Palace economy

A palace economy is one in which a significant portion of a state’s wealth is funneled through its central authority; once the ruling elite has been taken care of, any remainder is then redistributed to the general population. As a result, it may also be known as a redistribution economy. One of the key features of a palace economy lies in the extensive authority of its central administration, which typically controls how the economy is maintained and defines the individual roles of the public in maintaining it. These types of economic systems often have a form of government in which the head of state has absolute power. As a consequence, states with palace economies generally have only limited amounts of private enterprise. While individuals are allowed to have independent sources of income, large segments of the public rely on the resources distributed through the palace.

The term was coined to describe several historical civilizations of the Aegean Sea region. These civilizations shared similarities to the archaic economies of ancient Mesopotamia, but were distinct enough to merit a different term. In particular, it is used by archaeologists in reference to the Minoan and Mycenaean civilizations of the middle to late Bronze Age period. The term is derived from the extensive palace complexes of these early European civilizations.

Background

The palace economy was one of the first economic models to develop in Europe. Like other archaic forms of economy, it was based in part on the principles of householding, reciprocity, and redistribution. Householding describes the provision of goods for a person’s immediate family. The family unit was the core feature of the earliest peoples. In turn, communities developed from the relationship that formed between households that chose to live near one another for their mutual benefit.

Reciprocity is a type of exchange that does not involve the immediate transfer of money, nor does it necessarily even require an equal exchange of goods. Rather, reciprocity is based upon the expectation that should one party provide the other with goods or services, there is an unwritten expectation that the second party will repay the first. One of the goals of reciprocity is to assure the mutual survival of all parties rather than ensuring that debts are fully accounted for. It is more a social relationship than a financial arrangement.

The third key to these economies was the idea of redistribution, which was a vital aspect of the first systems of economics. In simple terms, redistribution involves the collection of surplus goods accumulated by individuals which are then passed out to the entire community. In early economies, there was typically a central figure in charge of collecting the surplus goods produced by the entire group and then deciding how to distribute them. This system of redistribution had several advantages for the earliest communities. First, it allowed communities to specialize. Craftspeople who were no longer focused on producing food for their own survival could develop skills that were useful to the community at large. Second, it enabled them to diversify the types crops produced, which could then be pooled together for the good of the community. Finally, by sharing their resources with others, each individual was assured that their goodwill would be rewarded later when their own supplies were low.

Local leaders in charge of doling out goods to the community generally did so to accumulate power and prestige. For the earliest leaders, such actions often came at a personal cost. They would make sure they ate last to ensure the loyalty and welfare of their community. Over time, these individuals used this power to cajole the community to produce more food. Eventually these figures accumulated enough leverage to become elite figures or chiefs within the community. As communities evolved into cities, the most powerful of these figures became rulers, thus creating hierarchical structures within societies that had once been a collection of equals. Such systems predated the creation of money or markets. Over time, the voluntary provision of surpluses by individuals to the ruler became mandatory, establishing a rudimentary form of taxation. In return, rulers would ensure that the people under their supervision were protected from rival groups and would be provided for in times of personal shortages.

The palace economy shares some similarities to household and tributary economies, two other forms of archaic economies. Each of these systems emphasized different aspects of the three key features of householding, reciprocity, and redistribution. For instance, in a Greek household unit—known as an oikos—individuals would provide for their own well-being before presenting a portion of their surplus as a tribute to the ruling leadership. However, in archaic economies, the term oikos was used to describe units that were larger than a simple nuclear family. For instance, in an oikos economy, temples, estates, and palaces came to be regarded as oikos. Each household consisted of an estate that included the physical residence and a collection of pastures, livestock, farmlands, storage units, and workshops. These households would be staffed by laborers, farmers, craftspeople, and warriors. Many of these workers were not obligated to work for a single household. Rather, they would provide goods and services to several different households. The vast majority of land and tools were owned by the elite; the working class would typically be allowed to use these resources in exchange for food and supplies. Akkadian, Sumerian, and early Greek cultures followed an oikos system of economy.

By contrast, a tributary economy requires that members of a society pay a form of tax to the regional ruler. This relationship is the inverse of the first redistributive economies in which the ruler ate last in order to ensure loyalty and power; in a tribute economy, rulers eat first while their followers must rely upon their generosity to survive. Over time, the most powerful of these rulers would accrue greater land and more followers, developing into city-states. Mesopotamia was home to dozens of such city-states with tribute economies. In exchange for providing security and food, the rulers of these various city-states would offer protection. However, such systems worked best during periods of excess. During times of shortages, people were more likely to shift their allegiances to rival city-states, particularly if their own ruler managed their community poorly.

The palace economy is similar to a tributary economy. However, as opposed to a tribute economy, the palace serves a more active function in society. In addition to storing surplus goods, palaces employed a number of craftspeople and other specialists to provide services for the community that might otherwise be unavailable. In addition, these institutions had more control over the regional economy. They would decide for the community how much of each item to produce, a system that resembled an early incarnation of the planned economy. Unlike in modern planned economies, these decisions were probably based more on availability of resources and need rather than through research and choice. The palace further decided how to ration supplies, with elites likely getting larger shares of food and more high-status goods produced by craftspeople. To help ensure the loyalty of the people, leaders would use some of the surpluses to plan great feasts to coincide with religious observations.

Overview

The Minoan and Mycenaean civilizations are typically ascribed as having the first and most defined palace economies. The Minoan (3000 BCE–1100 BCE) and Mycenaean (1600 BCE–1100 BCE) civilizations were two Aegean cultures that flourished during the Late Bronze Age. The Minoans are credited as having the first advanced culture in Europe.

Located on the island of Crete, the Minoan civilization was largely unknown to modern archaeology until its rediscovery in the early twentieth century. As the Minoan written language remains largely undeciphered, little is known about the culture of the Minoan people; archaeologists are instead forced to rely upon the ruins left behind in their wake. Among the greatest achievements of the Minoans were a series of huge palaces that seem to have served as the centerpieces of the largest urban centers.

These buildings apparently functioned as regional administrative, political, and religious centers. They contained large throne rooms, theaters, and workshops. Perhaps most remarkable are the immense storerooms, which occupied fully a third of these palaces’ total area. In these spaces, archaeologists discovered extensive catalogues of the storerooms’ wares. Based upon these discoveries, archaeologists generated the initial theory of the palace economy, which they suggested epitomized the idea of redistribution on a massive scale. One of the more remarkable features of the Minoan civilization was the development of a complex script, but the lack of a monetary system. These developments likely abetted their use of a palace economy, as the lack of a monetary system allowed Minoan rulers to make unilateral determinations about how to redistribute surpluses. The development of a written language ensured complete documentation of their stocks. Similar to the Minoans, the Mycenaeans of mainland Greece kept a series of regional palaces that seemed to serve a similar function to Minoan palaces, though on a smaller scale.

The idea of palace economies is typically ascribed solely to the Minoan and Mycenaean economies, but other cultures have used comparable systems. These cultures include the Incan Empire of Peru (c. 1200–1572) and the West African Kingdom of Dahomey (1600–1894). In the modern era, North Korea has similarly been linked to a palace economy system. Like the Minoans, the North Korean state is built around and managed exclusively by a single entity, in this case the ruling Korean Workers’ Party (WPK). The WPK, under the authoritarian leadership of the Kim family, micromanages every aspect of North Korea’s centralized economy, with the lion's share of its production used to support its leaders. Food and housing are heavily subsidized by the government, a practice that has roots in the tributary economic model.

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