Talking to My Daughter About the Economy

Agricultural surpluses set the stage for modern economic inequality.

January, 1788. Eleven British ships reach the shores of Australia. These first colonists bring guns, metal tools, domesticated animals, and European diseases. Australia’s original inhabitants, the Aborigines, have none of these things. They can barely resist as the newcomers take over their home.

Why did it happen this way and not the other way around? Why did the Aborigines not conquer London? It’s not that the Aborigines were inherently less developed than the Europeans. No, the key difference was the material conditions each society developed in.

While Aborigines could easily live off hunting and gathering, the British relied on agriculture – which led to a whole chain of subsequent developments. 

The key message here is: Agricultural surpluses set the stage for modern economic inequality.

So, how does agriculture lead to Europe conquering much of the world? Well, 12,000 years ago, when humans began farming, it was the first time people could produce more food than they actually needed to survive. This excess production, called a surplus, allowed for more material security, but it also required new inventions to maintain and manage future surplus production.

For one, it required buildings to store it, writing to keep track of it, and guards to ensure its safety. With these in place, people could even start trading. Rye for wheat, wheat for barley. You could also leave the surplus in place and simply trade tokens that represented it. Or, trade tokens for surplus that did not yet exist. Suddenly, you have money and credit.

However, money only works when everyone believes it does. Therefore, its value had to be reinforced by, well, force. So, these societies developed bureaucracies to keep track of money and armies to ensure their legitimacy. Pretty soon, you have a whole caste of people who don’t produce surplus but have immense power over its distribution. Suddenly, there’s a hierarchy.

So, while the Aborigines were living hand-to-mouth, developing a society rich in poetry, music, and myth, Europeans were accumulating surpluses and developing a society based on money, management, and hierarchy. The material inequality between these societies was not based on inherent differences, like genetics, but was the result of different material conditions.

But, as we know, Europeans didn’t see it this way. They, like all cultures, had a system of beliefs – an ideology – that reinforced these conditions as inevitable and correct. To them, they didn’t just have more, they deserved more. Thus, when the colonists arrived in 1788, they felt Australia was theirs for the taking.