In time spast I have made the point that in the Arab countries, human freedom is squelched because of the fact that the financial resources and political power are located in the same centers, the rulers. This is not an accident, but is the result of ancient history, specifically the history of the most fundamental economic activity - food production. So this posting explores the relationship of agriculture with the political-economic structures of the mid-East and the West.

The great primordial states of Egypt, India, China and Mesopotamia all arose from the need to intensify what historian Karl Wittfogel called “hydraulic agriculture,” dependent on great rivers for food production. This kind of agriculture required intensive central planning and central control because the construction of water channels, sluices and locks required “antlike armies of workers . . . obedient to a few powerful leaders pursuing a single master plan,” according to cultural anthropologist Marvin Harris. It did not take long for power to become concentrated solely at the top.

In contrast, the agriculture of Europe relied on rainfall. Pre-Roman-era peoples in Europe were widely distributed because they did not rely on rivers for food production. Because rainfall agriculture neither requires central authority nor prospers under it, statehood for northern Europeans developed later than in the hydraulic regions of the world. The Europeans formed into states not to produce food, but to cope with the military threat of the Mediterranean empires and to trade with them (and later to plunder them).

Centralized authority evolved in the European states to keep order and retain military capability, not to produce food. But the power of military rulers waxed and waned according to the degree of threat perceived by the societies. The basic facts of rainfall agriculture ensured that no post-Roman-era European kings could affect the fundamental basis of the economy. Simply growing food always depended upon large degrees of local autonomy. . . .

Thus, monarchs could never gain the absolutist authority enjoyed by their peers in the hydraulic states. In many ways, European kings were really mediators of relations among the manorial barons, who did have real control of the means of production. The matured version of this agri-political system was feudalism, which basically was a system of production, distribution and alliances among baronies, reinforced by marital and family ties.

By the 13th century, feudalism had reached the limits of efficiency. The populations of western European states had risen to a level that manorial farming could not support. Production efficiency fell, dragging profitability along with it. To prop up profits, barons turned over vast areas of depleted farmland to herding, especially of sheep for wool, which was highly profitable. . . .However, newly opened farmlands gave poorer yields than the old. In the short term, manorial profits went up, but over the longer term, the people working the land suffered terribly.

In the mid-14th century, the black plague killed between one-fourth to one-third of Europeans. In its aftermath, Europe was embroiled in intense political and economic unrest and warfare which feudalism did not survive. The basic economy of Europe was transformed from manorial farming into a manufacturing and trade economy, primarily of textiles made from wool. The economy of Europe became a proto-factory one.

But these proto-factories (mainly mills and later, metalworks) required accumulation of capital to maximize production because machinery was expensive. Profitability required ever-greater efficiencies of manufacture, and greater efficiencies depended on technical innovation. The principal thrust of technical innovation was to gain advantage over competitors, which was essential to raise capital and increase profits.

The merger of business, technology and finance into one operating entity, the legal company, was the unique invention of European states. All the other states of the world did business, produced inventions and technical innovations, and had financial organs, but only in Europe were all these functions combined in single companies owned by non-rulers for the purpose of increasing private capital. China, for example, enjoyed technical innovation at least as great as Europe’s until the 14th century, and Chinese emperors permitted private lands and business to a significant degree. They also established banking and merchant systems. But Chinese authorities never permitted Chinese business owners to establish legal corporations and technical innovations never became the key to competitive advantage over other businesses. Essentially, the Chinese monarchies treated private enterprise as a useful source of revenue and nothing more, feeding the Chinese internal revenue system. (Karl Marx delightfully called internal revenue organs, “bureaus of internal plunder.” Perhaps a name change for the IRS would be in order?)

The emergence of capitalism in late-medieval Europe served to check the power of royalty far more effectively than the baronial powers had ever done. Western monarchs could be just as power hungry as their eastern counterparts but their power had always been limited by the Church and the nobility. With the rise of capitalist systems, wealthy business owners and merchants became power centers in their own right, further serving to limit the power of the state. Ultimately, the combination of legal and new economic structures gave birth to bourgeois legislatures beginning in the 17th century.

Defining capitalism is not as easy as it might first seem. Is capitalism primarily an economic system of production distribution and profit, or is it really a political system of personal freedom and property rights, with economic consequences? Affirmative definitions for both sides can be found.

As it formed, though, it was neither. Capitalism began as nothing other than the search for maximum efficiency of using resources in societies mostly ordered for personal freedom with property protections, and this it basically remains. There is no single political or economic center in capitalist societies, meaning that both errors in efficiency and their corrections are continuous and multitudinous.

Capitalism on the whole is self-correcting. Indeed, the West’s ability to be self-critical, resulting from and sustained by the university system (another Western invention), and its ability to be self-correcting in its financial transactions may be the most powerful advantage that Westernism has over any other system. The other main systems of the world, mainly the Chinese, Indian and Japanese – but not most of the Islamic world – have either developed similar capabilities or adapted the West’s.

The historical result of Western capitalism has been the creation of enormous wealth in the capitalist nations. However, until 150 years ago, almost all the wealth was concentrated in very few hands. The capitalist society of Wesleyan England had more total wealth than its earlier feudal society but the lower classes were no better off. The middle class enjoyed a decent standard of living, but nowhere in Europe did the middle class comprise a significant percentage of the population until after 1850. It was only the development of new energy sources, means of communication and transportation after 1850 that enabled technical innovations to get ahead of the population curve, resulting for the first time in an overall rise in living standards.

Wealth creation was aided, of course, by the fact that Europe and the Americas were super-abundant in natural resources, but the mere presence of such resources did not automatically result in wealth. Many areas of the world have abundant resources but are poor. Furthermore, such resources were necessary for the great wealth of the West, but were not sufficient. The legal-political ordering of European societies were also essential to the rise of capitalism.