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The Rise and Decline of General Laws of Capitalism

It is hard not to be impressed by the meteoric success of Thomas Piketty’s Capital in the Twenty-First Century, a success that has spawned dozens, and perhaps hundreds, of reviews and reactions from social scientists and journalists.

Yet we felt that few, if any, of these reviews touched on what we thought was the biggest shortcoming of the book. Sure, one can — and should, and we do — quibble with the theory (and especially the way it is presented and the way it follows the put-down that economic theory gets from Piketty) and the strong predictions about the future dominated by capital income (even though there is little evidence backing this up, perhaps because econometrics is also not en vogue). But from our viewpoint, more important is the way in which Piketty eschews a careful analysis of the determinants, and implications, of inequality situated in the context of the economic and political institutions of a society, and instead links the dynamics of inequality to fundamental or general laws of capitalism, very much in the style of Malthus, Ricardo and Marx.

So here is our attempt at a critique focusing on this point.


The Coatsworth Thesis

The reactions of the campesinos in Chachapoyas to the state might not have been completely surprising to people who had read the work of the historian John Coatsworth. In Chapter 1 of Why Nations Fail we present a comparative economic and political history of the Americas showing how the very different institutions that got set up in colonial Latin America led to its long-run development. In characterizing these institutions as extractive on the one hand we focused on economic institutions, such as systems of labor coercion, designed to exploit indigenous peoples to the benefit of colonists. Lying behind these extractive economic institutions were extractive political institutions, political power concentrated in the hands of the elite and a weak state. Yet why was the Latin America state weak? John Coatsworth has persuasively argued that to understand the institutional path of Latin America it is important to understand the structure of the colonial state which involves an interaction not just between the elite and society, but between society, the Spanish settler elites and the Spanish state. For example, the colonial state often intervened to protect indigenous peoples from exploitation by the settlers. One reason of course was that the colonial state wanted to exploit the indigenous peoples itself (something which comes up in Melissa Dells’ path-breaking study of the impact of labor coercion in colonial Latin America - The Persistent Effects of Peru’s Mining Mita).

But it also wanted to weaken the power of these settler elites because it was also afraid of them declaring independence or refusing to pay taxes. A particularly interesting example of this is attempts by the Spanish crown to rescind grants of encomienda, the earliest system of labor coercion implemented in the Americas. Coatsworth also points out that this is a reason why property rights were ill-defined and insecure in colonial Latin America, by not giving settlers well defined and secure rights the colonial state made them more dependent on it, thus weakening their autonomy and power.

Thus the idea that Peruvians might appeal to the central state to help them fight against the tyranny of local elites was not a new one in the 1930s. It had actually been going on for a long time.

A good place to read his views is in his paper “Institutions and Long-Run Economy Performance in Mexico and Spain, 1800-2000” co-written with distinguished Spanish economic historian Gabriel Tortella.


Do People Really Dislike the State So Much? (with thanks to Joshua Walker)

Scott’s work emphasizes the fact that people don’t really like living in states and they get away from them if they can. This argument certainly mirrors a great deal of anthropological evidence from small scale and stateless societies and it is certainly true in some cases as our last several blogs (here and here) suggested. But our argument has a logical corollary which ends up looking like the opposite of Scott’s thesis: if people think they can control the state and use it in their interests, then they will demand that it takes action and expands.

This argument has been developed in a series of brilliant works by the anthropologist David Nugent, most centrally his book Modernity at the Edge of Empire with a summary of some of the key ideas being presented in his article “Building the State, Making the Nation: The Bases and Limits of State Centralization in “Modern” Peru”.

Nugent presents us with a detailed history of the department and city of Chachapoyas in Northeastern Perú over the past century. Early in the 20th century the national capital in Lima exercised little direct authority over the department given its physical isolation and the fact that it was not connected by a proper road to the rest of the country. Instead, the department was controlled by a group of powerful families, castas, who controlled not land, but local politics. They used this political hegemony to staff and control all the positions of the state, most importantly the police force. Their main source of income was the taxes that they were able to extract from the population. The castas ruled, but they did so by occupying the positions of the state that in the early 1930s began to change its relationship to these local elites. In 1931 the National Election Law introduced a secret ballot, extended the franchise and made voting obligatory and generally weakened the control of the castas over local elections. In 1933 the local police force was abolished and a well-trained Guardia Civil composed of people from outside the region took its place. The national state began to exert its control over local administrative appointments and particularly the collection and allocation of tax revenues. Also important was educational transformation. Prior to 1930 the castas had appointed all the teachers in the department and did so as part of a clientelistic political strategy to keep power. After 1930 the national Ministry of Education gradually began to exercise control over appointments.

Clearly what was going on here was the extension of state authority and power to integrate Chachapoyas more firmly into the Peruvian state. Nugent shows that though this might have been highly adverse for the castas, it was not so for everyone. Most important, what put this dynamic of expansion into motion was not some autonomous impulse from Lima coercively imposed, but local demands from Chachapoyas.

