Antropoloji 8. Ünite 2

8 Exchange in Economic
Systems
© Copyright
Luca Picciau/Cubo
text toImages/Glow
come Images, Inc.
Economic Systems Market

Reciprocity Money
Generalized Reciprocity Market Exchange
Balanced Reciprocity Market Economies and Capitalism
Negative Reciprocity Productivity
Peasants and other classes who
Reciprocity and Social Distance Globalization and Markets
sell products at market places
like this one in Chici, Guatemala, Redistribution
make money, but they do not
depend on market sales for their
entire livelihood. In this and
other ways, their lives contrast
with those of people who live
and work in countries with fully
market economies.
165
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LEARNING OBJECTIVE S
After reading this chapter, you should be able to
1 DESCRIBE the three main forms of exchange in economic systems.
2 ANALYZE how the form of reciprocity between people varies with social distance.
3 DISCUSS the relationship between redistribution and political organization.
4 DESCRIBE the properties of money.
5 DISCUSS the distinction between market exchange and market economies (capitalism) and the differences
between neoliberalism and social welfare capitalism.
6 DISCUSS the globalization of markets and its impacts on workers, consumers, corporations, and cultural
preservation.
East Liverpool is an Appalachian town of about 13,000 American Mugs’ mugs to make profit for Starbucks. Its
in southeast Ohio. The heading on its 2013 website is motivation is a mixture of altruism and public relations.
“The Pottery Capital of the World.” Indeed, there used Fortunately for Starbucks, as a corporation, most of its
to be four dozen pottery factories here. Its workers business is more profit centered. If it weren’t, there
made off-white, generic-looking coffee mugs for would be no Starbucks.
coffee shops and small diners as well dinnerware for
households. Today, only two pottery factories remain
in East Liverpool, which is about half its size in the Economic Systems
1950s. American pottery manufacturing globalized in The word economics has many meanings, but here we
recent decades, sending pottery jobs overseas to East use its everyday meaning: economics is how people
Asia and other places. Many town residents now work make their living by satisfying needs and wants. At
in services at West Virginia casinos, just across the the societal level, three processes are involved in mak-
Ohio River, at the airport in Pittsburgh, Pennsylvania, ing a living. First, people work and use technology to
or for the local school district. transform nature’s resources into useful products. In
However, pottery is making a small comeback in modern postindustrial economies, most people do not
East Liverpool. On June 12, 2012, Starbucks began produce any tangible (material) product but work in
marketing a new $10 coffee mug labeled with the word services. For example, they produce or process or trans-
“Indivisible.” It is made by East Liverpool’s American mit information, sell something to someone else, post
Mug and Stein Company, which was able to keep its four blogs, nurse or doctor their patients, wait on restaurant
specialist pottery makers and even hire eight new ones. diners, manage the activities of others, and so forth.
The workers at American Mug produced 20,000 mugs Service industry workers do not produce any material
for Starbucks, casting the mugs in molds, firing them products with their own labor, but their jobs allow
in a 30-year old kiln, and finishing and glazing them them to earn money that satisfies their own material
by hand. Despite its back-in-the-day technology, wants and needs.
American Mug has two advantages over Chinese Second, someone consumes the products. We con-
factories: it can supply the mugs to Starbucks in only sume material products by eating them, living in them,
4 days, and Chinese suppliers usually require orders driving them, wearing them, and so forth. Many ma-
in the hundreds of thousands, potentially sticking terial products are valued for their practical use: food
Starbucks with a large inventory of unsold mugs. nourishes, houses shelter, motor vehicles transport, and
Does the “rebirth” of pottery making in East clothes cover. In addition to their material usefulness,
Liverpool illustrate reverse globalization? No, because many products also are valued symbolically. For exam-
when Starbucks’ sells the mugs, the proceeds support ple, in addition to their practical value, food choices
Starbuck’s’ Create Jobs for USA Fund, which aids small may express identity, houses demonstrate wealth, mo-
businesses. Starbucks coffee shops are not selling tor vehicles show status, clothes flatter. These products
166 PART III The Diversity of Culture
send social messages about who we are as well as sat- who already know one another or wish to establish
isfying our material needs and wants. Many products or strengthen a relationship. With redistribution, all
and services are bought largely or entirely for their sym- contributors to a central pool or fund may or may not
bolic significance, such as jewelry, cosmetics, haircuts, have relationships with one another, but all have a re-
athletic shoes, and sometimes club and fitness center lationship to the authorities who collect and reallocate.
memberships. With markets, no party needs to know any of the others
Third, between the time they are produced and outside the context of the exchange itself. With some
consumed, many material products are exchanged. In qualifications, market transactions are impersonal, and
economies like those of foragers or horticulturalists, one person’s money is worth the same as anyone else’s.
often the producers and the consumers are the same Most products (including land and labor) are ex-
people (usually, family members), but nonetheless exchanged through the market mode in modern indus-
change exists in these and in all economies. In modern trial economies, but reciprocity and redistribution also
market economies, the producers and the consumers exist. Examples of reciprocity are various gifts we give
are nearly always different people or groups, so practi- and receive on holidays, birthdays, weddings, baby
cally every product is exchanged (marketed) before it is showers, and other culturally special occasions. If you
consumed. Most people make their living by working are employed, every pay period you participate in re-
for firms or public agencies in exchange for money in distribution because federal, state, and local govern-
wages, salaries, tips, commissions, and the like. ments collect a portion of your wage or salary as taxes.
In market economies, most products are produced They spend these public monies on public purposes,
entirely for sale. Once the value (money) acquired from like wars or roads, or transfer money to other members
the market exchange has been gained, the companies of society, like the elderly, the poor, and subsidies for
or persons who produce and sell the product have lit- corporations.
tle further economic interest in it, except insofar as All these exchange forms thus exist in modern so-
its quality affects future sales or reputation. However, cieties, but not all preindustrial peoples have all three.
markets are only one way of organizing exchange. In Reciprocity in one form or another occurs in all hu-
subsistence-based economies, families or other kinds man populations. But redistribution implies a central
of kinship groups produce mainly for their own needs, leader(s) whose role(s) carries authority to organize
not for sale on the market. And rather than exchanges the collection of resources from the group and to
based on supply, demand, and prices, exchanges are or- make decisions about how they will be reallocated.
ganized around other principles. Redistribution, therefore, is an insignificant exchange
Anthropologists usually classify various forms of mode in societies that lack strong leaders who make
exchange into three major modes or types: decisions on behalf of the group. The market mode of
❚ Reciprocity, in which individuals or groups pass exchange requires money, private property, and certain
products back and forth, with the aim of helping other features that are absent in nonmarket economies.
someone in need by sharing with him or her;
creating, maintaining, or strengthening social
relationships; or obtaining products made by
Reciprocity
others for oneself. In subsistence-oriented economies such as those based
❚ Redistribution, in which the members of an on foraging, horticulture, and pastoralism, most fami-
organized group contribute products or money lies and households are capable of producing most of
to a common pool or fund that is divided the food and other products they consume. That is,
(reallocated) among the group as a whole by a
central authority.
❚ Market, in which products are produced and sold reciprocity Exchange of products or objects between
for money, which in turn is used to purchase other two or more individuals or groups.
products, with the ultimate goal of acquiring more redistribution Collection of products or money from
money that can be spent on more products, or an organized group or society, followed by a reallocation to
saved, or invested. the group by a central authority.
The Concept Review illustrates the three forms of market Exchange by means of buying and selling,
exchanges. Notice the key differences. With reciprocity, using money.
generally speaking products pass between individuals
CHAPTER 8 Exchange in Economic Systems 167
CONCEPT REVIEW Three Forms of Exchange in Economic Systems
Reciprocity Back-and-forth exchange of products, gifts, and objects; symbolizes relationships as well
as satisfies material needs and wants.
Redistributions Collection of products and valuables by a central authority, followed by distribution

