Trade Economy vs Craft Economy

The great shift that reshaped roles, relationships, and societies

It would be reasonable to write the entire economic history of humanity in terms of the transition from a craft economy to a trade economy. Indeed, it would not be farfetched to write the entire history of humanity in those terms, for the difference between the two touches every aspect of our lives.

By craft economy, I mean making the things you need for yourself. By trade economy I mean making things to trade with other people for the things you need. A trade economy may work by barter or using money. The point is that you make things specifically to trade, as opposed to making them for your own use.

Today we are so immersed in the trade economy and its habits of thought that we scarcely register that the craft economy even exists. Recently, I saw an article complaining about the distribution of “unpaid work” between spouses. From time to time, we see proposals either for putting a monetary value on “unpaid work” in the home, or for actually paying people who do it. To think of work as “paid” or “unpaid” is to think in purely trade economy terms. In trade terms, all work is done in exchange for something else, not for the benefit it provides to the person who does it.

Money is a medium of exchange and it only enters into the picture when an exchange is taking place. It is inherently an instrument of trade. A pure craft economy has no role for money. If I knit myself a sweater because I am feeling cold, and then wear that sweater to keep myself warm, I have engaged in craft, not trade. My work in knitting the sweater is not “unpaid.” In making myself a sweater, I am engaging in the direct creation of wealth. I am better off for making the sweater. My labor has increased my wealth by one sweater.

That is how a craft economy works. My labor increases my wealth directly by increasing my stock of possessions. It is absurd to call such labor “unpaid”. Payment only enters the discussion when I buy or sell a sweater. Not if I make one for my own use.

Today, we don’t tend to think of making our own sweaters as a form of economic activity, nor the possession of a sweater as a form of wealth. If we knit a sweater, we think of it as a hobby. We think of it that way because if we want a sweater to keep warm, it is far faster and cheaper to go to the store and buy one. Today, you would probably spend more money on buying the tools and supplies that you would need to knit a sweater than you would to buy one off the rack, never mind the value of your time.

For your sweater to be purely the product of a craft economy, you would have to raise your own sheep, sheer it, clean and spin the wool, carve your own knitting needles out of sticks, and knit it. If you wanted it any color other than the natural color of the wool, you would have to find the plants or minerals needed to make your dye, prepare them, and dye the wool yourself. Today, only the most wild-eyed back-to-the-lander would do all that to get a sweater. But it is exactly what much of humanity did for most of the time that our species has existed.

Today, we would hardly count a sweater as part of our wealth. Look up any net worth calculator online and the only material good that is likely to be figured into the calculation is your house. Other than that, we think of our wealth in terms of our bank accounts and the value of our investment portfolios. And yet, for most of history, wealth was counted in physical goods. Land was principle among these goods, for those who had it. But all of your other material goods as well, for they were not so easily acquired now as then, nor so carelessly discarded.

There may never have been a pure craft economy among homo sapiens. We are inherently a social species, given to cooperation and sharing. It is more likely that craft and trade economies have existed alongside each other from the beginning. The anomaly of the present is that the trade economy has taken over to such a degree that we don’t even recognize the distinction and try to account even for the little craft work that we still do in trade economy terms. We see cooking a meal not as increasing the wealth of our family but as unpaid work, as if we were entitled to the same wage as someone working in a commercial kitchen, even when the meal we prepare is eaten by ourselves and our family.

The reason that the craft economy has become so small a part of our lives is simple. A pure craft economy is monstrously inefficient. Every person has to gather all the materials themselves, make all their tools, master their use, and provide all the labor. Their tools will necessarily be primitive because they don’t need them often enough to invest in making them better. Their materials will be limited, because they can only source them locally, from the landscape around them. Their labor will be slow because they are not sufficiently practiced in each craft to work quickly. Specialization of tools and of labor and access to a wider range of materials mean that a trade economy can produce far more wealth than a pure craft economy ever can. Things have reached the point where you can generally buy a fully cooked barbecue chicken at the front of the store for less than you can buy a raw one at the butcher’s counter to cook yourself.

Even in a pure craft economy, there would have been cooperation involved in many of their crafts. Many crafts are either more efficient with more than one person, or simply cannot be performed by one person alone. Our ancestors lived in tribes, and one of the keys to tribal life would have been shared craft. If the tribe needed meat, a hunt would be organized, and the hunters and their families would share in the kill. If someone needed a hut, the community would help them build it. This is not yet trade. It is shared craft. But it is a step in the direction of trade.