Chachapoyas was the fiefdom of the castas, but Perú had a constitution which enshrined things like the rule of law, security of property. During the 1920s Nugent shows how social mobilization in Chachapoyas, mostly started by a few elites who had got an education in Lima, began to demand the end of casta rule. Critically, they demanded the expansion of state power as a tool to free the society from the rule of the castas who they saw as violators of their basic rights as Peruvian citizens. As Nugent puts it

In the first phase (in the 1930s) the state was proclaimed the legitimate protector and potential liberator of a self-defined “moral community” – a local, marginalized group that sought to free itself from the control of local powerholders – who actively assisted the state in effecting a more complete integration of regional territory and nationalization of regional population.

So this is James Scott’s thesis upside down! Rather than fleeing from the state and resisting it, ordinary people are demanding the expansion of its authority in order to attain freedom from arbitrary and coercive local elites.

As we have already argued and will continue to argue in the next post, this underscores the necessity of a conceptual framework in which the politics of state formation, and in particular whether different groups expect to be able to control the state, is at the center stage.


Shakespeare in the Bush

Though it is a bit of a distraction from the theme of state formation, we can’t mention the Tiv and the work of Paul and Laura Bohannon without mentioning Laura Bohannon’s wonderful story published in 1966 “Shakespeare in the Bush”. Here she relates the problems of telling the story of Hamlet in a completely different cultural context.

You can read the story here:



Why Didn’t the Tiv have a State?

The lesson we learned from the Lebanese case is a general one. Here is a seemingly unlikely case, which we would argue is very similar.

The Tiv are a pre-colonial society of Southeastern Nigeria. You can see Tivland on the next map.

The Tiv were a stateless society but lived in villages of extended kin. The next photograph illustrates how these villages looked like from the mid-1940s onwards when the anthropologists Paul and Laura Bohannan studied them.

There are many interesting things to say about the Tiv but here we make only one point building on Paul Bohannan’s 1958 paper “Extra-Processual Events in Tiv Political Institutions”.

During the summer of 1939 the colonial government and most social and economic activity came to a standstill in Tivland because of a cult called Nyambua. At the heart of the cult was a shrine and a man called Kokwa who sold charms to provide protection from mbatsav or “witches”. Tsav means “power”, particularly power over others. A person with tsav (it is a substance that grows on the heart of a person) can make others do what they want and kill them by using the power of fetishes and tsav can be increased by cannibalism.

Bohannan explains this as follows:

A diet of human flesh makes the tsav, and of course the power, grow large. Therefore the most powerful men, no matter how much they are respected or liked, are never fully trusted. They are men of tsav — and who knows?

 The people will tsav belong to an organization — the mbatsav.

Mbatsav has two meanings:

 -   Powerful people (it is the plural of tsav)

 -   A group of witches organized for nefarious purposes (robbing graves to eat the corpses)

Now this is a pretty interesting double meaning. Imagine if in English the word “politicians” simultaneously meant “people who contest for or control political offices” and “A group of witches organized for nefarious purposes (robbing graves to eat the corpses)”!

People initiated into the Nyambua cult were given a leather covered wand and a fly-whisk. The whisk allowed one to smell out “counterfeit” tsav — created by cannibalism. In 1939 the whisks were pointed towards the ‘chiefs’ created by British indirect rule (the Tiv had no chiefs prior to the colonial period and in consequence the British colonial government imposed them from the outside). But historical evidence shows that the roots of these practices ran much deeper. According to Akiga’s Story: The Tiv Tribe as Seen by One of Its Members:

When the land has become spoilt owing to so much senseless murder [by tsav] the Tiv have taken strong measures to overcome the mbatsav. These big movements have taken place over a period extending from the days of the ancestors into modern times.

In essence these religious cults were a way of stopping anybody from becoming too powerful. Bohannan explains this as:

Men who had acquired too much power … were whittled down by means of witchcraft accusations… Nyambua was one of a regular series of movements to which Tiv political action, with its distrust of power, gives rise to that the greater political institutions - the one based on the lineage system and a principle of egalitarianism - can be preserved.

But to have a state someone has to become powerful, start giving orders to others who accept their authority. Witchcraft accusations were therefore not just a method of stopping someone becoming too powerful but simultaneously stopped in its tracks a process that could have culminated in state formation.

Hence the Tiv were a stateless society in the pre-colonial period. To our reading of Tiv history this is a quite similar situation to what we find in modern Lebanon, though obviously Lebanon is not a stateless society. The Tiv feared that if people became too powerful they could not be controlled, and the only solution was to block power accumulation. They did not get as far as institutionalizing a state and then keeping it weak, like in Lebanon, but the mechanisms are very similar.