How the Exchange Economy Formed Society
Hempstead’s household economy produced enough to supply his family and to yield a surplus for exchange in the town economy. He was constantly performing services for his neighbors or trading goods. These exchanges which bound townspeople together in a web of debt and obligation formed the sinews of local society. Relationships of trust developed over years of economic exchange, becoming the basis for selecting spouses, electing people to public office, and granting credit. Had Hempstead lived in Virginia, less trust would have been required for exchanges. Warehouse receipts issued by tobacco inspectors facilitated exchange without the parties needing to evaluate each other’s credit worthiness. Hempstead’s ability to incur debt measured his economic strength. Most active farmers were both debtors and creditors. Debt was a sign of vigor not of weakness. Those who could not buy on credit were at a disadvantage in purchasing land for their children or expanding their enterprise in any way. Debt was a necessary outgrowth of engaging in the exchange economy.
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