Lesson 4 economic systems.doc
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This document discusses systems of distribution in economies, including the concept of money, types of economies (market vs. non-market), and how resources are allocated. It explains that market economies use money and specialization of labor while non-market economies rely on reciprocity, gift-giving, and sharing within communities. Different forms of exchange are used to distribute goods depending on whether the economy is market-based or non-market based.
Lesson 4 economic systems.doc
- 1. V. Systems of Distribution A. Economic Systems B. The Concept of Money C. Types of Economies D. The Allocation of Resources Based on thorough reading of the chapter, students should be able to: ● Explain what is meant by term economic systems. ● Discuss the concept of money as a universal form of exchange. ● Differentiate between the two types of economies. ● Discuss how societies allocate their resources through conversion and production. Economic Systems Systems of Distribution – practices that are involved in getting the goods and services by a society to its people. ● all societies need to have mechanisms of distribution and exchange ● large scale societies operate on what is known as market economies - impersonal but highly efficient systems of production, distribution and exchange characterized by: ● Use of money as means of exchange ● Having the ability to accumulate vast amounts of capital ● Having complex economic transactions that are ultimately international in scale ● Non market economies – isolated, small and self-sufficient societies such as those studied in the previous discussion namely, foragers, pastoralists and horticulturalists The Concept of Money Two types of money: Generalized money ● portable, arbitrarily valued medium of exchange, used in all forms of market economies, for example, coins, paper money or bank checks; ● digital transmission from one computer to another that occurs with use of credit cards or the electronic transfer of funds ● Also known as standard currency ● Key point: anything that is for sale can be bought with it General Purpose money in the Philippines Special Purpose Money ● objects that serve as medium of exchange in limited contexts; ● certain goods and services can be purchased only with their specific form of special purpose money
- 2. ● not easily obtainable For example: The Tiv of Central Nigeria used brass rods to buy cattle and pay for bride price. The rods are acquired by trade from Sahara Deserts. If a male Tiv cannot acquire brass rods through trade or by borrowing them, he cannot acquire cattle and get married. ● Cattle--a form of special purpose money among traditional East African pastoralist tribes Market economy ● General Characteristics ● in market economies, like in factories or offices, strangers come together in impersonal groups of thousands ● every minute of labor is accounted for ● pay varies with amount of time and quality of work an individual does ● goal of work is the money one acquires rather than in producing a good product or working with friends ● there is opportunity to save and accumulate wealth North American office worker exchanging his time and work for money. Non market Economies ● General Characteristics: ● low level of technological knowledge ● preoccupation with the daily, and at most, seasonal food supply ● work teams are small and usually include only members of the local community ● tasks are relatively simple and require only a few people hence large scale collaboration is of short duration ● also known as subsistence economies ● little or no attempt is made to calculate the contributions of individuals or to calculate the individual shares of what is produced ● some sort of leveling mechanism operates as social pressure generally obligates
- 3. individuals to freely share food and other products of their labor with others ● there is little or no possibility of wealth acquisition ● The initiative to work is not derived from the desire to acquire what is being produced but from the pleasure of sharing with family and friends ● potential for increased prestige from doing the job well Polynesian teenagers sharing their catch to feed their families. Distribution of Goods in Non Market Economies ● Barter – trading goods and services directly for other goods and services without the use of money as a medium of exchange. This can be complicated and time consuming as it involves a lot of talking (negotiations). ● Dumb barter – barter without direct contact between traders as in the case of communities openly hostile to each other (Timor, New Guinea, Northern Scandinivia, Sri Lanka, India, Sumatra, Amazon Basin of South Africa) ● Gift giving – includes tools, food and other supplies needed to meet family shortages. Primary motive for such exchange is social rather than economic. In small scale societies, political power and influence