The stages of economic development are each characterized by its own key social / ideological innovation.

Thus, the first innovation, the state, puts an end to autarkic total war. The isolated families come together to form a tribe. The state (perhaps exemplified by the entire community) is more powerful than any individual or identifiable subgroup within the tribe, and each is deterred through fear of punishment from inflicting unjust harms on fellow men. Tribal wars persist, but the foundation for peace is laid. Everyone is equal before the “law” and alive, though everyone is still equally a loser mired in abject poverty.

With slavery comes division of productive activities. In our primitive tribe there were no business firms of any sort; there were no economic differences between members at all. Now some men offer to their fellows to work for them as slaves, receiving subsistence — but still higher than autarkic — wages, thereby organizing an enterprise to produce something. They also may acquire the ability to capture and guard many unwilling slaves obtained through raids upon neighboring nations. Prisoners of wars between tribes are no longer murdered outright but are enslaved and put to work. Each slave-owner produces different things and trades with other slave-owners. Wealth creation for a few skyrockets.

The problem is that slave labor is deeply unproductive. The third innovation inaugurates the transition to feudalism and serfdom: division of labor. Each serf pays a tax to the tax-lord but is free to specialize and work wherever he pleases and accumulate as much wealth as he can, subject to the taxes. Each worker now has an incentive to be as productive and competent as he can. The great variety of individual talents and natural environments ensures that labor will be minutely divided within firms and factories. The spectacular efficiency of this device brings vastly increased prosperity to many.

(Note that division of productive activities is in between firms; division of labor is within firms. Entrepreneurs do not work but produce by arranging complementary divided factors including workers who do not produce but work.)

Capitalism is marked by the final improvement: freedom of entrepreneurship. With it, all productive and creative forces of society are finally fully unleashed to the enormous benefit of all members who now enjoy fast improvement in their standard of living, whatever (temporary) positions within social cooperation they hold.

This has bearing on Rawls’ theory of justice. Once again I wondered, where do the goods to be distributed equally in the original position come from, such that any deviation from this equality shall then be permitted only if it is in the interest of the worse-off?

Perhaps our stage 2, a tribe with a state qualifies. Let’s say every week the men venture out to hunt a mammoth whose meat is then divided equally among the households. How should this society evolve?

The answer has been suggested: it should implement the foregoing innovations step by step or even all at once. But each innovation greatly increases the speed at which the standard of living grows for some, and the last one, entrepreneurial capitalism, maximizes this speed for everyone, both worse-off, medium-off, and better-off.

Rawls’ fanatical and preposterous interventionism to “correct” capitalism simply is not in the picture according to this interpretation of the choices extant in the original position.


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