This is different from, say, a feudal system in which economic exploitation and political domination are organized directly by the same system of power and authority. Adam Smith thought government ‘interference’ in the economy could upset its ‘natural’ self-regulation. Karl Marx and Karl Polanyi both disagreed, holding that it was mistaken to think of the economy as natural rather than historically produced.
Classical economists formulated the idea of universal, natural economic laws in a 19th Century argument against state efforts to control export and import prices. The timing was surprising. In precisely the same period, the social impact of industrialization was so dramatic that observers called it ‘industrial revolution’ and classical sociologists showed that it changed society as much as political revolutions.15 Agriculture was industrialized first, leading to the decline of rural villages and the rise of cities.
Modern markets are vastly larger than earlier ones, and organize a much larger proportion of human activities. Modern society doesn’t simply have markets, as kingdoms, empires, and feudal societies elsewhere have had markets. It is structured in a basic way by markets. Moreover, continuous marketization has meant that activities previously organized in other ways have been reorganized on market bases – like paying for a nursing home rather than caring for aged parents at home. Of course, states could also provide care on a non-market basis, but the dominant trend has been ‘commodification’, the organization of production and provision as for monetized exchange. Property that was previously passed on through generations, like family farms, has been commodified.
The discipline of economics developed to understand this new phenomenon of large-scale economic systems. It was initially called ‘political economy’ largely to signal a concern with trade, production, and wealth at the scale of states not just households. Mainstream economics is not about state-dominated economies, but about private property and how to allocate it in decisions about consumption, savings, and investment. Though grounded in an idealized image of individuals making such decisions, it uses mathematics and statistics to address both larger scale and law-like patterns. Classical sociological theory engaged both the contexts and social organization of economic activity.
A classical sociological theorist as well as economist, Adam Smith (excerpted here) showed how manufacturing was transformed not only by new technology but new social organization.16 A coordinated division of labor was basic to every factory. This depended not just on management but on an ethic of work discipline, as Max Weber showed, and discipline was also necessary to investment: saving and reinvesting profits rather than only consuming luxuries. While Weber stressed this “spirit of capitalism” which he thought had religious sources. Karl Marx and Karl Polanyi both showed how labor discipline was more coercively enforced, by fear of poverty, the power of capitalists, and government regulation. Trade unions and socialist politics were socially organized responses. Work, management, and investment were all transformed by the rise of large corporations.
Evolutionary theorists examined the transition from the fixed statuses of premodern societies, where most roles were determined by gender, age, descent, and kinship, to modern societies with their range of roles based on individual attributes, achievements, or contracts.17 Adam Smith analyzed how new divisions of labor made work more productive; markets expanded as different people and whole countries had different things to sell. Herbert Spencer, one of sociology’s great 19th Century founders, saw differentiation as the key to social evolution, including the transition from ‘militant’ societies based on sheer power to industrial societies based on structures of cooperation. It was key as states branched out beyond simply exercising power through a military hierarchy, to undertake a range of different kinds of administration including eventually education, housing, and health care. Emile Durkheim (excerpted here) linked division of labor to ‘dynamic density’ – a matter not of physical crowding but of the number and complexity of transactions typical of modern society – and through this to social integration based not on similarity alone, but on relationships among people who were different from each other. Talcott Parsons continued this functional analysis by showing the relations of economic activity to other institutions, like education. He held that by the post-WWII era, problems of economic exploitation and disruption had been minimized; government policy combined with representation of workers through unions to produce a functional balance.
Functionalist theories emphasized the evolution of spontaneous structures of cooperation, though they thought good policies could help these along. Their examples of ‘earlier’ stages came mainly from smaller scale peoples of the Americas and Africa. But colonialism brought greater knowledge of India, a very large-scale society that didn’t fit the premodern/modern contrast easily. India’s caste system was an almost infinitely complex hierarchy built largely out of kinship and descent, but also religion and occupation. But caste hierarchy was different from class. As Marx analyzed it, class was based on the sale of labor power as part of the relations of production. Others saw class simply as differences of income and wealth. Either way, class was reproduced more in strictly economic distinctions and less in elaborate cultural codes. Later sociologists would use the distinction to analyze the relations between race and class – for example in the US South. Race was embedded in a whole set of cultural norms governing things like who could mix with whom – or drink out of the same drinking fountain. Efforts to forge class solidarity based on the common interests of Black and white workers kept foundering on these caste distinctions.
Issues like this illustrate what Polanyi called the ‘embedding’ of markets in society. To say something like “it’s all just supply and demand” is not realism about economic life but a radical abstraction from actually existing markets and social life. Abstraction can be a useful tool, but when it is confused with more complex reality it becomes ideology and is usually misleading. Similarly, evolution is not just a shift from culturally embedded codes of status to markets and contracts that are somehow autonomous from culture and society. First, changes usually reflect power relations. Second, both markets and contracts are shaped deeply by differentiations rooted in the rest of social life. The different roles and rewards given to women workers offer a prime example.
Karl Marx also pointed out that economic production depended on social organized reproduction – like raising children. Polanyi showed how both family and community mattered. But neither Marx nor Polanyi went deeply into the gender roles that made childrearing and reproduction more generally largely women’s work. This became a theme for 20th century feminist theorists. As Jane Addams (excerpted here) pointed out, much was unpaid, embedded in family relations. And when household labor was paid – commodified – it often meant racial minorities and immigrants working for middle class families.
Marx, Polanyi and others also pointed to the exploitation embedded in the relation of rich countries to colonies. Slavery was one extreme form, developed in its modern form to serve plantation economies. Plantations produced cotton, which the textile mills of Britain or the US North converted into cloth and clothing. Colonies were run for the benefit of capitalist colonizers, as for example Britain undermined craft textile production in India in order to have markets for factory-made goods. Followers of Marx saw former colonies locked into subordinate positions and exploitation. Followers of Parsons and other modernization theorists argued that a process of development could enable them to follow in the path of the already rich countries.
Individuals. In the Middle Ages, and indeed in much of history beyond Europe, most people were peasants, making a living in agriculture, with any surplus production beyond their mere subsistence needs appropriated for cities and their elites. Indeed, they had less leisure time and freedom than people in small-scale societies that lived by hunting and fishing. Peasant lives were short, focused largely on survival, with few choices about consumption. The individuality of a few people – kings, heroic warriors, poets, priests, and philosophers – was celebrated but treated as exceptional. This doesn’t mean that individual qualities weren’t recognized among non-elites or that they were never individually creative. It means their material choices were limited. One effect of producing economic goods beyond the requirements of subsistence was that choice could proliferate. This was a major source of
