ECONOMIC SYSTEMS. – The aggregate of the economic activities of individuals and the action of political authority, which aims to coordinate individual ends with social ones. In every period of history, multiple economic systems have always coexisted because remnants of outmoded systems survive within new ones.
I. ECONOMY OF PRIMITIVE PEOPLES
Until the last century, it was believed that hunting, pastoralism, and agriculture had been three successive stages of economic development for all peoples. The historical-cultural ethnological school now distinguishes four main forms of economy: gathering, advanced hunting, pastoralism, and agriculture. The latter three derive, independently and with their own centers of origin, from the first, and their intermingling gave rise to mixed forms.1. The economy of gathering
In groups that practice it, men obtain food through hunting and fishing; women and children gather plant foods or slow-moving animals such as worms, insects and their larvae, snails, etc. Exceptionally, men contribute to gathering when collective and rapid labor is required, or when it involves climbing trees, e.g., to collect honey or to use an axe. To dislodge roots and tubers, women use digging sticks. For hunting, men use weapons such as the bow and arrow, harpoons, blowguns, and traps; as auxiliary means, they employ dogs and poisons. For fishing, they use striking or throwing weapons, nets, weirs, traps (among the North American Indians), as well as poisons cast into the water and excavation. In some places, fishing can be so abundant as to almost replace other means of subsistence and may hold an important place even in economic systems other than gathering, whereas hunting does not. Each tribal group knows well the hunting and gathering resources of its territory during favorable periods of the year, while in certain other periods prohibitions or taboos are imposed to protect game, fish, and plants. Whether this way of life is hard or easy, gatherers love it and do not wish to change it for any other, even if they have been able to recognize its advantages, as when, for example, the Andamanese became acquainted with agriculture in their territory through the work of whites.2. The economy of advanced hunters
This is so called in contrast to that of gatherers. What characterizes it, in fact, is that it is originally familial, whereas the other is tribal and seems proper to totemists. Among these, in fact, a broad economic solidarity is observed, whereby individual clans and groups regularly exchange certain means of subsistence and tools, such as utensils, weapons, etc. Since the production of tools requires favorable conditions, such as good raw materials, specialization arose: one group found itself in better conditions to forge swords, another daggers, another to produce clothing and ornament items. Hence, a craft differentiation between clans emerged. Whereas in the economy of gatherers there was gender equality with a suitable division of labor, in that of advanced hunters the economic importance of men increased relative to women, with the consequence of a gender imbalance. The great development of the idea of the state, with all its divisions and subdivisions of clans with their totems, diminished the importance of the family, reduced almost to nothing, to the great detriment of human personality. The economy of advanced hunters would have arisen in the Upper Paleolithic, while that of gatherers in the Lower Paleolithic, or rather in the pre-lithic or a-lithic period, if one can conceive of the use of wood without the exploitation of stone.3. The agricultural economy
This provides sustenance through the cultivation of plants: it is an activity mainly performed by women; men, however, contribute by clearing and preparing the land for sowing, by erecting, if necessary, protective hedges around the field, by helping with the harvest, by building storehouses and similar structures, and especially by defending against enemies or wild animals. The oldest form of cultivation is that done with a digging stick. In tropical regions, taro and yam are planted every three or four months, so that mature bulbs are always available, the garden being at different stages of maturation. Some peoples abandon land that has become sterile, burning the forest or brush to prepare cultivation in a different place; other peoples instead leave the land fallow for several years before cultivating it again. To the cultivation of plants is added the planting, done by men, of fruit trees (mango, date, betel, pandanus). There is no lack of hunting or fishing expeditions by men, nor of gathering excursions by women, individually or in groups. For the irrigation of fields, canals are dug, which also serve to drain swamps. Belonging to this economic system is the raising of pigs and poultry, the invention of pottery and weaving. The agricultural economy is originally familial, and since it has a predominantly feminine character, it diminishes men’s economic activity, leading to the matriarchal system (v. DONNA; MATRIARCATO) and to the rise, requiring settled residence, of the village with its solid, square houses with gabled roofs.4. The pastoral economy
