By contrast, the pre-17th Century enterprises operated in a premodern manner. Social exchange operated in premodern societies. Everyone in the premodern community knew one another and provided goods and services through a process that was embedded deeply in a shared set of values and a multi-generational foundation of trust. Commercial enterprises were based on local, informal exchange of goods and services on demand–often engaged through bartering processes (Bergquist, 1993)).
Specialization and Interdependence
For Smith, it was not only a matter of shift from social to market exchange, there was also a shift to more specialized functions. The purveyor of bread often produced only baked goods and the manufacturer of chairs often specialized in chairs (and other pieces of furniture). By contrast, the premodern farmer grew many different crops and tended many different animals that soon became the basic ingredients for diverse meals prepared in the kitchen of the farm. A meat stew was being prepared while the bread was baked in the oven. A pot of baked beans was warming on the wood-burning stove to be served a bit later with the newly baked bread. Chairs were either home-built or acquired from a local all-purpose craftsperson in exchange for grain or perhaps some of the baked bread.
A premodern economy required diversity in the operation of a viable farm—especially important given the unpredictable character of Mother nature. A modern economy was based, instead, on specialization and economy of scale—especially important given the increasingly complex world of modern commerce and market exchange. In a premodern society, one learned how to do many things well as a viable means of survival. In a modern society, one learned to do one thing very well and to repeatedly engage this one enterprise as a viable means of economic security (and ultimately survival).
With the increased specialization of production and services in the modern society, Smith proposed that members of a society were becoming increasingly dependent on one another and that they “naturally” trade with one another to get what they need and want. Both party to an exchange of products or services must “gain” from this exchange. There must, in other words, be a “harmony of interests” among the parties involved in all market exchanges. This harmony, in turn, requires that all parties operate in a rational manner dictated by their balanced self-interests. This “laissez-faire” perspective often leads to a call for minimal government interferences and to the assumption that true freedom requires maximum freedom for each member of society. I would suggest that this perspective leads to a societal imbalance with individual rights taking precedence (with destructive outcomes) over collective responsibility.
The Anvil of Anonymous
Then along came a keen social and economic observer of the mid-19th Century who is only known as “Anonymous” (1849). Offering a detailed description and set of numbers and statistics regarding commercial operations (especially agricultural and manufacturing) in the United States, Anonymous wrote of the anvil provided by government in mid-century America to protect the harmony of interest between those wielding the plow (agriculture) and those running the looms (manufacturing) in mid-century America.