according to some normative or legal principle.
Market Free exchange of products (P1, P2) and services (S1, S2) for money ($) at prices determined
by impersonal forces of supply and demand.
(P1, S1)
$ (P2, S2)
most families are potentially self-sufficient in the sense engaging in mutual feasting, and bartering. Various
that they own or have access to the land, labor, tools, forms are motivated by different considerations and
and other resources necessary for survival. values, so anthropologists distinguish three forms of
However, in no known society are families, house- reciprocity: generalized, balanced, and negative.
holds, or other kinds of social groups self-sufficient in
fact. Everywhere, such groups exchange products with
other groups. Most anthropologists say this is because Generalized Reciprocity
families and other groups need or want to maintain rela- The defining feature of generalized reciprocity is that
tionships with other families and groups, and exchange those who give objects do not expect the recipient
is necessary to create and sustain these relationships. to make a return at any definite time in the future.
For one thing, most groups need help from time to time, Generalized reciprocity occurs between individuals
so they keep up relationships with others to increase who are (or at least are normatively expected to be)
long-term economic security. Other reasons include emotionally attached to one another and therefore have
acquiring spouses, maintaining political ties, strength- an obligation to help one another on the basis of relative
ening military alliances, and having new social contacts. need. Parents who provide their children with shelter,
The form of exchange used for such purposes is food, vehicles, and college educations are practicing
reciprocity, defined as the transaction of objects with- generalized reciprocity that sustains younger genera-
out the use of money or other media of exchange. tions. Giving without expectation of definite return also
Reciprocity takes several forms, including sharing should occur between parties to certain other kinds of
with those in need, providing hospitality, giving gifts, social relationships, such as wives and husbands, sib-
lings, and sometimes close friends. Other familiar forms
include donating objects to Goodwill and Salvation
generalized reciprocity Giving of products or service Army and giving money to United Way or your alma
without expectation of a return of equal value at any mater. However, in these latter cases the possibility of
definite future time. taking tax deductions for your gift complicates the con-
cept of generalized reciprocity.
William W. Bacon III / Photo Researchers, Inc.
Each member of this Inuit (“Eskimo”) whaling crew will receive a share of the whale meat and blubber. Sharing the fruits of
cooperative efforts is one form of generalized reciprocity.
Because it includes various forms of sharing with is unable to return anything for a long time, if ever.
relatives and other people whom cultural norms define With balanced reciprocity, the giver tries to apply some
as close, generalized reciprocity is found in all societ- kind of sanction against the receiver if the latter does
ies. However, among some peoples it is the dominant not reciprocate within the appropriate time period.
form of exchange, meaning that more resources are Donors may become angry if there is no reciprocation,
distributed using this form than any other form. may complain or gossip to others, may try to force a
For example, most hunter-gatherers expect their return, or may suspend all relations until things of ap-
band mates to share food and be generous with their propriate value are returned.
possessions, partly because most members of a band Although the value of the objects exchanged is sup-
are relatives of some kind (see Chapter 7). Among the posed to be about equal, balanced reciprocity is char-
Ju/’hoansi, the band is a social group within which acterized by the absence of bargaining between the
food sharing is culturally expected or even mandatory. parties. In some preindustrial economies, the exchange
Those who are stingy with possessions or who fail to of objects without having to negotiate for each trans-
share food with others are ridiculed or socially pun- action frequently is organized by a special relationship
ished in some other way. Generalized reciprocity en- between two individuals known as a trade partnership.
sures an equitable—if not entirely equal—distribution Individuals of one tribe or village pair off with specific
of food among the band’s families. individuals (their “partners”) from other regions with
whom they establish long-lasting trade relationships.
Balanced Reciprocity For instance, in the Trobriand Islands off the east-
ern tip of the island of New Guinea, there was a form
In balanced reciprocity, products are transferred to of balanced reciprocity called wasi. Residents of coastal
the recipient and the donor expects a return in prod- villages traded fish for yams and other garden crops
ucts of roughly equal value. Over the long run, the
value of the products exchanged should be roughly
equivalent. The return may be expected soon, or when- balanced reciprocity Exchange of products or
ever the donor demands it, or by some specified time services considered to have roughly equal value; social
in the future. With generalized reciprocity, the giver interests or goals usually motivate the exchange.
continues to provide assistance even when the receiver
produced in the mountainous interior. The exchange used to create an obligation to return a favor if not a
was formalized: a coastal village paired off with an inte- material object. Political lobbyists and sales represen-
rior village, and within each village individuals formed tatives know that balanced reciprocity can serve one’s
trade partnerships. The rates at which garden produce self-interest.
was exchanged for fish were established by custom, so Among many preindustrial peoples, balanced rec-
there was no haggling at any particular transaction. iprocity takes the form of mutual exchanges of gifts
In wasi, each trade partner received foods not read- or invitations for political purposes. The Maring are
ily available locally, so parties to the transaction gained a horticultural people of the mountainous interior of
a material benefit. In other cases, trade partnerships Papua New Guinea. In the 1960s, when Roy Rappaport
have social as well as material benefits. For example, the worked among them, the Maring lived in settlements
Ju/’hoansi have a gift exchange custom called hxaro. In composed of clusters of kin groups. Each settlement
hxaro, the gift exchange is delayed—those who receive engaged in periodic warfare with some of its neighbors.
an object are not expected to return anything for an Unless a settlement was unusually large, its members
indefinite and often long period of time. Hxaro part- formed a political alliance with one or more nearby set-
ners rely on one another for mutual support in other tlements. When warfare occurred, the warriors of each
contexts, such as when one partner asks to forage in settlement relied on their allies for military support
the territory of another. The social relationship created and, in the case of defeat, for refuge.
and reinforced by hxaro matters more to people than An important expression of continued goodwill
the objects given and received. between allied settlements was periodic invitations to
In hxaro, gifts make friends and vice versa, illustrat- feasts, accompanied by exchanges of pigs and wealth
ing that gifts have symbolic value. More generally, when objects. Every few years, whenever they accumulated
two people exchange gifts, ideally both gain something enough pigs, the members of a settlement invited their
more than the sum total of the economic worth of the allies to an enormous feast, appropriately called a pig
objects. On your friend’s birthday, instead of giving feast. At the pig feast, which was attended by hundreds
her earrings in exchange for a gift of about equal value of people, allies brought large quantities of wealth ob-
on your own birthday, you both could save the cost of jects to exchange and pay off debts; they consumed
wrapping paper and cards by buying the objects your- enormous quantities of pork provided by their hosts;
selves. However, neither of you would gain the sym- they were on the lookout for potential spouses and
bolic value added when the exchange of “objects” be- sexual partners; and they aided the host settlement in
comes an exchange of “gifts” on culturally appropriate the ceremonial dancing that the Maring believed rit-
occasions. As material symbols of good relations, gifts ually necessary for success in the fighting that soon
both create and sustain feelings of solidarity and rela- occurred. The host group also used their pig feast to
tions of mutual aid between individuals and groups. gauge the amount of military support they could ex-
Gifts show that the giver has expended some re- pect from their allies: the more people who attended
sources and taken some trouble because she or he cares the feast, the more warriors the host settlement could
about the recipient. Perhaps this is one reason why so put on the battleground. Later, the guests accumulated
many people do not like giving or receiving cash or gift enough pigs to reciprocate by hosting a pig feast of
cards: cash and gift cards take too little effort, are too their own.
generic to be personal, and the nature of the gift does Reciprocal feasting was essential to the military
not express the character of the relationship. To many success and continued survival of a Maring commu-
people, gifts of cash or cards dilute the symbolic value nity. Here, and among many other peoples, the back-
of the gift. and-forth flow of products, invitations and return invi-
Gift exchange communicates warm feelings, per- tations, and other forms of give-and-take are essential
haps even better than words, both because talk is cheap for well-being and even military survival.
and because some of us never know the right words In the contemporary world, too, balanced reci-
to say. Conversely, failure to present objects of the so- procity in the form of foreign aid creates and sustains
cially appropriate value also can communicate feelings, relationships between “communities”—in this exam-
although less warm ones. ple, between nations. In anthropological jargon, for-
However, gifts are also used to create social bonds eign aid seems like more of an example of generalized
that are useful to the giver, and to obligate people from reciprocity conducted on a massive scale. However, to
whom the giver wants something. Giving a gift tends the extent that it influences relationships between do-
to make someone feel indebted and therefore can be nors and recipients it is more than “aid.” American aid
promotes political stability in another country (Egypt, groups depends on the social distance between them.
Afghanistan and Egypt until August, 2013), maintains Social distance is the degree to which cultural norms
potential sites for military operations (Pakistan), and specify persons should be intimate with or emotionally
assists allies in warding off perceived or actual enemies attached to one another. A given mode of reciprocal
(Israel, South Korea). Moreover, foreign aid is a relatively exchange is normatively appropriate only with certain
cheap way to look out for the interests of one’s own na- kinds of social relationships.
tion. In a 2001 American survey about foreign aid, on North American social norms illustrate the con-
average Americans believed that 20 percent of the U.S. cept. We expect people to practice generalized reci-
federal budget went to foreign aid. The actual percentage procity with children and perhaps with siblings and
is less than 1 percent of the annual budget. elderly parents. All else equal others may judge those
who refuse to offer to help family members as uncar-
ing or selfish. Well-off grandparents may help with
Negative Reciprocity their grandkids’ higher education, with cars or down
In negative reciprocity, the third form, both parties payments on a house. But middle-income persons who
attempt to gain all they can from the exchange while repeatedly give or “lend” money to a deadbeat cousin
giving up as little as possible. Negative reciprocity is might be seen as a bit foolish.
usually motivated largely by the desire to obtain ma- As our social relationships with other people
terial goods at minimal cost. Insofar as it is motivated change, so does the kind of reciprocity we practice with
by the desire for material goods, negative reciprocity is them. For example, as we mature, our increasing inde-
like market exchange; it is different mainly because no pendence from parents is manifested by a change in the
money changes hands. way we exchange goods with them. We go from being
In economies with no money, negative reciprocity the recipients of generalized reciprocity to more of a
is an important way for individuals and groups to ac- balanced reciprocity as we become more independent.
quire products that they do not produce themselves. Near the end of our parents’ lives, we are providers of
Few communities are entirely self-sufficient: some generalized reciprocity, for most people need or appre-
foods they like to eat are not found where they live, ciate the assistance in spite of government aid by Social
some materials they need to make tools are not found Security and Medicare.
locally, or they lack the skill to produce some of the ob- Finally, changing one form of reciprocity into an-
jects they use. To acquire these things, people produce other can be a way of changing the nature of a social
other goods to exchange for “imports.” relationship. Because the form of reciprocity two peo-
Barter is the most common form of negative reci- ple practice is related to the degree of social distance
procity. In the interior highlands of Papua New Guinea, between them, one party can increase or decrease the
many indigenous peoples manufactured money or social distance by initiating a new form of exchange.
wealth objects by stringing shells together into long Or someone can signal his or her wish to draw another
chains or belts. Because these shells did not occur nat- person closer by tentatively initiating a relationship of
urally in the interior, they were traded from people to balanced reciprocity.
people until they reached their final destination. Salt If we are work colleagues, I can let you know that I
was also a trade object because it was found in only a few want to become more friendly by giving you an unex-
areas. Similarly, in western North America, the obsid- pected gift or inviting you to dinner. In turn, you let me
ian (volcanic glass) used to make stone tools was found know whether you share my feelings by whether you
in only a few areas; other peoples acquired it through return my gift on an appropriate occasion, repeatedly
trade. In some cases, these trade routes stretched for find reasons to refuse my dinner invitation, or come to
hundreds of miles, with the obsidian passing through dinner several times at my place without reciprocating.
the hands of numerous middlemen before finally being
made into a tool.
negative reciprocity Reciprocal exchange motivated