It is believed that the transition to plant cultivation and livestock raising was one of the milestones of the technical progress of the human race, achieved in the transitional period from the Lower to the Upper Paleolithic, or in the Neolithic according to others. Pastoralism initially requires the taming of wild animals and their multiplication in a state of captivity. Today, the Turkic-Tatar peoples use meat, especially horseflesh, as their main food; in fact, they have no other word for food. The Mongols, Altaians, and Kirghiz mainly use lamb meat. Reindeer herders (Chukchi, Samoyeds, Ostyaks, Lapps) do not use reindeer meat except when game is scarce, and they use reindeer for travel and for milk. As milk animals, however, they primarily consider the mare, cow, sheep, and goat, secondarily the reindeer, yak, camel, and donkey. Milk is abhorred in non-Aryan India, in Indonesia, and in East Asia. Among many other tribes in East Africa engaged in pastoralism, the practice of drinking the blood of cattle and oxen is noted, by opening a vein and drawing one or two liters of blood. Pastoral peoples eat cooked meat and milk; otherwise, all peoples of the world use fire, and all, except the Andamanese, Tasmanians, and Bongo (Congo), know how to produce II. Livestock raising is distinctly a male activity: women are left with the care of milk vessels, tanning hides, constructing tents, making garments, grinding grain, cooking food, and sometimes preparing beer and the like. Since herders need good pastures for their flocks, nomadism and transhumance are characteristic of them.5. Economic collaboration
From the union of agricultural economy with that of superior hunters there arises, as has already been noted, an intense exchange of goods, which leads to the development of industry and commerce, technology and art, as well as vast social aggregates, as has been observed, for example, in Melanesia, Australia, America, and Africa. Thus, among African farmers one finds potters, carpenters, and blacksmiths, who often inhabit a reserved part of the village of the group to which they belong and trade their products at the nearest market, bartering them for subsistence goods (millet, maize, beans) that others have in surplus; or else they work on request. Whenever nomadic shepherds have succeeded in subjugating these mixed peoples, or farmers, or superior hunters, great archaic empires have arisen, with a consequent technical advancement in agriculture and craftsmanship. Animals are then employed in agriculture with the plow, in transport with two- or four-wheeled carts (already known in the fourth millennium B.C.), while in war the use of war chariots and cavalry appears. The exchange of goods, which among gatherers is rather based on contacts among relatives, gradually leads to the development of routes and means of communication and to the introduction of primitive money. This, however, is used only to facilitate and measure the barter of goods, not for purposes of capitalization. There are very rare cases in which primitive money is transformed into possession of livestock, as, for example, occurs in Buin in Bougainville (Solomon Islands archipelago).6. Origins of different economic systems
Ethnology has proven that the man of the most primitive culture (gatherer) is no different from all others of every time and place. The most authoritative prehistorians affirm that even the tools of the earliest Pleistocene attest to the full rationality and hence the spirituality of primordial man.The other economic systems—superior hunting, pastoralism, agriculture—arose independently from gathering during the transitional period from the Lower to the Upper Paleolithic.
Hahn, followed by others, believes that livestock herding began for magical-religious reasons in pre-Sumerian agricultural civilization, where it was later used for plowing, and from there passed in a second phase to other peoples, while in Mesopotamia agriculture would have originated. Recently, Fr. Hermanns and Wolfel, independently, have sought to demonstrate that pastoralism began with sheep and goats; then the ox was domesticated, followed by the donkey, onager, camel; then the horse and reindeer, not by Proto-Samoid and Proto-Tungusic hunters, but by a hunting people of Western Asia between Turan and Iran. From here, pastoralism spread to Mesopotamia, the Near East, and Egypt, then to Africa and Europe, then to India, at Mohenjo Daro, among the Toda, and finally to Central and East Asia, where the ox arrived but not the horse.
