In praise of peddlers, merchants, and money lenders

Cavemen and Middlemen

By Richard W. Fulmer

If a caveman could specialize in a single craft, such as making obsidian knives, he would likely become skilled through sheer repetition.  He would soon learn to create better products more quickly and with less effort than if he had to spend potential knife-building time hunting, fishing, gathering food, constructing shelters, building fires, and crafting baskets, pottery, and clothing.  Specialization, however, would only be possible if there were sufficient demand for his tools.  If the caveman’s clan were small, demand would be limited, making it unlikely that he would be able to trade his knives for enough food, clothing, and other goods to ensure his survival.

The size of the market determines the degree of specialization possible and therefore the productivity of the caveman’s clan.  Its productivity in turn determines how well the members live.  If the market could be expanded, a higher degree of specialization would be possible, raising both productivity and living standards.

Suppose that Rok, an itinerant caveman, notices that his clan makes particularly good knives, another, miles away, makes excellent bone needles, and that still another makes fine loin cloths.  Rok is lucky in a hunt one day, killing a large deer.  He trades most of the meat for stone knives reasoning that he can easily transport the knives to the other clans and exchange them for needles and loin cloths, which he can then bring back and trade for even more knives – which he can trade with the other clans for still more goods.

Dynamic Process Unleashed

Rok has done far more than simply transport products between clans.  He has unleashed a complex dynamic, iterative process.  First, by expanding the marketplace to three clans, he has enabled more cavemen to specialize, increasing their productivity and raising the welfare of their clans.  By opening trade between the clans, he has increased each clan’s chances for survival.  If a hunt goes badly for one, it may be able to trade for food with another that has had better luck.

In addition Rok has introduced clans to goods they have never seen before, sparking new ideas and planting the seeds for improved and perhaps entirely new products.  If he profits by the exchanges he makes, he also provides an example to others who may go into direct competition with him, increasing the volume of trade among the three clans, or who may open trade with still other clans, potentially discovering new products and ideas.

No Value Added?

Unfortunately Rok also sparks anger among some clan members.  A few cavemen believe Rok is cheating them out of the full value of their labor.  They see that he is simply transporting goods between the clans and making a profit even though he does not improve the goods in any way.  They do not see that he adds value to the goods by moving them from where they are valued less to where they are valued more.  Nor do they, along with Rok himself, see the subtle, though critically important, processes he has unleashed by expanding each clan’s market, nor the clans’ greater resilience and rising prosperity through increased specialization and communication of ideas.

Rok moreover is seen as an outsider to the members of two of the clans with which he trades.  People’s natural distrust of strangers, their resentment of Rok’s “exploitation,” and their envy of his relative prosperity may lead them to drive him away.  If so, they may later wonder why their living standards fell after Rok’s exile and will probably see no connection.  These clans are far less likely to survive and prosper than those that welcome, or at least tolerate, Rok and other middlemen.

Rok’s descendants are what Thomas Sowell called “minority middlemen”: Jews across the world, “Armenians in the Ottoman Empire, Ibos in Nigeria, Marwaris in Burma, overseas Chinese in Southeast Asia, and Lebanese in a number of countries.”  A significant number of people from each of these groups have for a variety of geographical, cultural, and historical reasons, worked far from their homelands as peddlers, merchants, and money lenders.  They and other middlemen helped bring mankind out of caves and into prosperity. In return they have been reviled, persecuted, and killed.