Polanyi's Error About the Significance of Markets

CGEH Working Paper Series:

“Soldiers and booze:

The rise and decline of a Roman market economy in north-western Europe”

Eltjo Buringh, Utrecht University Jan Luiten van Zanden, Utrecht University, Maarten Bosker, Erasmus University Rotterdam, Tinbergen Institute, CEPR

Abstract

“This study quantifies the importance of the Roman military for the development of a market economy in north-western Europe. Distributions of low denomination coins show how the Roman arrival kick-started a local market economy. Additionally settlement densities of fluvial catchments are used as a proxy for economic development. Our newly constructed dataset of settlement sizes shows a high correlation with Roman military requirements. After the demise of the empire the local market economy faded away. This antique market economy had a different geographical distribution than its medieval successor, which was not mainly driven by military demand.”

“Introduction

Two millennia ago Rome had a large economy based on market institutions and a stable government.1 In Italy, the Middle East and in Egypt the Roman Empire (RE) was highly urbanised with cities of 100,000 inhabitants and more, despite being a pre-industrial society. In a seminal article Keith Hopkins argued that it were the taxes in money that greatly contributed to the development of a market economy in the RE, as people now had to produce a surplus that could be sold on a market to generate the money with which to pay their taxes.2 This paper aims to study what happened in north-western Europe in this respect. An important and, as yet, unanswered question is how the Romans got a market economy to flourish in the then backward part of the empire that was newly conquered around CE. In considerably less than a century the Romans produced an effective and successful local economic system largely based on market exchange. This is a surprising result: European colonizers in Africa, for example, were to experience that just imposing a tax in money on the native inhabitants does not automatically lead there to the establishment of a market economy even with military presence. How did the Romans succeed? The short answer given by Robert Bruce Hitchner is that it was the Roman military that delivered this feat.3

However, for us such an answer is not completely convincing, as the role of the Roman army has up to now only been presented in general terms, while its more specific local influence has not been unravelled and the various regional economic consequences have never been properly quantified. Intriguing questions, such as why did the military limes along the Rhine produce the large Roman towns of Cologne and Xanten, while along similar military establishments at a very comparable limes in the German Taunus and along Hadrian’s Wall in Britain equally sized towns did not develop? And why do we see such a huge difference in economic development between e.g. the Roman settlements along the rivers Scheldt and the Thames, while both are seemingly similar local river systems in north-western Europe and both are located well outside the frontier zones of the RE?

The first aim of this paper is to study the regional development of a Roman market economy, for this we use local coin finds as a proxy. The idea is that the share of small change in these finds is an index of the degree to which processes of commercialisation have occurred; large denomination (gold or silver) coins will mainly have been used in long-distance trade, but the appearance of small (copper or bronze) coins points to the use of them in small, local transactions.4 The study of the fraction of precious metals in stray coin finds can therefore supply additional evidence about the rise and decline, and the spatial structure, of the monetarisation.

The second aim of this article is to study how the Roman market economy was spatially distributed and which were its main drivers. Therefore we will look at the regional settlement density in various fluvial catchment areas as a proxy for economic development and consider the differing distribution of the Roman military over these areas in north-western Europe as a natural historical experiment that can be used to quantify its influence on the development of the local economy.5 We will also be looking at the other potential factors that could have driven the local economy in Roman times and try to quantify those. With help of a specific statistical technique (multivariate analysis) we can eventually determine which of these potential drivers were the most important and quantify their influence.”

Notes: 1 See e.g. Peter Temin (2006, 133), Bowman and Wilson (2009, 28) argue that the actual extent and the precise nature of the economic growth at the time continue to provoke debate among scholars. 2 Keith Hopkins, (1980, 101 and later in 2002, 229), this, however, does not preclude that taxes could still be in kind as well, as Richard Duncan-Jones (1990, 30 ff) argued.

3 Robert Bruce Hitchner (2003, 4, 398). Some decades earlier Lothar Wierschowski (1984) had made a similar point in his study of the Roman army and the economy. And before him A.H.M. Jones (1974, 127) had indicated that the expenditure of the army had stimulated development in backward areas of the RE such as Britain and the Rhineland, and in particular the growth of towns.

4 The remark that the use of coin of low denominations is an index for the extent of a market economy has already been made by Wolf Liebeschuetz (2001, 24). Jan Lucassen (2007) describes that the end of the Roman rule meant the end of small change, with the consequence that wage labour (a labour market) could no longer exist without a reliable and abundant coinage.

Comment

I cannot quote anything more from the text without offending the authors' copyrights.  But the above is sufficient to indicate why I consider Karl Polanyi’s thesis is a 20^th-century thesis about “embedded” markets from the 19^th century onwards being significantly different from markets and exchange relationships in all-previous millennia.  What Polanyi missed is the significance of the difference between all previous millennia from mid-19^th -century living standards onwards – I refer to the overwhelming sheer quantity of previously unknown mass availability goods and services facilitated in modern markets. There is no other way to sustain modern market economies.

In fact, Polanyi’s assertions facilitated his political ideology. He and his followers missed the empirical point that without market distributions in a complex modern state, the variation of qualitatively superior commodities in sufficient quantities to raise living standards to historical unprecedented levels for populations would not have been possible for those living in the market-economy societies.  1944 – when Polanyi’s composed his “Great Transformation” – perhaps, was not the best vantage point to make his assertions, given the war-driven austerity in the capitalist countries free of Nazi occupations and the remaining Left’s illusions about socialism in the Soviet Union.

[Any reader wishing to read the Eltjo Buringh, Jan Luiten van Zanden, and Maarten Boskers' who paper contact me and I shall send a copy.  Warning: they use a lot of statistical analysis to establish their points.]