Luigi Vannicelli
II. ECONOMY OF ANCIENT EVOLVED PEOPLES
Once the phase of primitive economy had been surpassed, the most important economic systems of antiquity were those of ancient Egypt, Greece, and the Hellenistic monarchies, and ancient Rome.7. The economic system of ancient Egypt
It developed during the millennium encompassing the six Theban and Memphite dynasties (from 3200 B.C. to 2275 B.C.). The religious presupposition of this system was the consideration of the pharaohs' power as a direct transmission of the power of the gods. A consequence of the religious essence of monarchy in the political sphere was the absolute tendency toward centralization and voluntarism even in the economic-administrative realm. This tendency was accentuated by geographical conditions (v. EGITTO): given the particular importance of the Nile’s periodic floods for agriculture and the relative isolation of the country, state intervention was facilitated, as only the state could first carry out the great works to regulate the waters and then the great religious and state constructions that balanced the scarcity of commercial activity.The two cornerstones of the productive structure of ancient Egypt are: agriculture, predominantly carried out in an individualistic form by small landowners who live on the produce of their holdings, paying the state direct taxes in kind and in days of labor on the vast estates of the pharaoh or the temples; and industrial activity, predominantly carried out in a monopolistic form by the state. State monopolies include mines, quarries, construction enterprises for public buildings (pyramids, temples), and factories where products from state lands and those obtained from taxes in kind are transformed into manufactured goods. In addition to slaves—limited to prisoners of war—free workers hired by contract also work for the state. The administration of the state’s economic activities is entrusted to officials. Internal exchanges are limited to taking the form of barter; external exchanges, though not intense, are directed toward Syria and Palestine and are a state monopoly. The high productivity of free agricultural labor and the strong monopolistic gains of the state enable the economic system to sustain the great unproductive expenditures of public construction, but the disproportionate extension of these expenditures ultimately affects agricultural productivity and is one of the causes of decline. Other causes include: the concentration of wealth in the hands of officials, whose offices, after the Fourth Dynasty, became hereditary; the transformation of free agricultural workers into colonies legally bound to the soil; and the formation of tax privileges favoring large estates. After the Sixth Dynasty, the Egyptian economic system, through a slow process of involution, loses its distinctive characteristics.
8. The socioeconomic system of ancient Greece and the Hellenistic monarchies
They developed from the 7th to the 3rd century BC. The geographical conditions of Greece ([v.] limited arable soil with extensive coastal development) and the political conditions (consolidation of the city-state and tendency toward colonizing expansion) favored intensive agriculture (vineyards, olive groves, orchards); the exchange of foodstuffs provided by foreign peoples and colonies in return for industrial products obtained in the city-state; and the necessity, hence the development, of maritime transport and commerce. The legal system and the productive structure varied significantly from city to city. Inheritance was permitted everywhere, with legal limitations aimed at preventing both the concentration and the fragmentation of property, not so much for economic reasons as for political and moral ones. The forms of management of agricultural enterprises also differed. Agriculture and livestock, however, constituted a secondary source of wealth in the Greek socioeconomic system. More developed was the small industry producing for the market. Labor was mainly provided by slaves belonging to the owner of the enterprise or entrusted to him. In democratic cities, and especially in Athens, free wage laborers, citizens, and foreigners were also employed.The commercial techniques of the Greeks reached a level of perfection that would not be surpassed until the advent of modern capitalism. Besides spreading the use of money as a medium of exchange, the Greeks established between the various city-states and between cities and colonies actual monetary agreements. During the period of the apogee of the Greek socioeconomic system (v. e. 4th century BC), when money had become the principal form of income and accumulation, the need was felt to prevent it from lying idle and to promote lending, regulated by precise legal norms and carried out by specialized merchants.
With the conquests of Alexander the Great, the urban way of life, individualism, the spirit of initiative, and the advanced industrial and commercial techniques of the Greeks were grafted onto Oriental absolutism, giving rise to the characteristic socioeconomic system of the Hellenistic monarchies. In this system, state monopolies were widespread. The state directly owned the largest landed properties, and on the small and medium properties granted to private individuals, it reserved significant rights (military service of colonists, taxes, corvée labor). Highly specialized industrial activity was carried out in predominantly state-run factories, using slave or free labor hired by contract. Artisan production organized into guilds also persisted; however, its output was minor, regulated by state laws (notable are those of Ptolemy in Egypt regarding the production of oil and papyrus), and authorization to practice a trade was subject to the payment of a tax. The socioeconomic system of the Hellenistic monarchies declined when, as wealth became concentrated and the artisan classes and free workers grew impoverished, state intervention turned into indiscriminate and oppressive fiscalism.
