The Development of Economics

CHAPTER II

THE MERCANTILE SYSTEM

The so-called mercantile system flourished in the seventeenth century and the early part of the eighteenth, though its beginnings date further back and remnants of it still linger. It connotes a national policy and a system of doctrines, both of which were at least partially represented in the practices and the literary output of all the nations of Europe. We shall consider it first in the first mentioned aspect, namely, that of a national policy.

A. Considered as a National Policy

The development of these national economies followed a similar but not an identical course in each of the countries of Europe, and its complete exposition would require the writing of the economic history of Europe from at least the end of the middle ages, a task beyond the scope and purpose of this work. We shall attempt merely a brief summary of the results attained.

B. Mercantilism in England

Beginnings of economic processes, interests, and policies that transcend local boundaries and approximate national importance may be traced in England back a considerable distance into the middle ages. Foreign commerce, for example, was of national concern from a very early period, and its promotion and regulation frequently occupied the attention of kings and Parliaments before the so-called mercantile era. The same may be said of some phases of industry and agriculture. Many facts dating from earlier periods may also be cited, illustrative of the consciousness that purely local regulations and local provisions for wants were inadequate and that cooperation in these matters was needed on even a national scale. The fact is that the national economy of England was a gradual growth, and it is difficult, perhaps impossible, to determine precisely when it is proper to speak of it as an accomplished fact. All that may safely be affirmed is that up to a certain time localism or provincialism dominated in economic matters, and the national point of view, national interests, and national regulations played a subordinate role. The two tendencies or forces, more or less in conflict with each other, existed side by side for centuries with localism in the ascendant. Nationalism gradually grew in importance and power, however, in each succeeding generation gaining greater and greater victories over localism, until finally it dominated the economic life of the nation. This was the era of mercantilism.

A characteristic feature of localism at the height of its development was the control of economic life by the municipalities and the manors. The chief organs of that control in the case of the towns were the gilds and the governing body or city council. The former were corporate bodies into which the various branches of industry and commerce were organized. Instead of exercising the individual initiative and freedom with which we are familiar nowadays, the workers in each trade, including both masters and men, were organized into one body which in its corporate capacity controlled the details of the business. In the process of time the most important of these developed elaborate codes regulative of the kinds and qualities of the goods to be manufactured, the prices to be charged, the wages to be paid, the hours to be worked, apprenticeship, the relations between masters and men, etc., etc.

The governing bodies of the towns were dominated by representatives of these gilds, but to the authority of these governing bodies the gilds were themselves subordinated. By them their regulations were enforced, their differences settled, and their interests protected. Sometimes, especially in the latter part of the period, these governing bodies took the initiative in legislating regarding industrial and commercial matters. In outside affairs they acted for the entire body of citizens and for the gilds, regulating commercial relations with other towns and intermediating between their citizens and higher authorities, such as kings, princes, ecclesiastical dignitaries, and other persons belonging to the feudal hierarchy.

In a similar manner the country life of the period was dominated by the manorial organization of which the lords of the manors were the heads. By them and their subordinates the industry of agriculture, as well as most of the other trades essential to the maintenance of country life in that day, were regulated.

To a great extent the manors were self-supporting. Only a comparatively few commodities were purchased at the fairs and in the markets of the towns. To a much greater degree than at present the towns were also self-supporting, the surrounding lands being owned and worked by their citizens under much the same kind of supervision as that to which artisans were subject. Municipalities and manors were, of course, subordinated to the state represented by the king and his government, but the peculiarity of this stage is that this higher authority did not dominate economic affairs. These were in the main locally controlled. For the most part the king lived off his own, that is to say, he was a great landlord, the greatest landlord in the kingdom, and as such was lord of many manors, the income from which constituted his chief means of support. He received various dues of a feudal character from cities, towns, and other lords of manors, and was with increasing frequency given special grants. He collected duties on the frontiers and frequently intervened in commercial dealings with foreign countries. He also exercised authority over the currency, granted charters to towns, settled intermunicipal and inter-manorial quarrels, and sporadically interjected his authority into all kinds of affairs which normally he let alone. But in spite of all this, the local authorities really dominated the economic life of the time.

The Protestant Reformation and the opening-up of the New World were potent factors in the breakdown of this system of localism and in the substitution for it of a real national economy. England’s revolt from the Church of Rome was accompanied by the confiscation of the monastic lands, the disposition of which placed in the hands of the state a mighty agency for controlling the landed aristocracy and for breaking down the localism of the manors. England’s position as the leading Protestant state of Europe made her the protector of Protestant refugees from the Continent and was the means of adding to her population a considerable number of industrially efficient people whose handling and incorporation into the industrial life of the nation was a national, and not a local, affair. England’s part in the Reformation and in the wars which grew out of it enormously increased the financial needs of the government and forced a large increase in its revenues, a result accomplished only by strengthening the grip of the state on the financial resources of the country, which were in the possession of private individuals. The exploitation of India and America constantly called for state aid and regulation and ultimately became the field of extensive governmental operations.

The international rivalries inherited from the age of the Reformation and strengthened by the opening-up of the New World were also potent forces in the movement under consideration. England had to fight, or to be in constant readiness to fight, not only to get her share of the New World but to preserve her national existence. To this end she had to have a fleet and an army or the materials out of which these could be quickly made. The production of sailors, soldiers, and ships and their equipment and maintenance was essentially and chiefly an economic problem, the solution of which required the manipulation of the agriculture, industry, and commerce of the country for national purposes and on a national scale.