comes from social status acquired through generosity and personal skills (good story-teller, curer, hunter or midwife) Principal form of exchange in non-market economies ● Within a society gift giving ● Between friendly societies face to face barter ● Between mutually hostile societies dumb barter (rare) Concepts of Ownership ● In non-market economies, land and other property rights are usually restricted by the overriding rights vested in the community as a whole. ● Usufruct - an owner normally can "own" land and other substantial property only as long as it is being used or actively possessed; society as a whole is the real owner; individual "owner" is responsible for looking after the property for the society ● proprietary deed - an owner of property has the right to keep it whether or not it is being used or actively possessed; owner has the right to pass the property on to descendants or to others chosen by the owner
- 4. ● eminent domain - ownership may be forfeited to Distribution and Exchange 2 components of exchange: pure economic gain & social gain ● non-market economies ● Both of these motives usually occur at the same time in non-market economies ● Important exchange items include many more things than just food and manufactured objects ● most valued gifts are likely to be courtesies, entertainment (e.g., songs, dances, and speeches), curing, military assistance, women (to be wives), and children ● market economies ● social component is often missing ● social gain is usually sacrificed for efficiency and speed. ● the idea that women and children could be given away as gifts is shocking but in the 19th century, the heads of royal and wealthy families gave their daughters and sometimes sisters in marriage in order to establish or solidify economic and political alliances Reciprocity Types of Reciprocity ● Generalized reciprocity is gift giving without the expectation of an immediate return ● balanced reciprocity, there is an explicit expectation of immediate return ● Negative reciprocity occurs when there is an attempt to get someone to exchange something he or she may not want to give up or when there is an attempt to get a more valued thing than you give in return Redistributive Exchanges
- 5. ● economic exchanges intended to distribute a society's wealth ● charity ● When wealthier individuals in a society make charitable donations, it can have a similar effect. What the donors get in return may be a tax advantage, a relieved social conscience, and/or increased social status and recognition. ● progressive income tax systems ● Progressive income taxes are intended to make people with greater wealth give at higher rates than those at the bottom of the economic ladder. Some of the tax money is then allocated to help the poorer members of society Redistribution in non-market economies ● Potlatch - a complex system of competitive feasting, speechmaking, and gift giving intended in part to enhance the status of the giver. Among many of the indigenous societies of New Guinea in order to increase personal status and become a respected "big man," senior men often spent years accumulating pigs and other valuable, exotic items such as cassowaries (large birds similar to emus and ostriches) in order to give them away at elaborate ritual feasts. Commerce Between Small-scale Societies Kula, also known as the Kula exchange or Kula ring, is a ceremonial exchange system conducted in the Milne Bay Province of Papua New Guinea.
- 6. The Kula ring spans 18 island communities of the Massim archipelago, including the Trobriand Islands and involves thousands of individuals. Participants travel at times hundreds of miles by canoe in order to exchange Kula valuables which consist of shell-disc necklaces (veigun or soulava) that are traded to the north (circling the ring in clockwise direction) and shell armbands (mwali) that are traded in the southern direction (circling anti-clockwise). If the opening gift was an armshell, then the closing gift must be a necklace and vice versa. The terms of participation vary from region to region. Whereas on the Trobriand Islands the exchange is monopolised by the chiefs, in Dobu all men can participate. All Kula valuables are non-use items traded purely for purposes of enhancing one's social status and prestige. Carefully prescribed customs and traditions surround the ceremonies that accompany the exchanges which establish strong, ideally life-long relationships between the exchange parties (karayta'u, "partners"). The act of giving, as Mauss wrote, is a display of the greatness of the giver, accompanied by shows of exaggerated modesty in which the value of what is given is actively played down. Such a partnership involves strong mutual obligations such as hospitality, protection and assistance. According to the Muyuw, a good Kula relationship should be "like a marriage". Similarly, the saying around Papua is: "once in Kula, always in Kula" (Damon, 1980: 282). Kula