge of minerals.  Thousands of farm tools, hoes and oval spades suggest quite independent indigenous introduction of early agriculture in North America separate from the earlier agricultural revolution in the European middle east c.10,000 BC.

Now what these suggest, pertinent to Smith’s primitive discussion of the Ages of Man and to his hypothesis of the role of exchange in social evolution, is that he was broadly right about the role played by the evolution of forms of exchange, be the crude reciprocities common to all human cultures (and to near relatives like Chimpanzees), more sophisticated access by male elites to women and their children, whose males were trapped in some kind of invented social debts and general submission, exchanges of goods for goods however this was wrapped in local cultures controlled by elite men, or for political alliances for mutual security between strangers and neighbouring tribes.

I conclude, that Dr David Graeber takes far to narrow (and dare I say, somewhat too hasty) a view of Adam Smith, largely unsupported by the evidence of anthropology and archaeology of the deep past.  Anthropologists who only look to surviving remnants of living tribes living on the edges of modern society, as if they are perfect examples of isolated past, pre-modern contact societies, who once dominated the planet, may jump to fallacious conclusions. Of course, they are not helped by relying on modern neoclassical textbooks for their understanding of economics or of Adam Smith, as Lost Legacy has tried to show since 2005.