Reciprocity and Social Distance largely by the desire to obtain products or services.
Each type of reciprocity tends to be associated with cer- social distance Degree to which cultural norms
tain kinds of social relationships. As Marshall Sahlins, specify that two individuals or groups should be helpful to,
who first distinguished the three varieties, noted, the intimate with, or emotionally attached to one another.
kind of reciprocity that occurs between individuals or
© Jon Burbank/The Image Works
Gift exchange is a familiar form of reciprocity. Here in Narita, Japan, two men formally exchange gifts before an important festival.
If we both use this “strategy of reciprocity,” neither of us In modern nations, the main resource (money, in
needs to be put in a potentially embarrassing position this case) that is collected is taxes on wages, profits,
of verbalizing our feelings. I signal my wish by my ini- retail sales, property, interest, and other income and
tial gift or invitation, and you decline or accept my offer assets. Consider how national tax systems are sup-
of friendship by your response. Here again reciprocity posed to operate in most modern nations. The national
is symbolic, conveying messages about ideal social re- government redistributes tax revenues in two main
lationships, hoped-for relationships, and even rejected ways. First, revenues are distributed in such a way as to
relationships. Because we routinely use reciprocity as a benefit the whole country. Citizens receive police pro-
way of conveying feelings and sending social messages, tection, law enforcement, national defense, infrastruc-
anthropologists commonly view reciprocal exchanges ture (e.g., dams, roads, airports), regulation of pollut-
as a form of communication. ing industries, and so forth. Here, resources collected
from the citizenry are expended on public goods and
services. Second, taxes provide assistance for individ-
Redistribution uals in need. In the United States, these are “transfer
The major difference between reciprocity and redistri- payments” in the form of Social Security, Medicaid
bution—the second major form of exchange—is how and Medicare, disaster relief, children’s services, and
the transfer of products and other resources is orga- so forth. Such public expenditures are based on moral
nized. With reciprocity, resources pass back and forth norms and cultural values about social justice, equal
between two participants, with no third party to act as opportunity, and helping those in need. Redistribution
intermediary. With redistribution, resources collected systems around the world are used for similar pur-
from many individuals or groups are taken to a cen- poses: to provide public goods and services and to pro-
tral place or put into a common pool or fund. Some vide assistance to individuals and groups in need.
overarching authority (empowered to make decisions There is another side to redistribution, a side that
on behalf of those who contributed) later draws from also is familiar. First, there is often conflict over who
this pool or fund and returns public goods and services should provide the public resources, how the resources
to allegedly benefit the group as a whole. should be expended, and how much of a share should
be given to those who collect and distribute them. One people believe that American health care needs “re-
common social and political problem with redistribu- form,” issues of redistribution—who should pay how
tion is political disagreement: when many individuals much, to whom, and what is the proper role of gov-
have contributed to the public pool or fund, not ev- ernment—are among the most difficult obstacles to
eryone is likely to agree on how the “public resources” political action.
should be spent for the “public good.” Much of the con- In the preindustrial world a common form of redis-
flict between political parties in modern industrial de- tribution is tribute. The subjects of a chief or other ti-
mocracies is rooted in disagreements over who should tle holder contribute products (usually including food)
be taxed and how much and over how government into a common pool under the control of the central
revenues should be spent. Parties and various interest authority. Often the tribute is culturally viewed as a
groups are, in many cases, quarreling over redistribu- material symbol that the subjects continue to acknowl-
tion: Who pays? Who gets what? And how much? edge the chief ’s sacred authority. Some of the accumu-
Second, elected officials and other officeholders who lated products are consumed by the chiefs and their
make important decisions about redistribution some- relatives, some are distributed to support the work of
times use public resources to further their own interests crafts specialists (e.g., weavers and potters), and some
and ambitions, rather than to benefit the entire country are redistributed to the whole population at public
or to help those in greatest need. In the United States, feasts, celebrations, and ceremonies.
for instance, elected officials make “pork barrel” deals to Examples of redistribution systems using tribute
allocate federal tax dollars to finance highway construc- payments exist on many of the islands of Polynesia and
tion in their districts. Congestion might be reduced Micronesia in the Pacific. On many islands, the entire
for a while, but the real purpose is to provide jobs for population was divided traditionally into two ranks or
their constituencies or to serve special-interest groups classes, noble and commoner (Chapter 13 has more
who contribute to their reelection. Balanced reciprocity about rank and class). Members of the nobility did little
between members of Congress often integrates well agricultural or other manual work, but instead man-
with redistribution: “You vote for my district’s high- aged the political system and organized religious cere-
way project; I’ll vote for your wetlands reclamation.” monies. Commoners produced the food for themselves
Speaking more generally, political interests—in addition and their families and performed most physical labor,
to concern for the public welfare—enter into decision giving products and services to nobles.
making about redistribution. Many politicians oppose On some islands, the king or principal chief was cul-
subsidies to special interests—at least, those that are in turally perceived as the ultimate owner of the land and
someone else’s state or district or constituency. its resources. Nobles generally had ritual functions, in-
For over a decade in the U.S. political conflict cluding prayers and sacrifices to deities and ancestors.
over health care has existed. It is widely agreed that On most islands, commoners paid periodic tribute to
American health care is both too expensive and too families of noble rank, whether in return for their use
unequally distributed and so should be reformed. of the land or as a sacred obligation, or both. Tribute
Around 18 percent of the U.S. gross domestic prod- fed the nobility and their families and supported spe-
uct is spent in the health care industry, far more than cialists. The tribute rendered by commoners was used
any other industrialized nation, and costs are expected partly for public purposes, such as feeding people who
to increase further. The United States is nearly alone worked on trails and public buildings, providing relief
among developed nations in not providing coverage from temporary food shortages, and publicly celebrat-
for all its citizens. Reforming health care is difficult ing special events. On a few of the larger, resource-rich
because it raises so many issues about redistribution islands such as Hawaii and Tahiti, the nobles were suf-
over which there is no agreement: Is health care a ficiently powerful to become materially wealthy from
“right” that all should have? Is providing health care a tribute: they lived in the best houses, slept on the soft-
legitimate function of government; that is, should the est woven mats, wore special clothing, had numerous
government redistribute tax dollars to provide health servants, and ate only the finest foods.
care? If the federal government does offer health in-
surance for citizens who prefer it or who have no other
source of health insurance, will this put many private
insurers out of business? Will universal health cov- tribute Rendering of products (usually including food)
erage lead the country down the slippery path to the to an authority such as a chief.
dreaded European-style socialism? Even though most
them. Clothing, jewelry, cars, houses, and so forth are
Market not indicators of moral worthiness, but they are still
For our purposes, the word market has two uses. In one signals about how much individuals or families are
usage, market is one of the main forms of exchange, “worth.” How you spend your money also tells others
alongside reciprocity and redistribution. In another, a lot about you. Money can even symbolize national
market is a set of organizing principles, as in the phrase identity or independence: citizens of England still re-
market economies. The two uses are related but not sist adopting the pan-European currency (the euro) be-
identical. Market exchange can exist even in economies cause they see it as a threat to their sovereignty.
that are not based on the market’s organizing princi- These and other characteristics mean that not just
ples. Here we define market exchange as requiring a any object is suitable to be used as money. Obviously,
medium of exchange, so we begin with money. money objects must be durable. This is why hard ob-
jects such as modified stones, shells, and metals often
Money serve as currency.
Money is another of those things we take for granted— Money is more useful as an exchange medium if it is
so much so that it seems like a simple thing. However, divisible, so sometimes different kinds of objects serve
the idea of money presupposes a lot of other ideas and as denominations of money—equivalent to nickels,
institutions, so money actually is rather complicated. quarters, dollar bills, and thousand-dollar bills. Among
At root, money is objects that serve as media of ex- the Kapauku, a people of the rugged interior of Papua
change in a wide range of transactions of goods, ser- province, Indonesia, small cowrie shells imported from
vices (perhaps including labor), or both. With money, the coast serve as money. As the shells circulate, their
person A can acquire something from person B with- natural polish wears off. Because the older ones are
out having to return an object desired by B—that is, more scarce, they are worth more than the newer ones.
without having to barter. B can then use the money to Among Kapauku, the “age” of the money serves as a
buy a chosen object or service. If people sell their time kind of denomination.
and skills for money, the value of the labor is expressed The supply of the money object must be control-
in terms of money (“wages” and “salaries”). This facili- lable because if people can get all they want of it, its
tation of exchange is the main function of money. value inflates and it becomes worthless as an exchange
Other characteristics of money are derived from medium: who would give you anything in exchange for
its function as a medium of exchange. For example, it? The monetary supply can be controlled by a gov-
money serves as a standard of value: we can compare ernment, which manufactures the only “legal tender”
the values of the goods and services because money in the society. Or the supply can be controlled by us-
serves as a common measure of how much things are ing only imported or rare objects as money. Shells
worth. Having a common standard makes it a lot eas- imported from far away frequently serve as money
ier to compare the values of alternative products; for because of their scarcity and durability. The money
example, if you buy that new HDTV, you can calculate supply can also be controlled by using a currency that
what you are foregoing by your purchase. requires a lot of labor to make. Minerals or shells can
Money is also a store of value: because you can use it be ground into precise shapes, drilled with holes, and
any time to purchase a wide range of goods, it stores your strung into necklaces. In such cases, money remains
wealth, often in a portable form that can be carried in scarce because it takes a lot of time to make it.
pouches or pockets. If you want to defer immediate con- For convenience, most money is portable. In differ-
sumption so that you can get something really expensive ent cultures, you can stick it in your pocket, carry it
later, just save your money, since it stores your resources around your neck or waist, wrap it in a bundle, roll it up,
indefinitely. If inflation is high, though, and you store your or wear it around your arm. Chinese and Korean coins
wealth in a low-yielding bank account, then your money had holes in the center so the owner could store them
becomes worth less without you doing anything at all. on a cord. On the island of Yap in Micronesia, however,
Money has symbolic significance. Money is one way huge stone disks weighing hundreds of pounds serve as
to evaluate people, especially if we don’t already know a kind of money. Yapese stone money is seldom moved;
rather, the ownership of it is transacted so that the
money stays in one place even when its owner changes.
money Objects that serve as media of exchange in a wide As the stone money of Yap illustrates, an enormous
range of transactions of goods, services (including labor), or both. variety of objects serve as money in one or another re-
gion of the world. In preindustrial economies, the kinds
© Paul Chesley/National Geographic Image Collection
One of the more unusual forms of money is the stone money of Yap in the Federated States of Micronesia.
of monetary objects are surprisingly diverse. In Africa, Market Exchange

