Front Page Titles (by Subject) Violence, the State & the Rise of Capitalism - Literature of Liberty, Winter 1981, vol. 4, No. 4
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Violence, the State & the Rise of Capitalism - Leonard P. Liggio, Literature of Liberty, Winter 1981, vol. 4, No. 4 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Violence, the State & the Rise of Capitalism
“Violence and the Rise of Capitalism: Frederic C. Lane's Theory of Protection and Tribute.” Review 5(Fall 1981):247–273.
Frederic C. Lane formulated his theory of protection and tribute in the 1940s and 1950s. Professor Steensgaard hopes to encourage a debate on Lane's model, especially on its usefulness for understanding the interrelations between the economic and the political sphere in the process of long-term social change. Was organized violence a cause of modern economic development?
In his essay “Economic Consequences of Organized Violence,” Lane seeks to subject the (usually political) use of violence to economic analysis. The use of violence as a monopolistic “protection” service and the “income” derived from the production of protection may structurally influence the allocation of scarce resources and the pattern of demand, saving, and investment. Other economic effects of organized violence appear. Other enterprises, producing other goods than protection, may derive a profit from the variations in the cost and quality of protection. Lane termed “protection rent” the extra income that some merchants derived from lower costs they paid for protection services against bandits, pirates. Through a series of stages, mercantile profits from protection rent became more important than tribute; finally, the use of violence increasingly comes under the control of the consumers of protection, and industrial innovation becomes more important than protection rent as a source of business profits.
Lane's model may help us approach the problem of surplus and analyze accumulation and the rise of capitalism. Marxist studies of the rise of capitalism out of feudalism are defective since they ignore the history of some of the largest preindustrial concentrations and accumulations of resources. Lane's concepts of protection rent and tribute illuminate the unique development of the European economy in the centuries before the Industrial Revolution. Since protection is a commodity and tribute a profit, the use of violence can be analyzed in economic terms, even though the monopolistic nature of the enterprises makes prediction limited. Granted, the world may not become richer by violence, but the use of organized “protective” violence may create disequilibria of a structural character that alter economic levels and patterns. Although profits made by state-protected large trading companies and early colonial ventures might be dismissed as plunder, economic analysis would also point to their historical role in structurally preparing the preindustrial economy for changes. Likewise, we need to study, with the help of Lane's model, the enormous concentration of demand (and its structural consequences) that resulted from the consolidation of the early modern state.
Steensgaard applies Lane's model in analyzing Levantine trade, merchants becoming producers of their own protection (English East India Company and the V.O.C.), and the Atlantic trade. He concludes that this model helps us understand the merchants' profits from long distance trade and early colonization. He further asserts that the production of protection (organized violence) in Europe remained a competitive business.
Lane's model is more useful in interpreting the origins of long-term structural change in early modern Europe than other interpretations which suffer from one of two flaws. (1) Either they generalize the concept of voluntary barter and confuse the model of the theoretical market with the coercive (organized violence) reality of an age in which very few people were interested in buying and selling unless they were under some kind of coercion; or (2) they rely upon the clumsy concept of the feudal mode of production. Neither of these rival interpretations explains the most important problem in early modern history, the coincidence of two unique historical phenomena: the rise of the modern state and the rise of capitalism.
Steensgaard contends, in line with Lane's protection rent and tribute theory, that advantageous structural consequences for rationalized markets flowed from state violence or “protection” services. He also speculates on the following dialectic: parasitic empires grant increasing autonomy to the market goose that lays the golden egg of tax revenues; the independent and countervailing market displaces the empires, which become victims of their own greed.