9. The socioeconomic system of ancient Rome
It developed during the imperial era, from Octavian Augustus (63 BC) to Constantine (337 AD). Political unity, the large urban population, and the security of land and sea trade led to a harmonious development of the three productive activities: agriculture, industry, and commerce, which were favored by a relatively decentralized administrative structure and prevailing free-market policies. State interventions in the economy, limited to fiscal and welfare matters, were empirical and subordinate to political interests. The legal system, which reached a level of perfection in the Corpus iuris civilis unknown to previous civilizations, was centered on the recognition and protection of immovable and movable property (including slaves) and individual rights. The ager Romanus first and then the ager Italicus were susceptible to full or quiritary ownership and exempt from taxation. Provincial lands, assigned to colonists or veterans or left to former owners, were subject to land taxes that sanctioned Rome’s theoretical right of ownership. The small peasant property worked directly and producing for the family’s consumption, typical of the republican age, underwent a continuous process of concentration, favored by the influx of capital, slaves, and livestock resulting from military conquests. This led to the separation between property and farm management and between agricultural production and consumption, which characterized the Roman socioeconomic system. Since agriculture was the principal source of wealth, some authors, despite the lack of rationalization of the system for profit-making purposes and the predominance of politics over economics, have applied the term “agrarian capitalism” to II. The redistribution of lands to veterans during the imperial period did not alter the system, as it did not create new peasant holdings but rather new rural estates (latifundia) belonging to wealthy urban landowners, based on slave labor and producing for the market. Agricultural products found a counterpart in industrial manufactures, whose exchange, extending not only to luxury goods but also to essential products, was facilitated by a good road network, a unified monetary system, legislative protection of contracts, and the existence of interest-bearing loans.Commerce was an important source of wealth, but its profits were mainly invested in purchasing land. Industry was decentralized and operated as small artisanal enterprises with the help of slave labor; technically, it was not very advanced and did not reach the level of Greek and Hellenistic industry.
With the end of military conquests, the concentration of landed wealth, the low productivity of industry (whose development stagnated due to the shrinking market caused by the general poverty of consumers), and the increase in taxation—which traditional revenues could not support—set the socioeconomic system on a downward path. The administrative structure also changed: the state resorted to extraordinary levies in kind and labor (liturgies), the collection of which was first made collectively and then individually by wealthy urban citizens. Under Diocletian and Constantine, state interventions intensified (price controls, facilitation of the purchase of tools for small colonists, etc.), but their lack of systematic approach rendered them ineffective.
III.
10. MEDIEVAL SOCIOECONOMIC SYSTEMS
These are feudal economy and urban economy.### Feudal Economy
(see FEUDALISM). — It spans from the 9th to the 11th century and is based on the formation of a conservative and particularistic feudal society and on the continuous decline in population density. Real estate is concentrated in the hands of feudal lords, who cultivate it extensively and without profit. Serfs work the land either on behalf of the lord or on their own account; in the latter case, they pay the lord a rent and a share of the harvest. Other economic and fiscal rights of the feudal lord include the collection of tolls; the right to so-called banalities (the obligation to use exclusively and for a fee the lord’s oven, mill, and oil press); the right to inherit land from a tenant without heirs; exclusive rights to hunting and fishing, etc. Since the tax system is based exclusively on payments in kind and services—i.e., it is tied to the number and stability of the services owed by the land—the population’s mobility is severely restricted (prohibition on leaving the land, prohibition on marrying outside the fief, etc.). There is no industrial production for the market; essential manufactured goods come from artisans working to order or, for the most part, from home production. Trade is thus extremely limited and conducted by itinerant merchants who organize periodic fairs with great difficulty. Monetary circulation is minimal and does not allow for the accumulation of movable wealth. The entire feudal economy is anti-commercial, risk-free, and therefore inherently static.
