Arnold Kling  

The Plunder Economy

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From Jack Weatherford, Genghis Khan and the Making of the Modern World, p. 221:

The expansion and maintenance of the trading routes did not derive from an ideological commitment of the Mongols to commerce and communication in general. Rather, it stemmed from the deeply rooted system of shares, or khubi, in the Mongol tribal organization that had been formalized by Genghis Khan. Just as each orphan and widow, as well as each soldier, was entitled to an appropriate measure of all the goods seized in war, each member of the Golden Family was entitled to a share of the wealth of each part of the empire. Instead of the salary paid to non-Mongol administrators, the higher-ranking Mongol officials received shares in goods, a large part of which they sold or traded on the market to get money or other commodities.

I picture the Roman empire working the same way. Goods are seized or expropriated, then traded. Same with the Spanish empire.

I picture the early British empire as a hybrid or transitional system between a plunder economy and a trading economy. Initially, quasi-private entities (Francis Drake, the East India Company) were given licenses to plunder, as long as they were acting in the interest of the crown. Eventually, this evolved away from plunder and toward modern trade.

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CATEGORIES: Economic History

COMMENTS (4 to date)
Tim Worstall writes:

" Instead of the salary paid to non-Mongol administrators, the higher-ranking Mongol officials received shares in goods, a large part of which they sold or traded on the market to get money or other commodities."

Royal Navy and prize money is a later, similar, set up-

Lord writes:

The Mongols however were nomadic warriors. They could prosper because there were others richer than themselves to prey upon.

The Romans were farmers whose army was initially for defense. Romans were richer than most of those around them and usually pursued conquest to reduce threats to them and to colonize areas for development. Trade with its colonies was commonplace and the social structure extended far beyond Rome. While we often only consider Rome as an empire, it started as a monarchy and was a republic for centuries before becoming an empire.

Joshua Sharf writes:

Just because they saw their trade routes as the commercial equivalent of tax farming doesn't mean that we have to.

Plunder and tax farming are certainly easier to conceptualize than increased wealth through trade and specialization, even today. (See the frequent justifications of capitalism as a system for producing wealth of the government to tax.)

Is it possible that this is why the Vikings turned from traders to raiders?

Sudha Shenoy writes:

Quote: "The East India Company was given a license to plunder as long as it acted in the crown's interests. Eventually this evolved away from plunder...toward modern trade."

There's a small library of research on the East India Company by now. But it is all historical. See however, K R Chaudhuri, 'The Trading World of Asia and the English East India Company 1660-1760' (CUP 1978; pb 2006.) Chaudhuri used early computers (punchcard type) in his research, so it's at least quasi-scientific. He found that the Company's trading patterns were so intricate that only his early quasi-scientific research could really elucidate them.

The East India Company was in fact the world's first multinational. It established coastal trading posts in India from the outset: Bombay, Madras, Calcutta all started life as East India Company 'factories' or warehouse-cum-production centres. The Company organised textile production here, for sale in England, on the Continent, _and_ in the intra-Asian trade. Some 85 different types of textiles were produced. The Company also exported raw silk & pepper to England.

The Company traded too with China, importing tea, chinaware, porcelain, raw silk into England. It imported coffee from southern Arabia & pepper from SEAsia.

All the goods concerned were paid for in a very wide range of silver currencies, including Spanish 'reals' obtained in Amsterdam.

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