How War led to the advent of Market Economy


Evident throughout history is the belief that the bipolar divide of social reality has been between government and markets especially governments that wage war. Social reality is termed here in a sense to give an idea that how people place themselves in this context to either of the poles. That is to say that their political choice dictates their economic choices. Interestingly enough, the bipolar divide in its popular sense appears to be questionable. In fact, markets have appeared as a consequence of military adventurism led by governments.

David Graeber, an economic anthropologist at the London of School of Economics and Political Science aptly explores this historical anecdote in his book Debt: The First 5000 Years.In his account where he refers to the Axial age(600 to 800 B.C), a term coined by a German philosopher Karl Jaspers is a time period in which apparently all the major philosophical/religious movements came to the fore. What is most interesting is that it was the same period in which coinage was born. To keep things simple coinage was characterized by a set pattern of coins/currency being developed by local citizens and subsequently taken over by the government. This pattern followed in all the major regions such as Greece, China, and India. However, one thing of particular significance to this inquiry is that the first ever coins to be produced were in the Kingdom of Lydia which is the present-day Turkey.

Graeber argues that the Gold, Silver, and Bronze from which coins were made was initially only limited to the Kings and the nobility. That however started to change in an intriguing manner. Such precious valuables started circulating among the common masses which was how these coins were made. Here Graeber refers to David Schapsa professor of Classics: according to him, it was a period which he calls the ‘’generalized warfare’’. It is then of common sense to understand that in the aftermath and in the duration of war, loot and plunder is a consequential hazard. In such a circumstance it became inevitable that people were left with large amounts of precious metals. It is in this sense that Schaps argues:

‘’It may well have been the protracted wars among the states of these areas that first produced a large population of people with precious metal in their possession and a need for everyday necessities.’’

It is important to note here that at this point of time financial markets had virtually no relevance. It was only taken as war bounty initially but what’s fascinating to note is that it is in this very sense of material fulfillment that gave people both the want to diversify their economic life and as well the need to fullfil their basic necessities. Furthermore, in the context in which is discussed; war led to plunder and plunder led to the market trade based on exchange of valuable metals. Before dwelling deep into it, one should bear in mind that these metals and stones were not wholly looted for the fact of being simply precious but it had an added factor of being portable as well. As armies would mobilize according to situational needs, so their plunder would include such items which they can carry with them as well. Coming back to the central argument, Schaps further argues that:

 The constant warfare of the archaic age of Greece, of the Janapadas of India, of the Warring States of China, was a powerful impetus for the development of market trade, and in particular for market trade based on the exchange of precious metal, usually in small amounts. If plunder brought precious metal into the hands of the soldiers, the market will have spread it through population.’’(Pg 226)

As mentioned earlier the term ‘’generalized warfare’’ which engulfed the major empires did something which had no historical precedent; that is to say, it laid the foundations of a market economy. This might not be as straight forward as it may sound. The very fact that governments, the kings had the monopoly over national wealth and also the fact that the war was not a new phenomenon known to humankind and so the subsequent loot that would take place, the essential dissimilarity of the Axial age from the past was that during the times when coinage was born, the Greeks were improvising their war mechanics and sophisticating it.

This led to the demand of their troops world-wide and as obvious as it is, essentially a service of such sort demanded reward as well. Therefore, it is necessary to understand that these mercenaries were paid in diminutive value of what consisted as large-scale valuables. This leads to another factor explained above which is ‘’portability’’ of these items or to use an appropriate word, ‘’renumeration.’’ Any other form of exchange or barter would made it plausibly impossible for these mercenaries to carry them.

Governments had vested interests to monopolize this changing reality. On the one hand, due to the capacity it had, governments were responsible for distributing the newly formed currency/coins to the masses and on the other hand, due to this very fact it could regulate the flow of this currency internally by giving it an official value. This provided an eminent premise to create markets with the authorization of government subsiding all the other currencies which might have existed in one form of the other. Usage of coins as renumeration is believed to be a practice which started in the Kingdom of Lydia. Exploring the politically important regions of that time, Graeber concludes that as a practice of the day it was largely coinage which proved to be a solution to the prevailing debt crisis which happened to exist way before the coinage. Athens in this regard is an example of it where a crisis of such sort prevailed in 594 B.C. Any solution to curb the crisis would entail either being in servitude to landed elites or being a part of free- peasantry which would liberate the populace of debt servicing so that so their children would spend time training for the army. All the major economic activity of the time was centered around the distribution of looted goods in war and conflicts which has been repeatedly mentioned to be precious metals and stones. In Athens, it was not only limited to the distribution among the army but also the common masses.

A catalyst to this chain reaction was the phenomenon of slavery as well. With reference to Alexander’s army, Graeber describes that he had a long-standing army of more than 120,000 men which needed to be paid and since his attack on Persia resulted in large number war captive slaves. He directed them to mining fields in order to mine more gold and silver. Resultantly causing to formulate the ‘’military-coinage-slavery complex. ’’However, slavery is not of particular relevance to this inquiry but it did play a vital role in shaping the politico-economic landscape of that time. Exploring further, Graeber discovers the pattern to be similar in India as well. Divided in different forms of governments in terms of regions, the kingdoms here too held huge armies which were on the payroll of governing authorities. Simply put, those having control of the mines were able to sustain armies of large magnitude which would result in a more powerful assault on the enemy in case of war and the resultant cycle of subsequent war bounty. Eventually, the concept of the economic thought evolved. What is understood in modern terms as the public and the private sector find its ancestral roots in Axial Age. Governments reinstated officials on a fixed salary. The institutionalization took place in terms of establishing its monopoly of power and control. What started off as a consequence of war was extended to the entire governance system to establish economic monetization. The cycle of economic activity was established by having trading houses, warehouses etc. The aim was to put back into the treasuries the metals, stones and silver. This was the basis of economic commercialization.

Gulraiz Iqbal
Gulraiz Iqbal
Gulraiz Iqbal, is a Research and Teaching Assistant at School of Politics and International Relations in Quaid I Azam University, Islamabad. He previously was an intern at the High Commission of Sri Lanka. He tweets @GulraizIqbal10.