### Urban Economy (11th to 15th Century)
It develops alongside the revival of urban life and the formation of communes with a democratic structure. The Crusades (see) exert a significant influence on its formation by breaking the stagnation of feudal economy, opening markets in the Levant, and mobilizing both people and capital. Land ownership and exploitation are fragmented; productivity increases notably due to the influx of capital and the spread of rational irrigation and drainage systems. The autarchic economic policy of the communes fosters the rise of new industries; production retains its artisanal character, but a new category of merchant-entrepreneurs emerges, organizing the work of multiple artisans by providing capital and raw materials and assuming the risks of market-oriented production.
A defining feature of urban economy is the formation of guilds and corporations (see). Initially a voluntary professional association, the guild becomes a mandatory professional monopoly. Trade, both interregional and international, flourishes; monetary circulation is abundant but insufficient for the volume of transactions, which are largely facilitated by credit. During this period, while the prohibition on usury (see) remains in place, legitimate grounds are recognized for compensating lenders (actual damages, lost profits, risk, etc.). The activities of Florentine and Flemish bankers lead to the development of advanced credit techniques. The fiscal system of cities relies on indirect taxes as regular revenue; direct taxes, public loans, and monetary devaluation serve as extraordinary sources of income.
### IV. ECONOMIC SYSTEMS OF THE MODERN AND CONTEMPORARY AGE
#### 11. Mercantilist Economic System
(see MERCANTILISM). — It manifests itself in varying degrees of coherence across European states from the 16th century to the late 18th century, reaching its peak in France and England during the 17th century. Its foundations are provided by the practical necessity of newly formed unitary states to secure steady, reliable, and substantial revenue to meet their needs (organizational, administrative, military expenses, etc.). The mercantilist system involves a series of state interventions aimed at increasing national wealth, of which money is considered both an expression and a measure. It unfolds in three phases. In the first, interventions are limited to prohibiting the export of coinage. In the second phase, efforts focus on increasing the domestic money supply through the regulation of individual foreign trade contracts. In the third phase, corresponding to the system’s peak development, the state seeks to indirectly influence the balance of trade by creating conditions within the country that favor the export of finished goods and discourage their import (see MERCANTILISM; CROMWELL, OLIVER). The mercantilist economic system facilitated the transition from urban economy to modern capitalism, from which it differs due to its voluntarism—that is, its reliance on deliberate state intervention to achieve economic well-being rather than spontaneous market forces.
#### 12. Capitalist Economic System
(see CAPITALISM). — The premise of this system is liberalism (see), which the American Revolution (1776) and the French Revolution (1789) had established in politics, and which the physiocrats (see) first and the classical school (see SMITH, ADAM) later affirmed in economics, with a belief in a beneficial and spontaneous economic order. Its technical characteristics include: the renewal of agricultural techniques with the introduction of four-field crop rotation and artificial fertilization; the renewal of industrial techniques through the increasing adoption of machinery; and the renewal of land and sea transport with the creation of railway lines and steamships.
The consequences of this ideological and technical transformation are: the separation of capital (see) from labor, which passes into the hands of the entrepreneur who organizes production, presenting themselves on the market as both seller of the product and buyer of raw materials and labor, which is treated as a commodity; the growing use of fixed capital in proportions exceeding circulating capital; the division and rationalization of labor; the search for ever-expanding markets; and the continuous transformation of the combination of productive factors and the scale of enterprises to adapt to qualitative and quantitative market changes; a highly developed monetary economy to facilitate the formation and distribution of savings; the predominance of corporate enterprises over individual ones, leading to the separation of ownership (shareholders) from management (administrators) of the firm; and the proletarianization of the working class, which, though a necessary collaborator of capital in production, becomes its antagonist in the distribution of the product, resulting in class struggle. The capitalist economic system presents highly complex and difficult-to-schematize characteristics due to the inherent dynamism of the system itself. Its development can be divided into three periods.
The first (in the most economically advanced countries, from the end of the 18th century to the mid-19th century in Italy) is the period of transformation in agricultural and industrial techniques; the dominance of private initiative by owner-entrepreneurs; and the formation of class consciousness among workers, who are left to fend for themselves in a labor market unfavorable to them due to weaker bargaining power, competition from female and child labor, and the lack of organization and legal protection.
