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Economic data from the feudal period is scarce. However, the consistent theme is the low productivity of the feudal system compared to paid agricultural labor.
It typically suffers from:
- overregulation which violates Law 3
- undercapitalization of farm capital which violates Law 2
It persisted because the warrior class was essential during the chaotic times.
In contrast to feudalism is the allodial system—where land is owned free and clear by an individual, not granted by a lord. Allodial title is the enemy of authoritarian control because it creates an economic actor who does not owe allegiance or service to any superior.
How Authoritarianism Is Eliminated by Intellectuals with Free Ideas and Merchants with Free Trade
The elimination of an authoritarian economy requires the rise of the Thinker and Trader Classes.
| Step | Mechanism | Effect |
|---|---|---|
| 1. Freeing Trade | The state removes internal tariffs, allows free movement of goods, and enforces contracts in courts. | Merchants can now buy where goods are cheap and sell where they are dear, capturing the difference as profit. |
| 2. Weakening Feudal Bonds | Money rents replace labor services. Instead of working three days a week for the lord, the peasant pays a fixed cash rent. He is now free to sell his labor or his produce elsewhere. | The lord’s power is reduced from command to contract. He becomes a landlord, not a sovereign. |
| 3. Creating a Market for Land | Land becomes a commodity that can be bought and sold, not an office granted by the king. | The allodial owner can sell to the highest bidder, breaking the feudal chain of allegiance. |
Example: The transition from feudalism to mercantilism in Europe (16th–18th centuries).
As long-distance trade (spices, silk, gold) expanded, merchants accumulated wealth that rivaled that of the landed nobility. Kings, needing cash to fund wars, sold charters, monopolies, and offices to merchants. In return, merchants demanded legal protections, predictable taxes, and the enforcement of contracts. The authoritarian, land-based economy of the knight was gradually replaced by the mercantilist economy of the merchant and the king acting in partnership. The state still managed trade, but it did so to maximize exports and accumulate gold, not to command the labor of serfs.
In Europe, the feudal system changed into the Mercantile system.
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