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Economic Consequences of Organized Violence

Published online by Cambridge University Press:  03 February 2011

Frederic C. Lane
Frederic C. Lane
Affiliation:
The Johns Hopkins University
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Extract

In The writing of economic history at present there is a tendency tofocus attention on the quantity of material goods and of people. This is not because economists seriously maintain that the chief end of man is to produce a maximum population, each member of which has at his disposal a maximum amount of material things. I do not think many economists or economic historians hold such a materialistic belief-why then would they choose to be professors ? We merely write as if we did, or at least we too often write so that we can be thus misinterpreted; and we are the more likely to be thus misinterpreted because the great political powers of the present, the United States and the Soviet Union, using different ideologies, each extols, paradoxically, its material productivity as proof of the force and validity of its ideals.

Type
Articles
Information
The Journal of Economic History , Volume 18 , Issue 4 , December 1958 , pp. 401 - 417
Copyright
Copyright © The Economic History Association 1958

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References

1 Strictly speaking, the production of protection depends on the control of violence; the use of violence is only one among a number of possible means to that end. Theoretically one might say that violence is productive when it is used to control violence and is not productive when it is used to transfer wealth from one person to another. In regard to advertising and salesmanship in general, a comparable distinction would declare them productive when they increase a consumer's knowledge of products available and of his own needs, but unproductive when they cause the consumer to misjudge the products available and to be confused about his own wants. It would be difficult to apply such a distinction in analyzing advertising budgets, and it would be similarly difficult to apply the first distinction in analyzing governmental budgets, for courts and police are used to collect taxes as well as to control robbers, and in the collection of taxes the control of violence is used to transfer wealth from the taxpayer to someone else. The question is: What does the taxpayer receive in return?

2 If a government rendered no service except “protection,” the taxes it collected might theoretically be divided into two categories: a part that were payments for the service rendered and another part that one is tempted to call plunder. How distinguish between them, even in theory?

1. One might consider as payment for service only what had to be paid in order to be protected from third parties and call plunder all that was exacted under threat of violent seizure by the government itself. But this distinction would be of very limited usefulness. Only in some aspects of the feudal system and of early maritime trade did violence-controlling enterprises punish refusals to pay their price, not by themselves using violence against refusers, but merely by leaving them exposed to the violence of third parties. Even governments that rendered good service required payments for it (but see note 5 below on forced sales).

2. One might consider as payment for service the amount the government collected to cover its necessary costs, all else as plunder. I attempt below some analysis along this line but do not in this connection use the word plunder. I would prefer to reserve it for the extreme case, namely:

3. Plunder I would define as the exaction by a violence-using enterprise of such large payments from another enterprise that the other enterprise is unable to keep up such payments and also maintain its production. I am inclined to stretch the phrase “payments for protection” to cover all exactions below this limit, even if they are in excess of real or necessary costs and are imposed by the violence of the collecting enterprise itself.

3 Compare the discussion of military expenditure as part of national income, and the comparison with deceptive advertising, in Kuznets, Simon, National Product in Wartime (New York: National Bureau of Economic Research, 1943), pp. 4–7Google Scholar.

4 Crudely, this means only that military expenditures were higher in times of civil war, which is obvious enough. A more careful historical analysis would have to consider how changes in the art of war, in transportation, etc., have changed the advantages and disadvantages of scale for violence-using enterprises and thus have changed the amount of territory embraced by a “natural monopoly.” In much of medieval Europe, governing more terri- tory than one province brought disadvantages of scale. In contrast, by the seventeenth century it had become almost impossible for a government to maintain against outsiders its monopoly of even a single province unless its military establishment was strong enough to conquer a national kingdom. The size of the natural monopolies have changed, and there have been periods of competition and higher costs of protection while new natural monopolies in accord with new techniques were being established. In our age of atomic weapons there is perhaps no natural monopoly smaller than the whole world.

5 To the objection that a “forced sale” is really no “sale” at all, and that concepts applicable to exchange do not apply, it may be answered:

1. “Forced” is a matter of degree. At one extreme the “buyer” may have the alternative of payment or death, or taking extreme chances of dying. This choice faces not only those who pay for “protection” but also those who depend for water on a supplier who has a monopoly of the supply. During a desperate famine many buyers of food have only this choice. In some cases of illness patients are in this sense practically forced to agree to the fee asked. Such extreme cases may arise more often in the purchase of protection than in the purchase of water, food, or medical care, but the purchaser of protection has very often had other, less extreme, alternatives.

