In this chapter, I explore certain dynamic properties of the economic systems of industrial/service market economies. For foraging and agricultural economic systems, we could only gain general insights into the processes of systemic change, primarily with regard to the change in the focus of production. In contrast, for industrial/service economic systems, we can begin to explore other aspects of their evolution over time. The first half of this chapter focuses on these systemic change in the past and the second half, on systemic change in the future.

Changes in both the economies and the economic systems of the OECD nations have accelerated. In the two centuries between 1500 and 1700, the average per capita GDP of the nations composing my OECD sample grew 30 percent; in the two decades between 1980 and 2000, 51 percent. Many have commented on this increase in economic growth; many fewer have noted a similar acceleration of change in the economic institutions and systems of the same nations. This neglect of systemic change arises both from our lack of theory about such matters and from the lack of detailed empirical studies on the impact of technology and other exogenous factors on the formation and development of institutions.

The rapid institutional and systemic changes in recent years allow us to explore some critical aspect of the process. In particular, we can look for four different types of systemic change.

In this chapter, I speak of Marxist regimes rather than socialist or communist governments because the Marxist ideal may have pointed toward socialism, but many of these regimes fell far short of such a goal. Indeed, as I note herein, some so-called capitalist nations achieved certain Marxist goals to a greater extent than some so-called socialist nations.

Marxist economic systems were created and sustained by authoritarian governments that, on the basis of a particular ideology, formed in many countries economic institutions quite different from those found in market economies. As I argue, even though these Marxist economic systems rose and fell primarily for political, not economic, reasons, it is useful to survey them, both to determine how much an ideology can influence a system and how their divergence from a market economic system affected their economic performance. The results also provide some indication of the viability of economic systems different from those examined in the previous two chapters.

My analysis is based on the assumption that the impact of the ideology, rather than the authoritarianism per se, was more important for determining the way these economies functioned. Of course, Marxism in its Leninist garb has few uses for democracy. Indeed, most leaders in Marxist regimes argued that some type of autocracy or dictatorship is necessary to carry out the radical institutional changes they had in mind, even though they knew that some changes had severely adverse economic consequences, at least in the short and middle run.

In this chapter, I show that agricultural societies featured four quite distinct economic systems. Each system had readily understandable organizing principles that were unrelated in large part to a variety of environmental, social, and political factors that many have alleged to be important. Despite the great differences between agricultural and foraging economies, most of these general conclusions about their economic systems are similar. On a more specific level, however, their differences were striking. The agriculturalists had a much higher average level of economic development than the foragers and the defining characteristics of their economic systems were also quite different. Moreover, in contrast to the apparent lack of influence of the foraging economic systems on a possible transition to agriculture, the type of agricultural economic system had an important impact on a possible transition to an industry/service economy, a topic discussed in the next chapter.

In the following analysis, I first discuss the sample and the criteria for defining an agricultural economic system. Then, I carry out a cluster analysis to determine the types of systems and examine the most important features of each. An important finding is that the complementarities between different economic institutions and organizations were less strong than in foraging and industrial/service economies, so that the individual societies with the same economic system were dissimilar in some important respects. Finally, I examine the degree to which the four types of economic systems were – or were not – related to various environmental, social, and political variables.

Although economic historians have intensely discussed the ultimate causes of the industrial revolution for more than a century, they have found little agreement. Was it differential population growth that changed the land-labor ratio and wages? Or the modernization of traditional rural society by land enclosures? Or the growth of foreign trade through colonial expansion? Or the overthrow of absolutist regimes and the reduction of uncertainty of property rights? Or the rise in urbanization and literacy? Or the increase in a nation's economic infrastructure?

It is not my intention to deal in this chapter with the industrial revolution in its entirety but rather to focus on one small part of the issue. In the previous chapter, I touched briefly on certain aspects of the systemic change of agricultural economic systems. In this chapter, I explore at greater length a critical aspect of these dynamic systemic elements: namely, the extent to which, in past centuries, the type of agricultural economic system aided or hindered the transformation to an industrial/service economy. Thus, many of the issues raised previously – for instance, the impact of the growth of the Atlantic trade – cannot be handled. The role of intermediaries between the farmers and the urban sector – for instance, small shopkeepers, traveling merchants, and financiers – is also left undiscussed. Nevertheless, we cannot avoid facing certain problems arising from the complexity of the causal connections between agriculture and manufacturing and the difficulties in pinning down the multifaceted nature of industrialization.

An economic system comprises the totality of institutions and organizations that specify property relations within a given society and that channel and influence the distribution of goods and services. This dry definition covers an amazing diversity of economies at all levels of development: the altruistic foragers of the Kalahari Desert in southern Africa; the highly competitive fishing societies on the Canadian Pacific coast; the egalitarian Lepcha farmers of Sikkim; the intricately structured caste agriculturalists in Uttar Pradesh, India; the industrialized market economies of West Europe; and the former centrally planned economies of East Europe.

How can we make sense of this exuberant profusion, which represents a tribute to humanity's ingenuity at organizing itself? In this book, I look at economic systems in a comparative fashion and ask four key questions about them: Is the number of these systems infinite or do particular institutions and organizations consistently cluster together in a few distinct patterns? If such patterns exist, are they a function of the environment, the social or political structure, or the level of economic development; or are they relatively independent entities? What impact do economic systems have on the performance of the economy? How do they originate, develop, and change?

