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A Classical Economic Riff of Class for Modern Times

“The whole annual produce…naturally divides itself…into three parts; the rent of land, the wages of labour, and the profits of stock; and constitutes a revenue to three different orders of people; to those who live by rent, to those who live by wages, and to those who live by profit. These are the three great, original and constituent orders of every civilized society, from whose revenue that of every other order is ultimately derived.” – Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776)

“The produce of the earth -- all that is derived from its surface by the united application of labour, machinery, and capital, is divided among three classes of the community; namely, the proprietor of the land, the owner of the stock or capital necessary for its cultivation, and the labourers by whose industry it is cultivated. But in different stages of society, the proportions of the whole produce of the earth which will be allotted to each of these classes, under the names of rent, profit, and wages, will be essentially different; depending mainly on the actual fertility of the soil, on the accumulation of capital and population, and on the skill, ingenuity, and instruments employed in agriculture.” – David Ricardo, On The Principles of Political Economy and Taxation (1817)

The structure of economic production and distribution has been understood through class divisions since the fledgling formation of economics as a discipline. Reviewing past contexts might enable modern societies to conceptualize updated structures.

America’s version of capitalism was founded on the concept of uncultivated fertile land in plenty. In this case, the classes of society, proprietor, capitalist, and laborer, are encompassed in one individual. This is the archetypical homesteader.

Rent is not needed if there is an oversupply that allows for basic levels of labor and capital to produce “gifts of nature.” The idea of the capitalist in American vocabulary has always bounded these classes together. It is only when the land is cultivated, where the more fertile land is divided from the less, that proprietors take center stage.

In an established society, like Europe, rents are paid because fertility levels of land vary and levels of labor production output (“gifts of nature”) are inversely related. Rent becomes an increasingly important factor. The rooted landowners of Europe had always remained as the dominant class for this reason. It is perhaps only in the peculiar society of England that the capitalist, as a standalone class, became dominant. Sharing in the tradition of the continent, England had the hierarchy of landowners and laborers, however, innovation led to the growing influence of the capitalists.

It is hardly contentious to suggest that capitalism had unique origins in the English industrial experience whereas the continent sought a slower or more mixed approach to the lessons learned from their island neighbor. This is also perhaps why the Anglo vs Continental cultural dichotomy exists. The contrast is meaningless without capitalism.

Returning to America, it concludes that a fully formed society established itself at some point and is well established (if not declining) as of the present. This suggests that anachronistic perspectives of capitalism as the system of the landowning, laboring, and capitalizing tripartite individual are ill-suited to combat challenges of the 21st century. Globalization, automation, and financialization represent three trends that are top of mind to tackle and it serves no purpose to pretend that the Goldman Sachs banker is identical to the yeoman farmer of colonial yesteryear.

The eras of humanity might also be divided into parallels of each class. The time of hunter-gatherers represented the dominance of the labor class. The time of feudalism represented the dominance of the landowners. The time of industrial revolutions represented that of capitalists.

While these class notions abound in the work of classical economists, other classes might be worth considering. The entrepreneur, the warrior, the clergy and the thinker (Adam Smith references the trade of “philosopher” similarly). These could exist in aspects of each class or era but they do seem worthy of exploration for inclusion in the categorical lexicon. Information and networks represent features of most recent economic revolution yet there’s still an inarticulation of proper vocabulary.

These ideas of classes and distributions should be contemplated for our present-day and future. When the share of GDP from the “gifts of nature” becomes smaller and smaller with fewer and fewer of all classes focused on it, what happens? What happens to a civilization where the gifts of man overshadow those of nature?

The innovation of the mind, in line with Peter Diamandis’ abundance theory, represents a new formation of classes and distribution. It’s perceivable that the owners of information become the new proprietors and instead collect rents rather than profits. The boundary between information and land becomes fuzzy. Information shares the terrestrial characteristic of varying fertility. Information labor could be the most confusing of all with more ubiquitous replacement automation. Informationalism seems like an off-putting name but then again so is it as an economic system.


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