for example, the following objects served as money in
some part of the continent: iron, salt, beads, cowrie To say that objects or services are exchanged by markets
shells, cloth, gin, gold dust, metal rods, brass bracelets, means they are bought and sold at a price measured
and livestock. Among the ancient Aztecs, cacao beans in money. Person A possesses products that person
served as currency. B wants to acquire; B acquires the products by giving
The range of goods that can be acquired with money A whatever amount of money both A and B agree
varies greatly. In some economies, the range is broad. on; A then uses the money to acquire more products
Many kinds of resources and goods can be bought and from other people.
sold, including labor, land, tools, and sometimes even Most readers are so familiar with money and mar-
people (slaves). In these systems, money serves as a gen- kets that the preceding sentence is just a convoluted
eralized medium of exchange; that is, it can be used to ac- way of stating common sense. If it seems that way to
quire many kinds of goods and services. Of course, there you, perhaps it is because you are making assumptions
are always some things that money just can’t buy. Love about the conditions that market exchange requires,
is the classic example, but if you have enough money, it forgetting that these conditions did not exist in the
might be easier for you to think everyone loves you. past or even in the present of many peoples. Market
In many preindustrial economies, the range of exchange requires three conditions:
money uses is relatively narrow. Only a few categories ❚ Some object(s) that serves as a medium of
of products may be purchased. For example, it may be exchange, as money. Notice that money itself
possible to buy food, clothing, and a few other goods; potentially earns more money, as when it is lent for
but land is not available for sale at any price, and labor interest (the price of money).
is rarely for sale. One reason for such limitations on ❚ Rates at which particular products and services
the use of money is that something (like land) must exchange for money or at which money itself
have a price to be transacted for money. In many cul- can be purchased for a fee, that is, prices and
tures, people rarely give up or acquire land, so it has interest that are determined by supply and
no monetary price. demand.
❚ Parties to exchanges have choices about alternative To clarify the difference, consider this example.
buyers or sellers and are free to make the best deal When you go to a friend’s house for dinner, to be po-
they can. Market exchange implies the absence lite and show gratitude you might take a small gift, like
of coercion: neither party to a transaction can be a drink, a dessert, or a plant. Alternatively you might in-
forced to buy or sell from the other party. This is vite your friend over for a meal to reciprocate. Next time,
the free market. No third party (a government, for show up empty handed. At the end of the meal, pull out
example) sets prices or forces anyone to buy or your wallet and tell your friend that you estimate the
sell from anyone else. No single supplier of a good cost of the meal at about $15 and you’d like to pay your
(a monopolist) controls enough of the market to share now rather than inviting your friend over to your
force people to buy from him, her, or it (in the case place later. Or, the next time you exchange gifts, if some-
of firms). one has clearly shorted you, tell the person that she owes
Some people don’t grasp the full significance of you about $6, your estimate of how much more your gift
differences between market exchanges and balanced cost than hers. If doing this makes you uncomfortable
reciprocal exchanges. There is often an element of self- or if the very idea of doing it seems wacko, then you rec-
ishness in balanced reciprocity, making some think that ognize the difference between social norms and market
reciprocal exchanges would become market exchanges norms. On the popular TV show The Big Bang Theory,
if only the people had a form of money. If only they one of the many reasons Sheldon Cooper’s behavior is
had money, they would have markets, goes the logic. humorous is that he seems oblivious to this distinction,
Although balanced reciprocity does not involve mone- often treating other people as means to his own ends.
tary exchanges, in a sense there are implicit “prices” of
reciprocity (otherwise, how would a person know what Market Economies and Capitalism
to give and what to expect back?). Some societies have money and markets without also
However, the difference is real and significant. It lies having a market economy. For centuries, peasant
in the form and degree of selfishness in the total con- classes in various places have sold foods they produce
text of the exchange. Acting in your own self-interest themselves at local markets. People make baskets,
is not merely culturally “tolerated” in markets. In the pottery, leather goods, art objects, cloth and cloth-
free market context, selfish acts are expected and pos- ing, and other goods sold locally or, sometimes, in
itively valued because selfish choice making leads to an distant places. The Aztec civilization of Mexico had
efficient economy. Selfish behavior is a market norm, so enormous marketplaces and even had traveling mer-
in the market context lawful selfishness rarely is criti- chants who went around buying and selling products.
cized. With balanced reciprocity, the two parties expect The ancient silk routes connected the civilizations of
something from one another, but the return cannot be China and the Middle East along trading stations and
precisely judged to be equivalent and can be largely towns in Central Asia, where traders bought and sold
symbolic. Returns can be material objects, mutual help Western and Eastern products like glass and silk. Even
when needed, invitations and hospitality, or even just a today, peasant marketplaces remain important in West
well-communicated sense of gratitude. It is crass to mea- Africa, southern and Southeast Asia, the Caribbean,
sure such returns in money. Reciprocity is a social norm. and Central and South America.
This difference between market and social norms is However, marketing products and going to market-
why you might worry or feel anxious about buying a places does not imply that the entire economy is orga-
used car from a friend, as will your friend. If the car nized by market exchanges. Most peasants and other
is a lemon, how will it affect our friendship? In con- indigenous peoples grow most of their food using fam-
trast, when you buy a used car from a dealership, your ily labor and are not employed for wages in the imper-
purchase makes you worry about other things besides sonal labor market. They go to the market (in the sense
damaging your relationship with the salesperson. of place) to buy something they need but can’t or don’t
want to produce themselves, but they do not depend on
the market (in the sense of system) for their livelihood.
market economy Economy organized by market A market economy is one organized on market
principles: prices determined by supply and demand; principles. Briefly, here are the most important of these
individuals and families rely on the market for livelihood; principles and a short example of each:
free market allocation of resources, products, and services;
self-regulation and decentralization of decision making. ❚ Practically all privately owned goods and services
have a monetary price and can be bought and sold
© Spencer Platt/Getty Images
Market economies require monetary prices determined by supply and demand, widespread dependence on the market for livelihood,
market allocation of the factors of production, and decentralized self regulation of economic activity. Buying and selling shares on the
New York Stock Exchange illustrates these features.
on the free market. Families live in houses and the rising global oil prices by reducing car sizes and
land on which they are built. This kind of property improving gas mileage. Resources were reallocated
is the main “asset” of most families. Many move toward smaller cars because car companies made
from house to house every few years, depending new choices.
on the local housing market. ❚ The economy is self-regulating. The impersonal
❚ Most people make their living by selling something forces of supply and demand set prices and
on the market. Some people make a living by therefore regulate the kinds of economic activity
selling goods or services to consumers. But most that occur. No individual, corporation, industry, or
people are workers: they make their living by other entity regulates a market economy because
selling their labor to a group (such as a firm or it is inherently decentralized. The Invisible Hand,
public agency). Workers have to do this because as economist Adam Smith called this principle of
most of them do not own the natural resources and self-regulation, is impersonal.
capital with which to make their own living. Capitalism is organized on these same four market
❚ The market allocates productive resources, such as principles, but this term emphasizes profits and the ac-
labor, land, equipment, and technology. The supply cumulation of capital. As companies produce products
of and demand for these resources determine the or services, they earn profit through sales. Profits may
uses to which they are put. If some company is be distributed to owners (often dividends to sharehold-
producing products consumers aren’t interested in ers), saved in a financial institution, given as bonuses
or is charging prices consumers refuse to pay, the
company will go out of business, or change what it
produces, or find ways to lower prices by lowering capitalism Market economy; emphasizes capital
its production costs. All companies adjust to accumulation through profit making as the key to
“market realities.” In the 1970s, the American auto economic growth and maximum material welfare.
industry adjusted to Japanese competition and
to top managers or workers, and/or reinvested in the Finally, capitalism automatically produces social and
company in hope of future profits to make the com- economic inequalities, further discussed in Chapter 13.
pany grow. Through capital accumulation, companies It is both easy and convenient for someone who be-
expand and hire more workers, benefitting them. If lieves in capitalism to give credit to the winners and