valuables never remain for long in the hands of the recipients; rather, they must be passed on to other partners within a certain amount of time, thus constantly circling around the ring. However, even temporary possession brings prestige and status. Important chiefs can have hundreds of partners while less significant participants may only have fewer than a dozen (Malinowski, 1920:98). Even though the vast majority of items that Kula participants have at any given time are not theirs and will be passed on, Damon (1980:281) notes that e.g. amongst the Muyuw all Kula objects are someone's kitoum, meaning they are owned by that person (or by a group). The person owning a valuable as kitoum has full rights of ownership over it: he can keep it, sell it or even destroy it. The Kula valuable or an equivalent item must be returned to the person who owns it as kitoum. The most important Muyuw men for example own between three to seven Kula valuables as kitoum while others do not own any. The fact that at least in theory all such valuables are someone's kitoum adds a sense of responsibility to the way they are handled, reminding the recipient that he is only a steward of somebody else's possession. The ownership of a particular valuable is, however, often not known. Kula valuables can be exchanged as kitoum in a direct exchange between two partners, thus fully transferring the rights of ownership. The right of participation in Kula exchange is not automatic. One has to "buy" one's way into it through participating in various lower spheres of exchange (Damon, 1980:278). The relationship giver-receiver is always asymmetrical: the former are higher in status. Also, Kula valuables are ranked according to value and age and so are the relationships that are created through their exchange. Participants will often strive to obtain particularly valuable and renowned Kula objects whose owner's fame will spread quickly through the archipelago. Such a competition unfolds through different persons offering pokala (offerings) and kaributu (solicitory gifts) to the owner, thus seeking to induce him to engage in a gift exchange relationship involving the desired object. Kula exchange therefore involves a complex system of gifts and countergifts whose rules are laid down by custom. The system is based on trust as obligations are not legally enforceable. However, strong social obligations and the cultural value system, in which liberality is exalted as highest virtue while meanness is condemned as shameful, create powerful pressures to "play by the rules". Those who are perceived as holding on to valuables and as being slow to give them away soon get a bad reputation (cf. Malinowski, 1920:100). The Kula exchange system can be viewed as reinforcing status and authority distinctions since the hereditary chiefs own the most important shell valuables and assume the responsibility for organizing and directing the ocean voyages. Damon (1980) notes that large amounts of Kula valuables are handled by a relatively small number of people, e.g. amongst the Muyuw three men account for over 50 percent of Kula valuables. The ten most influential men control about 90 percent of all and almost 100 percent of the most precious Kula objects. The movement of these valuables and the related relationships determine most of Muyuw's political alliances. Fortune notes that Kula relationships are fragile, beset with various
- 7. kinds of manipulation and deceit. The Muyuw for example state that only way to get ahead in Kula is to lie, commenting that deceit frequently causes Kula relationships to fall apart (Damon, 1980:278). Similarly, ::Malinowski:: wrote of "many squabbles, deep resentments and even feuds over real or imaginary grievances in the Kula exchange" (1920:100). The Kula ring is a classical example for Marcel Mauss' distinction between gift and commodity exchange. Melanesians carefully distinguish gift exchange (Kula) from market exchange in the form of barter (gimwali). Both reflect different underlying value systems and cultural customs. The Kula, as Mauss wrote, is not supposed to be conducted like gimwali (barter). The former involves a solemn exchange ceremony, a "display of greatness" where the concepts of honour and nobility are central; the latter, often done as part of Kula exchange journeys, involves hard bargaining and purely serves economic purposes (1990:22-23). Kula valuables are inalienable in the sense that they (or an equivalent object) have to be returned to the original owner. Those who receive them can pass them on as gifts, but they cannot be sold as commodities (except by the one who owns them as kitoum). Activity: 1. Money is an important concept. Visit http://www.ex.ac.uk/~RDavies/arian/money.html to learn about the monetary systems of ancient times. Read the information in the earliest time period to learn about the earliest uses of money. 2. Describe the major types of reciprocity. Give examples.