Economic history alerts us to long term trends, so that we are not trapped into thinking today’s circumstances will be forever.

It was only as I was writing Not in Narrow Seas: The Economic History of Aotearoa New Zealand that I realised I was telling explicitly a story which is there in economics but rarely told. That was because the book had to describe the entire development of the New Zealand economy. Most economic histories can not, because their beginnings are lost in the darkness of many millennia ago. New Zealand’s began with the arrival of the first Polynesians around 1300CE.

For the earliest economies were not dominated by market transactions, and lacked anything similar to what we call money or prices. Certainly there was exchange between communities, but they were of a barter nature and mostly regulated by what we call the ‘gift relationship’, in which the transactors were more important than what was transacted.

Communities in the Classical Māori economy were largely self-sufficient although there was specialisation within them (just as there is inside today’s families). For the few products outside the hapu there was an exchange, almost always with another local hapu with which there may have been ties of marriage. Yet the chains of exchange were long as illustrated by artefacts made of minerals such as pounamu – the stone is found in a specific locations are but artefacts made of it are found throughout New Zealand. Some things were not exchanged, especially land; Māori once had no conceptual framework to sell it to the earliest Europeans. James Cook was keen to acquire pounamu weapons and ornaments but was refused, presumably because he was not family. (Cook refused to exchange muskets.)

Over time the gift economy was replaced. Why? Europeans were not family, yet Māori wanted European things right from the beginning. Cook’s officers offered nails (actually spikes) in exchange for fish. Initially their potential was not understood but when his sailors offered tapa cloth the offers were seized upon and bartered.

And so the Māori economy began the transition towards a market economy and a higher material standard of living. Increasing output requires specialisation of production – as Adam Smith observed – and consequently trade to dispose of the surplus for something else. Barter is limited by the coincidence of wants and so an accepted medium of exchange – money – evolves. Initially, it was ‘fully backed’ with an intrinsic value, like gold, which simplified the barter transaction. (Later it lost that backing, a story which belongs elsewhere.) Competition – looking for the best deal – led to the rates of exchange becoming standardised – prices.

The exchange increasingly involved those the consumer did not know. Most people have no idea of the farmer who produces their milk, nor of those between production and consumption. The gift relationship in the economy is destroyed by anonymity, although it still exists elsewhere in society, as in the case of birthday presents.

The European settlers did not bring a fully market economy with them. As late as the 1880s many small farms operated on a subsistence basis of largely self-supply with their surplus traded with the local store for their needs. (Cash was earned by men working offsite; their women did most of the farmer work.) That applied for many Māori farms until the middle of the twentieth century. Over time the farms became commercial operations – refrigerated exports were one major driver of this change.

Another major area of nonmarket activity was the household. Rising productivity enabled its women workers to join the paid workforce. The same thing happened to Māori when rising farm productivity reduced farm jobs and they left for the cities.

This was not the story I was writing when I began Not In Narrow Seas. I had long been intrigued by the balance between the state and the market. (Alan Bollard discusses this dimension of the book here.) I saw the gift economy evolving to commercial economy as I wrote the book.

Which leads to the question of whether the market economy with its commercial underpinnings will continue to become more pervasive. Rogernomics was an attempt to extend the role of commerce. It is easy to point to its failures and overlook its successes. The frame I used analysing it in the book was the state-market balance; but perhaps the remaining unease with what happened – given the rollback of many of the Rogernomic failures – is the rejection of the widespread underlying commercialisation philosophy.

We saw the tension last week in the health redisorganisation. Funding requires a commercial framework, but the culture of healthcare workers is more akin to the gift relationship.

Another issue, currently troubling Parliament, is the extent to which political party funding should be subject to commercial pressures. For that is what the current bill dealing with political donations amounts to. Idealists might want political decisions to be insulated from such pressures. But, as is evident from some court cases, political parties have to rely on substantial donations and not just voluntary efforts. (The commercial dimension may reduce voluntary effort, a point made in Richard Titmus’ The Gift Relationship, which uses blood donations to draw the wider message.)

Of course there are areas where the market has not invaded. I know of no family which is organised on strict market principles. (Some are organised on authoritarian ones; they don’t usually function very well.) But all families are subject to a budget constraint – more or less.

The book which best represents this argument is Karl Polyani’s The Great Transformation, which is about the spread market of principles from the beginning of the nineteenth century. He warned of the tendency of the market economy to ‘commodify’ social relations. However, unlike me he did not have Raymond Firth’s The Classical Māori Economy while his book was written in the early 1940s.

Another economist who pondered on commodification was Karl Marx. He argued that there was an evolution from an exchange economy of

            commodity to money to a different commodity,

to a commercial economy

            money to commodity to money.

Today’s Karl would extend the story to

            money to financial paper to more money,

with its complement of

            money to financial paper to no money.

So yes, the commercial economy continues to evolve; there is no certainty that we will all be better off with the evolution. That is an advantage of economic history; it alerts us to change rather than leaving us with the impression that today is a normal – which can be, perhaps, mildly improved. Rather, today is a way station on a journey going to an unknown destination whose margin fades and fades forever as we move. The big policy challenge is the extent to which we can influence the direction of the journey and hence the destination.

How to be aware of this evolution? For instance, there may be a trend among a significant part of the affluent to focusing on wellbeing in a wider sense, rather than just their material standard of living. Not all the affluent of course; some still seek higher and higher incomes, much of which they display by conspicuous consumption. (And of course there are those at the bottom who are not affluent and are struggling; I have written about them elsewhere.)

This wellbeing group is characterised by their not trying to raise their material incomes further and even accepting some reduction by working shorter hours and making consumption sacrifices for other objectives – notably, but not exclusively, environmental sustainability. They are illustrating that income and wellbeing are not the same thing.

This is a tentative hypothesis; I do not know how widespread the phenomenon is. Don’t be seduced by your weekend magazine proclaiming a trend based on glossy photos accompanied by a few anecdotes. Do not assume it is necessarily all a good thing. There are fish-hooks, like cutting back on work reduces the taxes they pay, but not their demand for publicly funded healthcare; they may cut some of their environmentally damaging consumption (and demand that taxpayers fund environmental restoration) while the rest is more destructive.

Not in Narrow Seas shows home that history does not record an uninterrupted march of progress. Trickles become torrents, there are regressions, social groups suffer – certainly relatively, sometimes absolutely. We need to be alert to such trends, rather than living in a changeless present.

This column formed the basis of a discussion with Bryan Crump on RNZ Nights.