a company is profitable, its profits go to owners and disparage the talents and efforts of the losers. (Notice
investors, who may save or spend them, creating ad- that if you are a postmodernist, you are likely to believe
ditional demand for goods and services and thus stim- that such common beliefs reflect wealth inequalities
ulating more business activity. Capitalism is the eco- and power relationships.) It is especially easy for some-
nomic growth engine. one to believe this if that person is winning—unless
If you remember economic systems based on other that person later becomes a loser. Then previously
exchange principles such as reciprocity and redistribu- unsuspected complications become apparent.
tion, you can see how unusual capitalism is. Be careful, The ideas justifying socialism are that it provides
though, not to confuse capitalism with market ex- better for the poor by heavy taxation on the well-off
change. Lots of past societies had markets, but capital- and thus produces greater equality and more of what
ism existed only after the Industrial Revolution. some call social justice. However, this has not always
Between the economic systems of industrial na- happened in real socialist economies, which critics of
tions, capitalism and socialism are often contrasted. socialism say is why so few socialist economies remain
Ignoring many complications, in essence socialism today. Socialism is friendlier to workers than capitalism
means that the government makes decisions about with respect to wage laws, regulations about factory
product prices, wages and employment, what is pro- conditions, parental leave, unemployment compensa-
duced and how, and the accumulation of income and tion, and similar policies.
wealth. Under socialism, the government sets prices for Economies organized by market principles have
products and wages, which means that product prices many advantages for individuals. You can shop around
and wages are not determined by supply and demand. until you find the best deal available, now especially
The government, not market forces, decides what and easy with your smartphone. You can change jobs if
how much is produced and thus allocates productive you are dissatisfied with the work or your employer.
resources. In the twenty-first century, many people carry hardly
Each economic system has strengths and weak- any money but have deposited “it” somewhere and use
nesses. Again setting aside numerous complexities, it small cards that are a promise to pay when they want
is commonly said that the strength of capitalism over to buy something—not only a convenient practice, but
socialism is efficiency: overall, capitalist economies one that allows people to spend money they have not
outperform socialist ones in the quantity of goods and yet earned and thus invites indebtedness. Furthermore,
services produced per person. This is because the in- an economy organized on free-market principles is tre-
centives built into capitalism encourage and reward mendously productive, as Karl Marx—the nineteenth-
hard work and training. (Notice that if one is an evo- century archenemy of capitalism—recognized. The
lutionary psychologist, one might claim that capitalism People’s Republic of China has experienced tremen-
is more consistent with “human nature.”) On the other dous economic growth since its government intro-
hand, capitalism automatically and regularly produces duced market reforms in 1978.
losers as well as winners: some individuals are better After the Industrial Revolution (Chapter 7), capital-
off than others, often because of inheritance from par- ism took hold and expanded in Western Europe and
ents or because of educational and other advantages North America. Its philosophical basis—the cultural
they have from living in a particular place. It also has ideas that provide its legitimacy—was and is that free
business cycles (booms and recessions), which occa- markets lead to what has been called “the greatest good
sionally are economically disastrous for workers and for the greatest number in the long run.” For example,
businesses (the Great Depression) and often require to say that the market “allocates resources” means that
government bailouts (the 2007–2011 financial crisis). if some industry is declining (like textiles or shoes),
then the profit made by companies in that industry fall.
Companies in that industry will go bankrupt or choose
socialism Economy in which government makes to go into some other industry. As a result, companies
decisions about product prices, wages and employment, that produce products (like computer software) or ser-
what is produced, and accumulation of income and wealth. vices (like Internet advertising) will profit and grow,
producing value for their owners. This process can
be hard on the families of workers in declining indus- auto safety equipment is another. However, neoliber-
tries but benefits those in growth industries, so people als argue against other kinds of government actions.
shouldn’t be too concerned if the local businesses in Governments should not give tax breaks or subsidies
their town go out of business when a large retail store to companies that government officials judge are in
moves in or an upscale mall develops. Market princi- the public interest (e.g., solar technology, electric cars)
ples are operating: consumer demand, prices, market because then it is the government that is allocating re-
allocation of resources, relative profits and wages, and sources rather than the market. Governments should
other market forces. not impose heavy taxes on corporate profits, because
Capitalism is a “system,” not a “thing,” and how its then corporations are less motivated to make as much
principles operate vary from place to place and time profit as they can, which reduces growth and ultimately
to time. People—including economists—have different harms everyone. Governments should be only mini-
ideas about which version of capitalism works best. One mally involved in redistribution of income from wealth-
set of ideas is called neoliberalism (or laissez-faire, ier people to poorer people, both because the wealthy
roughly translated as “leave them alone”). People who have earned their income, and because redistribution
believe in it are not liberal in the political sense. Rather, discourages work effort. Governments should not force
they believe in what they call economic freedom: in companies or individuals to reduce their carbon emis-
market situations, leave people and corporations alone sions to reduce climate change, because even if climate
to do what they think is best for themselves and those change is real, it might not be caused by human activity.
they care about. This results in the best results for so- Social welfare capitalism is another form, justified
ciety as a whole. Governments can interfere with free by different ideas. This form and these ideas also are
markets with the best of intentions, but usually there based on free markets, although many people incor-
are consequences they do not intend that result in less rectly consider social welfare capitalism to be a form of
growth and public benefit than would otherwise occur. socialism. People who champion social welfare capital-
For example, when governments intervene to pro- ism point out that free markets generate a lot of “bads”
tect workers, they interfere with the workings of free along with their “goods.” One important task of elected
markets. Examples of intervention are minimum wage governments is to minimize the negative consequences
laws, safety regulations, requiring employers to pro- of capitalism without seriously compromising the value
vide health insurance, and allowing labor unions to of free markets and the capitalist system. This involves
require workers to pay union dues. These kinds of gov- heavy regulation of external costs (“heavy handed,”
ernment interference might help the few (the workers neoliberals believe); extensive legal or regulatory re-
in a given industry) but hurt the economy overall, be- quirements about worker safety, wages, and benefits;
cause government interference reduces the efficiency and taxation of the wealth and income of individuals
of the overall economy. to fund social programs benefitting the poor and un-
Neoliberals argue that similar consequences follow employed. When North American political candidates
when governments pass regulations to reduce the neg- and officeholders talk about “European-style socialism,”
ative environmental or social effects of external costs. they actually are referring to social welfare capitalism,
Examples include heavy pollution regulations, favoring because no European country remains socialistic.
companies that manufacture solar cells with subsidies However, most European countries do have socialized
or tax breaks, and heavy taxation of the profits of com- medicine: governments pay for preventative medical
panies. These, too, affect the operation of free markets, care and for treating the sick and injured. To neoliberal
leading to losses in efficiency and, eventually, a net low- thinkers, this is not a legitimate function of government
ering of benefit to society as a whole.
In short, neoliberals place a lot of trust in free mar-
kets. But even they agree that various levels of gov- neoliberalism (laissez-faire) Belief that economic
ernment have legitimate roles in the market. It should freedom results in the best results for society as a whole;
protect property, construct infrastructure (e.g., roads, mistrust in government interference with free markets.
ports), and provide defense, police, and some form of social welfare capitalism Capitalist economy in
public schools. It should regulate industries by mini- which a legitimate function of government is protection
mizing external costs, which are things companies do of workers and society from the harmful impacts of free
that harm individuals, communities, or the environ- markets; involves extensive regulations of business and
ment. Forcing factories to reduce the amount of air worker protections.
and water pollution is a familiar example. Mandating
and results in long waits for treatments and high costs. First, investment bankers judge the success of a
Neoliberals believe that governments are inefficient company by shareholder value (roughly, the price of its
because they are not subject to the “discipline of the stock). According to Ho’s interviews, in the culture of