From shared craft, the next step toward trade is the creation of specialized roles within the tribe. The man who makes spear heads well makes them for everyone and gets a share of the meat. The women who weave wool or flax to make clothes for the hunters get a share of the meat.

At some point (perhaps from the beginning) some of this moves from sharing in the common things to barter between individuals who haggle over how many spear points for a leg of venison or how many wild bore chops for a cloak. This is the start of a trade economy.

Once barter begins, spear point makers can get more meat by turning out more and better spear points. Women who make cloth can get more meat by making more and better cloth. The hunters have better spear points so they can hunt more easily, and they have better cloaks so they can survive better and hunt longer. The tribe has more meat and grows healthier. More children survive and the population grows. Better fed, the spear point makers and the weavers of cloaks work better, produce more, and perhaps find time to improve their tools and their craft, which leads to yet more prosperity.

The lesson that trade breeds prosperity is lost on no one. But there are all kinds of impediments to trade. Distance, transport, trust, and a disparity between the wants of the two parties, to name only a few. Naturally, people work to remove these impediments. The gradual removal of impediments to trade drives a huge portion of what we regard as the development of civilization.

Many early tribes were nomadic, because the materials and foodstuffs they needed were not all available in one place. But if you are nomadic, you can’t store good or build heavy tools. You have to be able to move all your stuff around. Staying in one place lets you build more wealth, create better shelter, and build heavier more permanent tools. But to stay in one place you need a means of getting materials from further away. You need transport to move things.

Once you settle down, it becomes more efficient (and safer) to trade for things with the people living in the places where the supplies you need are found. You trade wood from your forests for wool from their sheep. You trade beer from your barley fields for salt from their salt pans. Now you are spending more and more of your time making beer to trade rather than to drink, cutting wood to trade rather than build with or burn. You are engaging in a trade economy.

Of course, the people next door may need more beer from you than you need salt from them. Individual exchanges don’t work efficiently, so now you need a medium of exchange, something they can give you for the extra beer they want which you can turn around and exchange with the tribe on the other side of the river that makes the leather you need. And so, money is born.

Trade increases and you need to make your beer on a larger scale. You need materials to build a brewery before you have money to pay for them. You need credit. Once you have credit and debt, you need recordkeeping and contracts and courts to enforce the contracts. Large-scale institutions need financial protection. Insurance companies are born.

To secure and regulate all this you need governments. To protect and enforce it, you need armies. To facilitate the resulting trade, you need roads and ships and harbors. To maintain all of this, you need middlemen — people who are neither the producers nor the customers of your trade but facilitate the exchanges. Now you have shipowners and wholesalers and harbormasters and tax collectors.

These middlemen are going to live along your roads and around your harbors and that will lead to the growth of towns and cities, which will themselves need government and trade, and thus more courts, more currency, more contracts, and more middlemen.

Trade will create connections with other people that will lead to exposure to their customs, beliefs, knowledge, and methods. This will lead to an accumulation of knowledge, and soon you will need to dedicate some of your people to collecting and recording all of this information and passing it on. Now you have scribes and libraries and universities. These will then pass on the knowledge they have gained, allowing your artisans and traders to work more efficiently and your middlemen to conduct business in sophisticated new ways, meaning you get wealthier and more capable.

And just like that, we get from exchanging spear points for venison to a modern economy, and from simple tribes to complex modern societies with sophisticated forms of government. The transition from an inefficient craft economy to an efficient trade economy is the mainspring driving the creation of complex civilizations.

But the craft economy does not wither overnight. In fact, the virtual extinction of the craft economy is a very recent phenomenon, and it is one of the key things that makes the present the anomaly that it is. For most of our history, we have lived with a mix of trade economy and craft economy.

This is gross oversimplification, but we can see a trend in the move from craft to trade in which we move from trading raw materials to more and more finished goods. Thus, for instance, we went from trading grain to trading flour to trading bread to trading sandwiches. At each stage of development, a little more of the finished good is attributable to trade rather than to craft. You go from grinding the flour yourself to baking the bread yourself, to placing cold cuts and lettuce between pieces of sliced bread yourself, to buying a finished sandwich in a little plastic box. At each step, craft withers away until there is no craft at all left when you buy a sandwich from a sandwich shop. Your labor contributes nothing to the product. You pay for it entirely with money you got for making things entirely for trade.