The second period (second half of the 19th century) is characterized by the predominance of the speculative-financial element over the industrial one; by the development of large enterprises and the struggle for the conquest of international markets. Trade unions grow stronger and wages are determined through collective bargaining. The State intervenes in social relations with laws on the physical protection of workers and on the duration of work. It is in this period that the deficiencies of the system become fully evident: periodic renewals of depressions with consequent mass unemployment and unequal distribution of wealth.
The third period (from the end of the 19th century to the First World War) is characterized by agreements among large enterprises to move from a regime of competition to one of coalition (or quasi-monopoly). Enterprises, unable to react to demand variations with corresponding supply variations due to high fixed costs and the relative rigidity of wages, partly renounce their individuality and freedom of initiative by agreeing with other enterprises to form national and international groups, cartels or trusts. Enterprises promote the use of a monopolistic pricing policy. In this period, extensive social legislation and collective wage bargaining give labour-management relations a semi-public character, without however attenuating the separation and antagonism.
13. The collectivist economic system
It was implemented in Russia with the Bolshevik Revolution (1917). The philosophical presupposition of the system is the historical materialism (v.) of C. Marx; the political presupposition is the simultaneous achievement of the dictatorship of the proletariat, with the abolition of social classes, of property and of private initiative (v. BOLSCEVISMO).14. The regulated (or programmatic or partially planned) economic system
It has been affirmed in more or less definite form in all States, with the exception of the U.S.S.R., from the end of the First World War to the present day. It consists in direct and increasingly extensive State intervention in economic life, to modify the results of individual economic actions and to coordinate individual ends with social ends. In the current phase of development of the regulated economy, the social ends, theoretically indicated as the achievement of social justice, focus on the creation of a tendency towards full employment and a more equitable distribution of wealth. The regulated economic system recognizes private property and private initiative, but subjects them to legal limits (expropriation, stockpiling, etc.) and economic limits (control of investments, nationalization, control of exchanges, etc.). The presuppositions of the regulated economic system are to be found: 1) in the new structure of the market for products and production factors, which has shifted from a competitive market to a coalition market; 2) in the inability of the capitalist system to overcome its deficiencies: 1) the economic system and the social system; 3) in the mutual knowledge of the relations between the State and the economy, with the inclusion, among the essential functions of the State, of the achievement of social justice.State interventions that implement the regulated economy vary from State to State, to adapt to different pre-existing economic situations. They can be achieved through: interventions in monetary policy: management of the discount rate, privileged credit, etc.; interventions in international trade policy: bilateral and multilateral agreements, exchange control, protective tariffs, export premiums, etc.; interventions in social policy: social legislation and insurance, vocational guidance and selection, etc.; direct interventions in production: nationalization of key industries, public works, fixing of prices above (e.g., the U.S. Agricultural Adjustment Act of 1933) or below (e.g., the so-called political prices) market prices, etc.; interventions in cyclical policy, aimed at preventing expansions (control of credit, limits on self-financing by enterprises, etc.) or at lifting depressions (public works, increase in monetary circulation, etc.).
Such interventions, taken separately, are proper to any economic system, but in the regulated economy they assume particular importance because they are preordained and coordinated with one another in view of the achievement of a single economic-social end. The regulated economy brings profound modifications to the fiscal system with the introduction of the State’s economic budget, i.e. a budget imposed on criteria that are not exclusively financial, and to the administrative structure of the State, with the creation of new bodies (Ministries of the Budget or of Production, Superior Councils of the Economy, etc.) or with the expansion of the functions of existing ones. Particular forms of regulated economy are: 1) the corporative economic system, implemented by the Fascist regime in Italy (v. CORPORAZIONE), and 2) the British Labour economic system (v. LABURISMO). The regulated economy raises the problem of the relations between individual freedom and State authority.
Once the autonomism in international economic relations, proper to the gold standard system, which is incompatible with the achievement of full employment and social security and therefore with the regulated economy, has been abandoned, the regulation of such relations is conceivable only with common and organic criteria among the various States; hence the regulated economy also raises the problem of international cooperation, examples of which are the European Payments Union (E.P.U.), customs unions, etc.