market.” However, American health care costs are the Wall Street, a company owes nothing to its employees
highest of any developed nation at 18 percent of GDP, aside from the provisions of their contract. Nor is it ob-
partly because the medical profession is compensated by ligated to consider the impacts of its actions on the na-
the number and kinds of tests and procedures rather than tional welfare. For example, in a great many cases, soon
by patient outcomes. after a company has fired or laid off a large number of
its “excess” employees, its stock price rises. This in-
creases its shareholder value because it has shed excess
Productivity capacity. The management is responsible to the compa-
For a society or nation as a whole, then, the number one ny’s shareholders, so if shareholder value increases af-
benefit of a market economy is productivity: compared ter layoffs and firings, management has done what it is
to socialism, market economies allocate resources supposed to do: increase the wealth of its shareholders.
more efficiently, which leads to higher productivity. Second, Ho writes, the high-level employees of Wall
Think about the cultural meaning of the word pro- Street firms consider themselves as among the smart-
ductivity. When you say have a productive day, you est people around. Most have degrees from Harvard or
mean you have done a lot of work in some period of Princeton and rarely underestimate their own abilities.
time. In economics, though, factory productivity is This does not imply they think their decisions are per-
measured by the cost of producing goods compared fect, but a relative lack of humility makes them more
to the market value of the goods when they are sold. likely to allocate money—usually the money of other
Costs are measured by money, as is the GDP of a na- people who are looking to achieve high returns on
tion. Many economists worry when factory productiv- investments—toward risky investments because they
ity falls, because it means that factories are using more think they have the brainpower and skill to assess risks
“input” to produce the same level of “output.” Because accurately. Once hired, they work very long hours,
labor is a cost, companies can reduce their costs by often 70 or 80 hours a week, and are under constant
finding ways to employ less labor by automation, re- stress because of pressures to perform.
organizations, or moving production to places where Third, in addition to salaries, investment bankers
labor costs are lower. This leads to layoffs and firings, earn annual bonuses, often far exceeding their salaries.
which is good for the company’s productivity, however Usually, senior managers make decisions about bonuses
hard it is on unemployed workers and their families. in secret and without justifying them to their subordi-
In a capitalist economy in which neoliberal ideas are nates. More often than one might expect, midlevel an-
influential, companies do not and should not care about alysts themselves are “liquidated”—fired. The world of
such things as whether firings and layoffs harm their finance changes so rapidly that a division of a firm that
workers or the general economy. By “companies,” we was profitable last year may not be this year, so whole
do not mean the individuals in the company or even its divisions are often let go. Wall Street culture instills the
managers or board, all of whom have a diversity of ethical belief that that most assets must be “liquid”—they must
and moral views. We mean what is in the interest of the be able to be reallocated very quickly. Labor is such an
company, or what it should do to maximize its . . . what? asset. Because of bonuses and the real possibility of
Most readers will answer “profit.” In her 2009 book not working for a company very long, employees are
Liquidated: An Ethnography of Wall Street, anthropolo- “incentivized” to raise the shareholder values of compa-
gist Karen Ho provides a slightly different answer: share- nies they buy and sell as rapidly as they can.
holder value. On the basis of her detailed ethnographic Like you and I, investment bankers are natives. To
interviews in 1998–1999 with investment bankers grasp their point of view, suppose you work as an in-
working for Wall Street firms, Ho describes the corpo- vestment banker in a Wall Street firm. Your compen-
rate culture of the financial industry. One thing invest- sation is tied to your performance, which depends on
ment bankers do is use money (much of it borrowed) what happens to the shareholder value of the compa-
to buy stock in underperforming (“undervalued”) com- nies you advise your firm to invest in or take money out
panies. Typically, they then break the company up and of. You are not always sure whether your performance
sell parts of it to other companies, thus “liquidating” the meets expectations, which makes you work even harder
company. Ho’s study is too complex to summarize in its to become more productive. Your firm believes that the
entirety, so here we present some of her main findings. financial sector changes so often that not you and your
entire division might be liquidated at any time. You had
better make all the money you can right now. You, and Globalization and Markets
your colleagues, can play it safe and allocate money in Between May 2011 and May 2012, the world price of oil
relatively safe but low-return investments. But you and hovered between $100 and $118 per barrel. During those
your colleagues are the smartest of the smart, so you months, the price of gasoline in some parts of the United
are able to evaluate the risks of investments. If the fu- States exceeded $4.00 per gallon. This led to the latest
ture works out, you will make loads of money for the American realization of overdependence on foreign
company and for yourself at annual bonuses. If not, you oil, some of which is produced in nations that “hate us.”
might be downsized, but that could happen anyway. Private industry and the government point to alterna-
Karen Ho’s Wall Street research has many impli- tives sources of energy that potentially reduce foreign de-
cations for understanding financial markets in market pendence. The most recent large-scale energy industry is
economies. Here we call attention to only one. Many hydraulic fracturing, or “fracking,” the controversial tech-
people blame “greedy bankers” for the financial collapse nology that supplies petroleum and natural gas by forcing
that began in 2007. They seem to assume that the crisis water and chemicals into underground shale deposits.
was caused by the actions of individuals who were so Fracking has become a major industry in Pennsylvania,
intent on making money that they set aside their ethical eastern Ohio, North Dakota, and Wyoming. Although
standards or morality or found some other ways of jus- it has driven down consumer costs of natural gas con-
tifying their actions. Ho’s work provides an alternative: siderably since about 2010, there are concerns about its
it was not greed but the way that the financial industry impact on ground water supplies and health.
is “structured”—the corporate culture that guides deci- Ethanol is another fuel source. In the United States,
sions, how rewards are allocated, expectations placed ethanol is made mainly from maize (corn). American
on people working in a highly competitive industry, family farmers and giant agricultural corporations pro-
and the like. Without a change in industry structure duce a lot of corn—so much that corn and its many
and corporate culture, a new group of less greedy bank- products cost remarkably little to produce. Once pro-
ers would soon appear to be equally greedy. cessed into ethanol, mixed with actual petroleum, and
Remember the difference between market norms pumped into automobile fuel tanks, corn can both
and social norms? In a capitalist economy, a corpora- reduce prices at the pump and free North Americans
tion that acts altruistically toward its own workers or from becoming too dependent on people who don’t
the general society raises its own costs and thus re- like them, and vice versa. Everyone benefits.
duces its competitiveness. Because of globalization, in Actually, not everyone. The federal government sub-
the twenty-first century the companies of one nation’s sidizes both corn production and ethanol processing
economy are competing with the companies of other plants, to reduce foreign energy dependence. By 2008,
nations, whose governments impose fewer or different about 30 percent of the corn produced in the United
regulations. There are few enforceable international States was processed into ethanol. Rising demand from
regulations that level the playing field for corporations ethanol plants contributed to the near tripling of the
active in the global economy. market price of corn between the end of 2005 and mid-
Therefore, the desire/need to remain “globally com- 2008. Corn products are used in lots of processed foods,
petitive” becomes an argument for a political strategy. so when corn prices rise, the price paid by consumers
A nation’s industries or other kinds of companies claim for other foods increases. Corn syrup (fructose) is used
that things like “government overregulation” and the to sweeten such a large number of products that there
“unreasonable demands of labor unions” are reducing was a generalized increase in food and soft drink prices.
their international competitiveness. In this and other People saved some money on fuel for their cars from
ways, the global economy affects national elections, ethanol but lost most or all of the savings in increased
political debates, and programs that are enacted or not prices for their snack foods, soft drinks, and many
enacted. Public policies in all nations are affected by other fructose-loaded products. Furthermore, at most
how nations are integrated into the global economy. ethanol yields only about 30 percent more energy than
So are ideas about the optimal form of capitalism. In the energy needed to produce it, and some researchers
the United States, neoliberal ideas have been around claim its energy balance is negative. Most researchers
for a long time but have become more influential in the doubt that ethanol will reduce our dependence on for-
last several years with the emergence of the Tea Party. eign oil, despite its political popularity.
Perhaps globalization has promoted the influence of There is a global market for corn. Increased American
the neoliberal agenda in politics. demand for corn made into ethanol contributed to a