A corollary of this is that the transition from craft to trade follows a rough course from the point of making to the point of consumption, the home becoming the last bastion of the craft economy to fall.

But not only does the transition to trade reach the home last, it also pulls older forms of trade economy out of the home. A good example is textile production. Before the industrial revolution moved textile production into factories, it was a cottage industry, meaning literally that it took place in cottages. Agents would go around the countryside bringing raw wool to weaver’s cottages. Women (generally) would spin the wool into yarn. Men (generally) would weave it into cloth on the kind of looms you tend to see in museums these days. The agent would collect and pay for the finished cloth on their next round. Once spinning and weaving were automated and moved into factories, trade moved out of the home, leaving home all the more the last refuge of craft.

But trade would suck craft out of the home too. The making of finished clothes followed the weaving of cloth out of the home and into the factory. If we were to look at a typical ancient or medieval homestead — pretty much anywhere in the world — we would find that the labor of the home — largely, though not exclusively, the labor of women, was responsible for just as much of the household wealth as the labor of the field and forest — largely, though not exclusively, the labor of men. Many of the trade goods of the family, things like spun yarn or woven cloth, or the products of an herb garden, or a hen house, were either created or finished in the home, usually by women. The notion of the home as a place of leisure or idleness is a very modern one.

There is, of course, still some housework to be done. But almost all of it is done with the aid of appliances made in factories and bought with money. The answer to why people don’t have servants anymore is that they do, they just electrified them. Increasingly even the need to operate the machine yourself is disappearing as appliances transform into robots.

The great movement of middle-class women out of the home and into the workforce, which began in the 19th century and developed rapidly in the 20th was essentially a product of these changes. There was simply too little left to be done in the home, particularly when education entered the trade economy and children were sent to school to be instructed by paid teachers. At this point, the opportunity to make an economic contribution to the wealth of the family in the home had virtually disappeared. (Ironically, it is returning now, as work from home becomes a more viable and accepted practice, though such work is entirely trade work now, not craft work.)

The effect of the growth of trade economy in pulling women out of the home actually happened earlier for working-class women. The growth of the factories pulled rural people into towns and villages where people were less self-sufficient and relied more on outside work to generate wealth. Women were thus laboring in factories and mines where once they had labored in kitchens, barnyards, and market gardens. They tended spinning machines in giant mills where once they had turned a spinning wheel in their own homes with their children at their feet.

I have two books on my shelves, both written by John Seymore and published by Dorling Kindersley for the National Trust. The Forgotten Arts (1984) contains sections for Woodland Crafts such as coppicing and charcoal burning, Building Crafts such as thatching and slate cutting, Crafts of the Field such as hedge laying and peat cutting, Workshop Crafts such as blacksmithing and sail making, and Textiles and Homecrafts such as dyeing and candle-making. Except for the last section, these are all the crafts of men and are illustrated as male occupations.

Forgotten Household Crafts (1987) includes sections on Kitchen Crafts such as bottling and canning and ale and beer making, Laundry Crafts such as soap making and dyeing, Around the Home such as chimney sweeping and gathering and making fuels, Textile Crafts such as lace making and quilting, and Decorative Crafts such are stenciling and decorations. These are presented as the tasks of women and illustrated as such.

The point is that in a craft economy, crafts may have been divided between the sexes, (though with considerable overlap, and variation from one time and place to another), but for both sexes, their crafts were equally varied, complex, demanding, and economically valuable. And this continued to be true through much of the development of the trade economy, until the work was increasingly forced out of the home by industrialization.

The development of the trade economy has produced the extraordinary wealth which makes our present civilization such an anomaly. The virtual extinction of the craft economy, which is very recent, can make us misread the past, particularly as it pertains to roles and relationships, and to people’s understanding of prosperity, its sources, and its perils.

This transition, and the ways in which it makes us see life and the world differently, will be a recurring theme in this series on the anomaly that is the present. It affects how we see the past in so many ways. For novelists, it can affect how we portray our characters and their attitudes. For readers it can color their expectations and their interpretations of the characters and the social order that the novels they are reading portray.

As I noted in the first essay in this series, how we look at the world is determined in large part by what we regard as normal, wonderful, or terrible. Few things do more to determine what the people of any given time and place regard as normal, wonderful, or terrible than where they are in the transition from a craft economy to a trade economy. It fundamentally determines what their normal looks like, what they expect to be able to get and keep, and what kind of effort they need to expend to get it.