This study applies a uniform method of analyzing economic systems at various stages of development, ranging from foraging to advanced industrial/service economies. Although such an approach does not result in a generalized “theory of economic systems,” whatever that may mean, it does permit us to discover for economies with any given focus of production an important order arising out of the chaos of case studies, statistics, anecdotes, and factoids that govern most discussions. As a result, theorizing can begin about their institutional orders from a solid empirical base.

The most important empirical results can be quickly summarized: Economies at every stage of development feature a small number of distinct economic systems, defined in terms of particular groups of institutions that cluster together. From the statistical analysis presented in previous chapters, many of these economic systems do not seem to be generally determined by the social structure, political organization, or physical environment of the societies but rather appear as independent entities, worthy of study in their own right.

These economic systems provide an analytical framework within which a variety of economic activities can be placed in context and examined. Designation of the economic system also allows us to distinguish those characteristics typical of all societies with the same focus of production from those that are shared only by those societies with the same system and those that are unique to a given society. Moreover, in certain cases, these economic systems have an important impact on the performance of the economy.

Hunting, gathering, and fishing economies can change from one type of foraging economic system to another, and it is as important to understand these dynamic aspects of the system as it is to know the static elements of the system at a single point in time. Unfortunately, the evidence for such systemic transformations of these economies is skimpy and, as a result, this type of systemic transformation has received relatively little attention in the ethnographic literature. Foraging systems can also change into agricultural systems. The evidence for this transition – the “neolithic revolution” – is more abundant and has engendered a vast literature, but I am uncomfortable with it.

When discussing the transition from foraging to farming, most archaeologists and anthropologists adopt a bottom-up approach and usually rest their argument on a small number of cases, generalizing from these results to all transitions in other places. Such a procedure rests on the dubious assumption that the transition proceeded in a similar fashion all over the world. By way of contrast, economists have adopted a top-down approach. In previous years, they usually started from one or more of four general propositions about the causes of the transition (Weisdorf: 2003a): that it was a result of diminishing returns in foraging as the population increased; that it was a result of a general decrease in foraging productivity arising from a change in climate or an extinction of the plants and animals being foraged; that it was a result of a rise in the productivity of agriculture due to the invention or borrowing of more productive techniques in farming; or that it was a result of a shift in preferences for nonfood items that could be obtained only by exchanging agricultural goods.

I have long been discontented with the field of comparative economic systems and this book is the result of my efforts to show what I think this discipline should be about.

In the twentieth century, comparative economists focused too narrowly on industrialized economies and paid little attention to preindustrial societies. Because these latter societies have been rapidly disappearing, we are losing an important part of our potential subject matter. Comparative economists also have few overarching approaches to deal usefully with a wide variety of market and nonmarket economies in a coherent fashion. Although case studies of an enormous number of market and nonmarket economies are available, the literature is so rich and varied that it is difficult to gain perspective. What is necessary, of course, is to look at a large number of societies with different types of economic systems with the same analytic tools. In dealing with preindustrial economic systems, this also requires a considerable familiarity not just with economics but with history and anthropology as well.

For several decades, I have been writing in my mind a book that would analyze foraging (hunting, gathering, fishing), agricultural (herding, planting), and industrial/service economic systems with a unified analytic approach that would take advantage of the rich factual information on these economies now at hand – the kind of book that nineteenth-century social scientists tried to write without adequate factual materials and case studies.

In past millennia, foraging (hunting, gathering, or fishing) proved a highly successful method of adaptation, allowing humans to spread and survive over most land areas on the planet. In the analysis of preindustrial societies, it is tempting to group together all foraging societies because they operated in quite different ways from those based primarily on agriculture. But, as I show herein, more insights can be gained by looking at their different types of economic systems.

Given the fact that very few “pure” foraging societies now exist, it is necessary to rely on how these societies functioned at some pinpointed date many years ago. As a result, this is an exercise in historical analysis, utilizing the vast store of ethnographies written over the past centuries to arrive at new insights. Because all of the societies in my sample have greatly changed since the pinpointed date, I use the past tense in discussing them. The sample, reviewed in detail, includes forty-four different foraging societies from Africa, Asia, Australia, and the Americas.

The major conclusions can be readily stated: Foraging societies reveal six quite distinct economic systems, whose different organizing principles are readily interpretable. Such economic systems are, in most cases, unrelated to those ecological, social, and political variables that have received the bulk of attention by anthropologists. In brief, these economic systems are independent entities worthy of study by themselves.

In this chapter, I focus on economic systems of the industrialized OECD nations. These might seem simpler to analyze than foraging and agricultural economies, because we can draw upon more plentiful and standardized information. But, the complexity of these advanced economic systems also raises difficulties that were not necessary to confront in previous chapters.

The discussion begins with a cluster analysis to define the types of economic systems, using readily available data on forty different institutions and organizations. Although the results are not startling, they do confirm our intuitions, as well as the conclusions of several other studies using many fewer indicators. I then analyze the impact of these economic systems on the functioning of the economy, a task not possible for foraging and agricultural systems because of the lack of suitable data. Finally, I look at various political, ideological, social, and cultural correlations that might indicate why these countries adopted their current economic systems. In the following chapter, I examine how these advanced market systems have evolved over time and where they are heading.

Defining the Economic Systems

Data and Statistical Technique

We face a kaleidoscope of classifications and approaches when looking at the literature on economic systems of advanced market economies. A possible alternative to the cluster analysis used in previous chapters is a factor analysis to derive “ideal types,” but because all of the OECD nations had mixed economies, this did not prove fruitful.