global rise in the price of corn. In a 3-week period in Market globalization affects almost everyone to
early 2007, the price of corn tortillas in Mexico rose some degree, including people who seem remote and
by a third. When there are shortages and anticipated relatively isolated from global forces. In the last five
shortages, speculators on commodities tend to bid on centuries, indigenous peoples (see Chapter 17) were
them, and competition between them further drives up dramatically affected by colonialism, diseases, resource
prices—as seen repeatedly in world petroleum prices. extraction from their lands, and (in some cases) slav-
Distributors and processors also publicly justify price ery. In the modern global economy, many of them
increases to consumers by citing their own rising have found their own market niche (see Globalization
costs—as seen repeatedly in pump prices for motor fu- Challenges and Opportunities).
els. Poor Mexicans eat a lot of corn tortillas and beans, Global markets go back to the colonial centuries
which for many are staples of their diet. They had to pay beginning about 1500 (see Chapter 4). However, their size
more for their major dietary staple because Americans and geographic reach expanded dramatically in the last
diverted part of their production of a food (and feed) half of the twentieth century. In the 1960s, for example, an
crop to energy. Popular protests in 2007 against high agreement between the United States and Mexico allowed
prices were later called the “corn riots.” U.S. corporations to set up factories (called maquiladoras)
Corn continues to supply a large portion of food for in Mexico along the Texas border region. The plants pro-
rural Mexican people—about 40 percent of the caloric duced clothing and consumer electronics for American
intake in many parts of the countryside. The Mayans consumers. American garment companies sent cloth to
and other prehistoric Mesoamericans invented the pro- the maquiladoras to be cut and sewn into clothing sold to
cess called nixtamal or nixtamalización. Derived from American consumers. Electronic firms sent components
the language of the Aztec, nixtamalización involves south to be soldered and assembled. Products were then
boiling maize kernels with calcium hydroxide (“lime” brought back to the United States for final finishing and
as in limestone, not citrus) and ash (sometimes volca- sale. There were no tariffs (import taxes) on the finished
nic). After soaking in this alkaline solution, the kernels products, and Mexico allowed North American compa-
absorb valuable nutrients, and the soaking makes the nies to retain ownership of assembly plants on its soil in
niacin available for absorption by digestion. When the return for the jobs and training received by its citizens.
processed kernels are ground into tortillas and eaten Most Mexican employees of these multinational firms
with beans as tamales or another food, a nearly com- were unmarried women. American and European corpo-
plete diet results. The form of protein deficiency called rations made similar arrangements with Asian countries
pellagra is prevented, and the added calcium prevents like Taiwan, Singapore, and South Korea.
the disease called rickets. One Mexican nutritionist re- Since the 1980s, wage levels in the countries men-
ported that rising corn prices led many poor Mexicans tioned above have climbed, and their governments have
to switch to eating instant noodles, a much cheaper instituted more workplace and environmental regula-
but far less nourishing food than the maize and beans tions. To remain competitive by controlling labor and
that have nourished them for centuries. other production costs, corporations relocated pro-
Maize also is intimately tied into Mexico’s history duction facilities to other countries that had even fewer
and culture. Corn was first domesticated in southern regulations and lower prevailing wages. In addition to
Mexico. It is a meaningful as well as nutritional food, India, China, and Brazil, countries in Southeast Asia (like
like rice in Japan or lamb in Iran, and a symbol of Malaysia, Indonesia, and the Philippines), the Caribbean,
Mexico’s national identity. and Africa invited foreign companies to establish factories
The impact of American ethanol on Mexican corn to provide jobs for their people and tax revenues for their
prices is an example of market globalization. The en- governments.
tire world is increasingly integrated into a single system The impacts of market globalization are debated by
organized by market principles. Labor, capital, tech- news media, government officials, labor unions, corpo-
nology, consumer products, and services move with rations, and consumers. The most important questions
few restraints across national boundaries. focus on its costs and benefits, especially the question
of who loses and who gains. Four main metaphorical
“interests” participate in globalization: corporations
market globalization Process through which the who lower costs by outsourcing production, consum-
world’s national economies become integrated into a single ers in the more developed nations, workers in the more
exchange system organized by market principles. developed nations, and workers who hold jobs in the
lesser developed regions and countries.
Corporations forces millions of workers—most of whom do not have
Nearly everyone agrees that corporations in the richer higher education or professional training—to compete
countries win from globalization, mainly because of in a wider, global arena.
reduced labor costs and less restrictive environmental
Workers in Developing Countries and Regions
and workplace regulations. The owners and managers
of businesses in what we used to call the Third World Views also diverge on the welfare of these workers.
also gain new income by producing for the export Critics of globalization claim that these workers are
market. exploited. Rich foreign and domestic companies take
advantage of their poverty and lack of alternative eco-
Consumers nomic opportunities by offering low wages and deplor-
Consumers in the richer nations mostly benefit from able working conditions in terms of working hours,
lower prices because so many of the products they health, and safety.
purchase are made so cheaply. Go to your closet and Those who favor the expansion of global markets
try to find a garment or pair of shoes manufactured respond that these workers are being paid more than
in your own country. Check out your gaming console, they would otherwise be paid, they are getting job ex-
TV, smartphone, tablet computer, and other electronic perience and training, their governments receive the
equipment. What do you suppose you would have taxes paid on their wages, and their local businesses
paid for such products if they were manufactured in receive the capital needed for investment and future
Toronto, London, Tokyo, or Chicago? growth. In China, India, and many other countries,
On the down side, in recent years Mattel’s Chinese- tens of millions of rural people who would otherwise
made toys were found to contain too much lead, some remain peasants migrate to cities to work in factories.
pet foods imported from China contained an additive Do we think they are too ignorant to judge whether
that harmed animals, and Chinese-made drywall con- they and their families are better off taking wage work
tained toxic chemicals and often disintegrated. A fa- in cities?
vorite phrase of economists is “There is no such thing It is difficult for most people to decide which opin-
as a free lunch,” so if retail prices are lower, then the ion is correct about workers in the “global factory.”
costs are borne by someone else. Compared to wages, safety regulations, and general la-
bor welfare standards in Western nations, no doubt the
Workers in Richer Countries critics are right. Yet compared to the living conditions
Other players in the global market are workers who many factory workers would otherwise face, those who
used to work in the factories in the developed countries, claim that offshore production helps those who work in
whose formerly high-paying jobs were replaced by peo- factory production for export have a case.
ple who live half a world away. In market terms, many Wage rates can be argued either way: if factory work-
are the victims of “restructuring” and “increasing effi- ers choose factory work, perhaps outside critics whose
ciency” because their employers must “lower costs” to life conditions are different should not be so quick to
“compete in the global market” in order to “be respon- second-guess their choices. However, whether workers
sible to their stockholders” and increase “shareholder suffer health effects from their jobs—or die—is about
value.” Kannapolis, North Carolina, was once the home as clear a criterion as can exist. In November 2012,
of Cannon Mills, the company that supplied a large a fire at a garment factory in Bangladesh killed 112
percentage of textile products like sheets and towels. workers. International companies that subcontracted
Cannon’s buildings were demolished into enormous piles for clothing produced at the factory said they would
of brick rubble, and the American workers were “let go.” work to improve working and safety conditions in the
Those who favor globalization point out that most country’s poorly regulated industries.
laid-off and fired North American workers have found Factories located in Bangladesh produce more cloth-
other jobs. At any rate, in their role as consumers, ing for global markets than any other nation except
workers benefit from the lower prices made possible China. In 2013, international businesses outsource pro-
by lowered overseas production costs. Critics of glo- duction to about 5,000 garment factories in Bangladesh,
balization claim that most of these new jobs are lower employing 3.2 million workers. Bangladesh citizens
paid jobs in various service industries and that the working in the garment industry have the world’s low-
alleged decline of the American middle class and in- est minimum wage rates, $37 per month (many make
creasing economic inequalities (Chapter 13) are due more than this, of course). Because the labor market is
largely to globalization. Thus, the global labor market increasingly global, low wages in one country tend to
GLOBAL CHALLENGES
AND OPPORTUNITIES Globalization of Indigenous Products
affected due to exposure to new because the object traditionally was

