From Status to Contract
This phrase goes back to Sir Henry Maine, a British jurist and historian of the mid-nineteenth century. In his book Ancient Law (1861), he argued that the progress of society has been based on the steady shift of authority from the family to the individual. In the second-to-last paragraph of Chapter V, “Primitive Society and Ancient Law,” he wrote:
The movement of the progressive societies has been uniform in one respect. Through all its course it has been distinguished by the gradual dissolution of family dependency and the growth of individual obligation in its place. The Individual is steadily substituted for the Family, as the unit of which civil laws take account. . . . Nor is it difficult to see what is the tie between man and man which replaces by degrees those forms of reciprocity in rights and duties which have their origin in the Family. It is Contract. Starting, as from one terminus of history, from a condition of society in which all the relations of Persons are summed up in the relations of Family, we seem to have steadily moved towards a phase of social order in which all these relations arise from the free agreement of Individuals. In Western Europe the progress achieved in this direction has been considerable.
Maine listed a few exceptions.
The child before years of discretion, the orphan under guardianship, the adjudged lunatic, have all their capacities and incapacities regulated by the Law of Persons. But why? The reason is differently expressed in the conventional language of different systems, but in substance it is stated to the same effect by all. The great majority of Jurists are constant to the principle that the classes of persons just mentioned are subject to extrinsic control on the single ground that they do not possess the faculty of forming a judgment on their own interests; in other words, that they are wanting in the first essential of an engagement by Contract.
This development is consistent with the New Testament’s doctrine of the final judgment (Matthew 25). The threat of hell (Luke 16) and then the lake of fire (Revelation 20:14–15) applies to every individual. So do the benefits of heaven (Luke 16) and then the new heaven and new earth (Revelation 21–22). There will be no blame-shifting on judgment day. This judicial principle was basic to the Mosaic law. “Fathers shall not be put to death because of their children, nor shall children be put to death because of their fathers. Each one shall be put to death for his own sin” (Deuteronomy 24:16). Responsibility is overwhelmingly personal and individual. The Bible does not teach that institutions are not responsible. Leviticus 26 and Deuteronomy 28 list positive and negative sanctions. These apply to the nation in the broadest sense. Israel and Judah came under God’s negative sanctions repeatedly because of widespread covenant-breaking. But the New Testament’s emphasis is on personal responsibility. The Old Testament said little about the resurrection.
The individual covenant establishes the pattern for the legal order. God lodges primary responsibility for the administration of property with the individual. This includes women. The church baptizes females. There was no covenant oath-sign for women prior to the church. While it took until the early twentieth century for the West to acknowledge the judicial implications of the doctrine of female baptism, it is now universal. Women possess the right to vote in civil government. They can also own property in their own names.
In most areas and for most people, the family was the primary agency of production throughout man’s history. There was limited trade with other families in nearby villages: a few miles from farms. The main competitor in output in the rural West was the monastery. There, economic innovation was far more systematic than it was outside its walls.
The development of market institutions after 1500 in the West has steadily increased prosperity by increasing the division of labor. For millennia, the high costs of transportation kept the market from growing. Only on rivers and in coastal areas did these costs fall. The wealth generated by trade was limited both geographically and socially. The rich were the primary beneficiaries of international trade in inland areas.
Double-entry bookkeeping was an important conceptual breakthrough in the development of modern capitalism. Genoese merchants began using double-entry bookkeeping in the mid-fourteenth century. A century later, its use was widespread in Italian trading cities. Also in this period, Gutenberg’s printing press revolutionized the production of written materials. Prices of books began to fall. Books on double-entry bookkeeping found a ready market. As the price of books fell, more were demanded. The economic return on literacy increased: there was more to read. All of these developments led to an expansion of trade and the expansion of the money economy. Businesses outproduced families. They were larger. They had greater access to capital. The center of productivity steadily shifted from the family to business. Business is contractual, not covenantal. It is more flexible. When no longer competitive, it can easily be dissolved.
Beginning around 1800, this increase in the division of labor has become continuous: compound growth. This began in Great Britain and English-speaking North America. It spread rapidly to Western Europe. The primary technical cause was the development of the steam engine in the eighteenth century. These large machines were used to pump water out of mines. This lowered the cost of coal and metals. This application began early in the century. James Watt’s improvements accelerated the use of steam after 1775. Coal prices fell. This reduced the cost of producing iron and steel. The locomotive appeared in the 1830's. In the 1840's in the United States, rail transportation opened the Midwest’s prairie to farmers. They could ship their grain to the eastern seaboard. The mechanical reaper also appeared in the 1840's. The first telegraph was installed in 1844. That cut the cost of information and increased the speed of information as never before. The average speed of information prior to 1844 was about 1.4 miles per hour, about the same as it had been in the days of Imperial Rome. Overnight, this increased to 186,000 miles a second, minus telegraphy code transcription time. Information costs fell. Urban commercial markets grew rapidly. Then came the steamship in the 1870's. International trade in bulk goods across the Atlantic became economically feasible. This expanded the market for North American grain.
These developments lowered the costs of production. Falling costs expand the market. Price competition enables more people to increase their consumption. Adam Smith recognized this in 1776. He titled Chapter III of Wealth of Nations, “The Division of Labor Is Limited by the Extent of the Market.” The market after 1800 grew larger and faster than ever before. So did division of labor. This transformed the West.
The spread of the limited liability corporation in the second half of the nineteenth century accelerated this development. This reduced the risk of investing. Individual investors cannot be sued to make up the losses of a corporation. The economic model is the church. Members are not legally liable for the debts of a church. They are bound to the church covenantally, but not contractually. The church is therefore the legal equivalent of an individual. It can raise capital. This lets it grow. The corporation is not an oath-bound covenant, but it is a legal individual. The division of labor within a corporation is vastly more extensive than in an extended family. It is also far more specialized. The corporation has only one primary goal: make an accounting profit. This goal is objective. It can be measured.
Family businesses could no longer compete with the new industrial factories. Cities grew as farmers moved out of the countryside. The efficiency of farming increased. The number of farmers decreased. The family by 1900 was no longer the primary agency of wealth creation in the West. Business was. What Henry Maine described in 1861 regarding legal individualism by means of contract was confirmed by economic production. The family could no longer match the economic efficiency of the business.
© 2022 GaryNorth.com, Inc., 2005-2021 All Rights Reserved. Reproduction without permission prohibited.