Lorenzo Warby's Political Economy

government and the creation and extraction of surplus

In another provocative essay in his series posted by

Helen Dale

,

Lorenzo Warby

writes,

According to Marx, surplus is produced via ownership of the means of production extracting surplus value. And it is true commercial activity can absolutely generate income above subsistence (that is what surplus is). In modern mercantile societies, profit share is about 15 per cent of GDP.

Warby defines “surplus” as production that takes place beyond the level needed for bare subsistence. He implies that this is what Marx meant by “surplus value.” Warby points out that governments appropriate a much larger share of surplus, on the order of 30 to 50 percent.

Warby writes,

There is a claim that developing farming means generating surplus. This is also mostly not true. What more food production mainly means is more babies.

…straight Malthusian population dynamics that we can see throughout the biosphere.

The only way to reliably extract, and so generate, a systematic and substantial surplus was to take food before it turned into supporting more babies. Which is what the taxing activity of the state does.

Warby points out that in an agricultural society, extraction of surplus takes place when there are season crops and stored food. Because stored grain is vulnerable to theft, organized central states, which can command an army and administer taxes, extract surplus. He writes,

The development of chiefdoms and states enabled the techniques of exploitation (via tribute and taxation) to catch up and surpass these techniques of aggression. Chiefs and rulers pacified to protect their taxpayers (and so their revenue base).

Mancur Olson coined the term “stationary bandit” to describe the dynamics between government extraction and private production. A roving bandit robs you and then moves on to someone else. He has no incentive to leave you with anything. A stationary bandit repeatedly extracts revenue from you. He has an incentive to allow you to encourage you to continue producing.

The stationary-bandit ruler and his subjects have a mutual interest in shutting down roving bandits. By doing so, the ruler enables the subjects to produce more and to keep more surplus for himself.

Warby points out that effective policing and production of generous surplus go hand in hand.

the incentive to provide effective policing services is lowest at the localities where the need for effective policing is highest. The less effectively policed is a locality, the more illegal activities will occur there, both of which lead to the more violence. States, and what they do (or don’t do) really are fundamental to the ordering of societies.

Lawless places are poor, because people do not have secure property rights. But poor places are lawless, because the stationary bandit has little incentive to invest resources in policing a locality that does not generate much surplus.

Warby goes on to discuss the role of government in regulating economic classes (or social relationships more broadly) in order to further its extraction of surplus. One interesting example:

all manorial authorities (knights, nobles, the Church, kings) supported the Church’s measures against kin-groups, as it meant kin-groups could not compete against their authority. Kings even gave up their concubines (secondary wives able to also provide heirs). Suppression of kin-groups via the whole “Christian package” (single-spouse marriage, no consanguineous marriage, no adoption, female consent for marriage, individual wills to break kin-group control of property transmission) meant that kin-groups did not colonise their instruments of rule.

To me, this ties in with the latest Joseph Henrich book, in which Henrich argues that the “Christian Package” ultimately produced the evolution of WEIRD (Western, Educated, Industrialized, Rich and Democratic) societies.