2. Admittedly, protection is not as easily divisible as is water, and the amounts paid to a monopoly for protection cannot so easily be varied in accordance with the amount received as is done when water is purchased from a monopoly. But many other goods and services are also of very limited divisibility. Again, the fees of a hospital which is the only one within reach come to mind. And there have been many historical situations in which the amount of protection may be said to have depended on the amount and form of the payment made. The amount of protection may be measured in time, in space, in the degree of risk, and in the range of the activities that are protected.

3. Calling the taxpayer a purchaser of protection is no more inadmissible than saying that the servile laborers of an eastern German landlord were “selling” their labor services to their landlord, yet an economist describes that situation by saying: “The Lord of the manor was a monopsonist with a closed demand” (Eucken, Walter, The Foundations of Economics [London: Hodge, 1950], p. 155Google Scholar). When laborers had to work for the landlord at the wage he offered or else have no means of livelihood, there was a “forced sale” with the “force” in die hands of the buyer. 4. “Sales resistance” by taxpayers might take the form of flights into the “desert,” as in Ptolemaic or Roman Egypt, or of serfs running away from their seignioral lords to towns where they could hide for a year and a day. It might take the form of local riots against tax collectors, or pot shots by moonshiners at revenuers. In border regions it could take the form of smuggling, so that a salt tax, for example, could be higher in the center of a kingdom than on the frontiers. These examples suggest that many taxpayers could find alternatives to the more excessive of the payments demanded.

6 Some aspects of the mixture of governmental and business enterprise and their gradual differentiation are considered in my “Force and Enterprise in the Creation of Oceanic Commerce,” The Tasks of Economic History, supplemental issue of The Journal Of Economic History, X (1950), 19–30Google Scholar.

7 Military entrepreneurs are being fruitfully studied by Fritz Redlich, who has nearing completion a two-volume work to be published by the Harvard University Press. By-products that have already appeared are “Der Marketender,” Vierteljahrschrift für Sozial- und Wirtschafts-geschichte, XLI (1954), 227–52Google Scholar; De Praeda Militari: Looting and Booty, 1500-1815 (Beihefte 39 of the Vierteljahrschrift für Sozial- und Wirtschaftsgeschichte, Wiesbaden, 1956)Google Scholar; and “Military Entrcpreneurship and the Credit System in the 16th and 17th Centuries,” Kyklos, X (1957), 186–93Google Scholar.

8 Tax farmers are one example. The officeholder who uses his office as an enterprise of which he seeks to maximize the income is discussed in a different context but in terms significant in relation to my theme by Klaveren, Jacob von, “Die historische Erscheinung der Korruption,” Vierteljahrschrift für Sozial- und Wirtschaftsgeschichte, XLI (12 1957), 291 ffGoogle Scholar.

9 Lane, Frederic C., “The Economic Meaning of War and Protection,” Journal of Social Philosophy and Jurisprudence, VII (04 1942), 257–59.Google Scholar

10 Of course there was no sharp line between those who made fortunes by subcontracting governmental activities and those who traded with political privileges that yielded protection rents.

11 Ceteris paribus. As I was reminded by H. J. Habakkuk, in a society where there is chronic underemployment of resources, increased military expenditure has often stimulated more production of other kinds so that the amount of surplus rose in time of war. But can it not be said that over the long run, other things being equal, a society that is able to attain a high level of employment of resources only by high military expenditure produces less surplus than if it were able to attain that same level of employment of resources with less military expenditure?

12 Easterbrook, W. T., “Long-Period Comparative Study: Some Historical Cases,” The Journal of Economic History, XVII (12 1957), 574–75.Google Scholar

13 Some aspects of the problem are discussed in Luzzatto, Gino, “Sindicati e cartelli nel commercio veneziano dei sec. xiii e xiv,” Rivista di storia economica, 1936, and in his Sttidi di storia economica veneziana (Padua: Cedam, 1954), pp. 195–200Google Scholar; in my Andrea Barbarigo, Merchant of Venice (Baltimore: The Johns Hopkins Press, 1944), pp. 45-52, 77–84Google Scholar; and in my “Family Partnerships and Joint Ventures in the Venetian Republic,” The Journal Of Economic History, IV (11 1944), 191–94Google Scholar.