beliefs and customs as well as loss used in a cultural context that the
of resources, land, and participation educated buyer has taken the time
in a wider economic system. In the to master.
Americas, Australia, New Zealand, In the North American Southwest,
and most of the Pacific, the indigenous stores in cities like Santa Fe,
peoples suffered from Old World Albuquerque, Gallup, and Phoenix sell
diseases that resulted in population Native American products. Pottery
declines, usually estimated at 80 to made by Pueblo peoples sell for
90 percent. hundreds or even thousands of dollars.
Technically, peoples like the Navajo, Hopi, Zuni, and other Native
French and Germans are also peoples make bracelets, necklaces, belt
John & Lisa Merrill/DanitaDelimont.com “Danita Delimont Photography”/Newscom
indigenous, in these cases to Europe. buckles, conchos, and other jewelry

However, the common use of from silver and turquoise. Thousands
indigenous implies peoples whose of members of the Navajo nation in
ancestors were conquered and who the four corners region maintain herds
therefore became part of a larger of sheep, whose wool they dye and
nation state and/or global empire. As hand-weave into rugs sold to Anglo
we use the phrase, indigenous refers and European tourists. Visitors who
to peoples like Native Americans, travel on to one of the more than two
Pacific Islanders, native Africans, dozen Southwest reservations have
and Asians who are ethnic minorities the opportunity to buy pots, jewelry,
(Chapter 17). rugs, and other crafts directly from the
Today’s worldwide economic Indians, enhancing their sense of an
system affects indigenous peoples in authentic experience.
many ways. One way is that the global Most pastoral peoples (Chapter 7)
market connects consumers in the have marketed their products for
more affluent nations and regions centuries, relying on such exchanges
with producers of indigenous arts and for much of their livelihood. They
By moving people as well as things crafts. Most large world cities have sell or trade wool, hides and leather,
and messages around more than ever small stores that sell “tribal” products milk, and meat to neighboring
before, globalization makes it easier for
made by the world’s diverse indigenous farmers or at local marketplaces.
this Western woman to buy a tapestry
from someone on the island of Sulawesi, peoples. Here, you can buy things Many use the hair of their animals
Indonesia. marketed on the basis that they are to make carpets, garments, carrying
indigenous. They are handmade (rather bags, and other kinds of tapestries.
Indigenous peoples are groups whose than mass-produced), traditional (“just Herders in Persia (Iran) and many
ancestors lived in a particular region like their ancestors used to make it,” Arab countries shear the wool of
until they came into contact with although usually this is not the case), sheep, dye it in beautiful colors, and
outsiders who were more powerful authentic (made by an indigenous use the fibers to weave carpets, bags,
and wealthy than themselves. Most person who is “Other”), and different and clothing on hand looms. Ethnic
often, the indigenous peoples lost (few people you know have anything groups in northwestern China and
land, population, and resources as a like it). The object’s appeal is further Tibet, of the Caucacus in Europe, of
result of the contact. Nearly always, enhanced if buyers can become the parts of South Asia, and in northern
their traditional ways of living were expert among their family and friends, Africa do the same.
Outsiders have long recognized peoples allegedly still follow the ways In their quest for meaning and
the craftsmanship and beauty of such of their ancestors. Like its companion identity, some Anglo Americans turn to
woven products. The expansion of known as ecological tourism, cultural Native American cultures. They think
global markets in recent decades tourism has become popular as an they know enough about shamanistic
has increased consumer demand alternative way to visit and learn about worldviews (Chapter 14), vision
for pastoral products, which have other places without so many modern quests, holistic healing, and sweat
become global commodities that amenities. baths to believe such Native beliefs
fetch high prices among more Sometimes, people who feel and customs will help them in their
affluent people of the herders’ own their nations are sacrificing their search for meaning and for their own
country and others. To cover their values and traditions as they grow spiritual path. Santa Fe, New Mexico,
floors or hang on their walls, people richer seek connections with a more and Sedona, Arizona, are among their
in the richer countries with enough unadulterated, authentic cultural favored destinations. Entrepreneurs
money can buy carpets—both new past. The government of the People’s have established businesses to provide
and antique—that are hand-woven by Republic of China has built roads metaphysical services in return for
herding peoples. and provided public services that fees in the thousands of dollars.
Carpets, hats, coats, tapestries, have opened up many of the nation’s Among other issues, such practices
and other woven products sell remote mountainous southwest raise questions about whether it is
for high prices on global markets regions, making it easier for China’s disrespectful to borrow just a little bit
because they are certified to be emerging middle class to spend a few of someone else’s religious traditions
“authentic,” meaning they were days in the “backward” areas where during a week-long sojourn to acquire
hand-woven by an indigenous ethnic minority peoples live. This is one meaning or spiritual power.
group using fibers sheared from local way to transfer money from China’s Occasionally, tragedies result. In
livestock. The price may be even more affluent citizens to regions that October 2009, two men died and three
higher if the dyes are made from have not experienced the boom in the people were hospitalized during a
local plants and minerals rather than export economy. In Yunnan province “sweat lodge ceremony” held near West
chemically manufactured in factories. in the far southwest, there is actually Sedona, a place where multitudes of
If you can’t make it to Amsterdam, a cultural park where Chinese and vortexes release spiritual energies with
London, Vancouver, or New York, foreign tourists can witness traditional healing powers. According to the New
you can find one on eBay, perhaps dances and other “authentic” York Times, the overcrowded sweat
even offered by the indigenous practices. lodge was wrapped in blankets and
person who made it. If you live in In Western as in other countries, plastic tarps; then water was poured
Asia you can buy almost anything many people have houses full of over hot rocks to release the heat and
in Seoul, Shanghai, Tokyo, Mumbai, things but feel their lives are empty steam needed for the experience. A
Karachi, Kualu Lumpur, or Manila. of meaning. They long for authentic member of the Klamath-Modoc Native
In all the world’s cities, beware of experiences, feelings of belonging American tribe—who organizes such
knockoffs and counterfeits. You don’t and identity, spirituality in their lives, events—commented, “We would never
want to buy a rug or serape that looks and other intangibles. Most people use plastic to cover our lodges. The
indigenous but isn’t really. find these within their own cultural lodge has to breathe, that steam has
Buying material products is only traditions. However, some prefer to to go someplace.” A man who is part
one way to make a connection to connect more directly with “native Mescalero Apache noted that this
indigenous peoples. For a fee, small cultures.” Familiar examples include event was a good example of “why it
companies organize groups of tourists Eastern practices like Zen, yoga, is extremely dangerous to conduct
to visit “primitive” places like New meditation, tai chi, and prophylactic sweat lodge ceremonies without proper
Guinea and Vanuatu where native acupuncture. training.”
palash khan/Alamy
The costs and benefits of market globalization are difficult to determine, because whether workers gain and/or lose depends on
complicated circumstances. However, the 2013 deaths of 1,127 factory workers due to the collapse of five factories in a single unsafe
building in Bangladesh leaves no debate over “losers.”
drive down the cost of labor in other countries. Since the upper stories ordered their workers to show up the
the early 2000s as wage rates in China have risen, cloth- next day.
ing companies from rich nations have relocated facto- On April 24, 2013, a generator turned on and Rana
ries to countries with lower production costs to stay Plaza collapsed. For several days rescue personnel and
globally competitive and/or to make still higher profits. ordinary citizens worked to free trapped persons and
Bangladesh clothing factories receive credit for helping clear away the rubble to search for more. After more
to lift some families out of poverty. At the national level, than a week of rescue attempts, it was determined that
factories provide foreign exchange, helping Bangladesh 1,127 people died, the deadliest disaster in the known
earn money to buy products like oil and technology from history of the garment industry.
other countries. In explaining this and other human tragedies, many
In an industrial suburb of Dhaka, the capital of people blame national- or local-level owners, manag-
Bangladesh, there was an eight-story building called ers, and officials. Local building codes are too lax or
Rana Plaza. Garment factories owned by five separate are not enforced. Corrupt officials are often bribed to
Bangladeshi owners and employing about 2,500 people ignore violations. Greedy owners don’t care about their
were housed on the four upper floors of the building. employees. Such factors certainly contribute. However,
Investigation showed that the top four stories had been the responsibilities of corporations and consumers in
constructed with no building permits and with sub- richer nations should not be underestimated. If a global
standard materials and disregard for building codes. corporation is searching for a place with low produc-
Because of frequent power failures, to keep machines tion costs to remain competitive, then it should be as-
operating, factory owners installed large electric gen- sumed that suppliers in a place know that a lower bid
erators in the upper stories, which shook the whole is more likely to win a contract than a higher one. They
building when switched on. A visit by inspectors the know that large international corporations are able to
day before revealed large cracks in the walls. For safe- look elsewhere, whereas their own options are more
ty’s sake, a bank and several retail shops on the first limited. What do you think those suppliers are likely to
floor closed, but managers of the garment factories on do to earn the contract?
Odds are, you own some garments that say “Made in combination of price and perceived quality, as affected by
Bangladesh” on their labels. Perhaps you don’t even know advertising. Is it too much to ask global companies to tell
where Bangladesh is. Probably you have no knowledge of us more about a product than where it was made? Suppose
conditions in its garment factories, because it would take you could use your smartphone to scan the QR code that
a lot of moral commitment to do the research necessary now accompanies many products sold at retail stores. But
to find out. “Supply chains” in a global economy are very instead of finding out more about the nature of the prod-
complex, and you cannot see how your choices as a con- uct itself from the website that appears on your phone, you
sumer impact workers on the other side of the planet. could learn whether the company stands behind the work-
Consumer demand for a particular product is typically a ing conditions that produced it. Would you do that?
SUMMARY
1. Describe the three main forms of exchange in formal political leaders, who in preindustrial
economic systems. Anthropologists classify cultures are most commonly called chiefs. As part
exchange into three major modes or forms: of their status, chiefs have the right to receive
reciprocity, redistribution, and market. Reciprocity tribute from their subjects, in the form of labor or
is the giving and receiving of objects or services products. Chiefs organize labor for public projects
without the transfer of money. There are three and reallocate the products among the community.
subtypes, distinguished by motivations and Chiefdoms vary in the proportion of tribute kept
social effects: generalized reciprocity, balanced by the chief ’s family versus redistributed back to
reciprocity, and negative reciprocity. In the community.
redistribution, the members of a group contribute
4. Describe the properties of money. Money
products, objects, or money into a pool or fund,
makes the exchange of goods and services more
which a central authority reallocates or uses for
convenient and facilitates the making of profit
public purposes, as exemplified by taxes and
and accumulation of wealth. Money functions
tribute. Market exchange involves buying and
as a medium of exchange, a standard of value,
selling commodities and requires money, prices
and a store of value. These functions mean that
determined by supply and demand, and privately
money objects usually have the characteristics
owned property.
of durability, divisibility, limited supply, and
2. Analyze how the form of reciprocity between portability.
people varies with social distance. The kind of
reciprocity that exists between individuals and
5. Discuss the distinction between market exchange
groups depends on the normatively appropriate
and market economies (capitalism) and the
social distance between them. Exchange
differences between neoliberalism and social
relationships alter as social relationships change.
welfare capitalism. Market as a form of exchange
involves the buying and selling of products
Conversely, one party can attempt to alter a
or services using money. Market economies
relationship by offering an object (or invitation),
exist wherever market principles organize the
and the other party can signal acceptance or
entire economy of a people. Capitalism refers
rejection by a particular response. Reciprocal
to economic growth by the accumulation
exchanges can communicate messages about
and investment of capital. Neoliberals place
feelings and relationships, so they often have
great trust in the Invisible Hand of markets to
symbolic as well as material content.
regulate economic activity and produce optimal
3. Discuss the relationship between redistribution outcomes. In social welfare capitalist economies,
and political organization. Redistribution is a governments exercise a lot of control over the free
major form of exchange in societies that have market to benefit workers and the poor.
6. Discuss the globalization of markets and its production costs and generally make more
impacts on workers, consumers, corporations, profit. Consumers also benefit from prices
and cultural preservation. Because of market that are lower than they otherwise would be.
globalization, most of the world is integrated The impacts on working-class people in all
into a single-market system. Global markets countries are more complicated, variable, and
impact all categories of people. There is wide debated. However, worker health and safety is
agreement that corporations who export one issue on which both critics and promoters of
production facilities benefit from lowered globalization agree.

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8 Exchange in Economic

Economic Systems Market

Redistributions Collection of products and valuables by a central authority, followed by distribution

negative reciprocity Reciprocal exchange motivated

172 PART III The Diversity of Culture

of monetary objects are surprisingly diverse. In Africa, Market Exchange

aﬀected due to exposure to new because the object traditionally was

indigenous, in these cases to Europe. buckles, conchos, and other jewelry

184 PART III The Diversity of Culture

CHAPTER 8 Exchange in Economic Systems 185

188 PART III The Diversity of Culture

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