Coöperating with these influences were others of local origin. By the sixteenth century self-interest induced the towns voluntarily to modify some of their monopolistic features, especially that one which excluded outsiders from the privileges of their markets or burdened them with excessive tolls. When the merchants of nearly all towns found themselves sufferers from such regulations, they naturally favored reciprocity and mutual toleration, and these results were secured by intermunicipal treaties and the repeal or lax enforcement of the regulations. This movement was favored by the gradual development of the territorial division of labor which made intermunicipal trading advantageous and in some cases necessary.

During the same period manorial exclusiveness was also breaking down as a result of the substitution of sheep culture for tillage. To a greater extent than ever before, this change made the agricultural population dependent on the towns where their markets were, and the social problems which the enclosures raised required an increasing amount of interference of the central government in manorial affairs.

Under the Tudor sovereigns the machinery for the national control of agriculture, industry, and commerce attained a high degree of development. Legislative enactments initiated by the Council of State, confirmed by Parliament, and executed by justices of the peace extended this control to the vital parts of the economic organism. The most noteworthy of these enactments were the statute of apprentices of 1563 and the poor law of 1601.

The former act included apprenticeship regulations similar to those previously enforced by the gilds and made them applicable to all manufacturing industries throughout the nation, and provided for the payment of a suitable wage by making it the duty of the justices of the peace to make such regulations as would “yield unto the hired person, both in the time of scarcity and in time of plenty, a convenient proportion of wages.” These assessments were to be made by the justices in quarter-sessions, and by them revised as often as necessary for the attainment of the objects in view.

This legislation assumed that all able-bodied persons could and should secure employment. Those who did not were to be adjudged vagrants and, according to a statute passed in 1598, were to be openly whipped “and sent back to their places of residence where they were to be put to work,” workhouses or houses of correction being provided for the purpose in case service could not be found for them in other ways.

The poor who were unable to work were provided for by the act of 1601, which directed the justices to appoint overseers to attend to their relief and to tax the property of the parish to the extent necessary to raise the funds required.

Other enactments aimed to limit and control the enclosure of land for sheep culture and to regulate the relations between the lords of the manors and their tenants or dependants.

The attitude of the English monarchs of the seventeenth century toward their realm may be compared to that of the lord of a great estate or to the head of a great business. It was thought to be their business to develop it, to watch over and provide for the details of its management, and to use it for the accomplishment of such purposes as their wisdom and royal duties might dictate.

The purpose for which this great estate was actually used was largely determined by the international rivalries of the seventeenth century. These were the natural outcome of the period of the Reformation. In the course of its struggles hostility between nations was aroused, depredations committed which called for reprisals, relative economic resources and military and naval strength tested, and military ambitions aroused. The discovery and exploration of the New World and the opening of the Cape route to India also contributed to the same end. The desire for the exploitation of the vast resources of these regions was universal, and different nations contended for them like athletes for a great prize.

During this period of intense rivalry it was the ambition of each of the leading nations to outdo the others, to become the dominant member of the European family, and to secure each for itself the lion’s share of the territory and wealth of the New World. To this all other ends were subordinated and the power of the nation employed. In attempting to realize it each nation was confronted by difficult problems to the solution of which it bent its energies. Among these the most important were the development of strong armies and navies, a large and vigorous population, and the production of the material means for their support. Force was the only efficient means which could be employed, and strong armies and navies were therefore necessities. The nation that did not have one or both of these could scarcely hope to maintain its independent existence, to say nothing of reaching the goal of its ambition.

On account of her situation, the acquisition of a strong navy was of paramount importance to England, and consequently the problem of producing one was one of the chief objects of her endeavor during the period under consideration. There are two conceivable methods of navy production, one that of the construction of warships and the other that of the development of a merchant marine which can be transformed into a fleet of warships in case of need. The latter method alone was possible for England in the sixteenth and seventeenth centuries, and hence the development of a merchant marine became an important feature of her policy.

As a means of such development foreign commerce was essential. Englishmen could only be induced to build, equip, man, and operate ships if profitable employment for them were found. Fishing was another industry in which ships and seafaring men were employed. The encouragement of foreign commerce and of the fishing industry therefore occupied the attention of English statesmen.

Many means to these ends were employed, among them the colonization of the New World, navigation acts, trading companies, commercial treaties, and the development of manufacturing industries. The last-named was important, since nearly every European nation at that time produced a sufficient quantity of the staples of agriculture for its own consumption. Furthermore, manufactured articles contained greater value for their bulk, were more easily transported, could be more easily increased in quantity and variety, and (what was perhaps of equal or even greater importance in a nation like England with a very restricted territory) might furnish the means for the employment and support of a large and ever-increasing population.

Colonization of the New World was important because it promised a market for English manufacturers and a supply of raw materials for their consumption, a supply of precious metals under direct control, and occupation for English ships and sailors. The navigation acts were designed to ensure this latter result, and the commercial treaties aimed at securing and enlarging the markets for English goods as well as at enabling her to carry out her balance-of-trade policy, to be described later. The trading companies were also a necessary instrument for the promotion of colonization and foreign trade. Individual resources were inadequate for enterprises of this character. Cooperation of numbers of traders was needed for protection en route, for the overcoming of hostile peoples in the countries in which trade and colonization were prosecuted, in the maintenance of colonists and trading-posts, and in the administration and development of the vast territories which were often granted together with the trading privileges.

For the encouragement of manufactures and the execution of the other details of this policy a large number of other measures were devised and put into operation. As in previous centuries England continued to serve as a refuge for the oppressed. In this capacity she welcomed the Huguenots when they were expelled from France and used them for the building-up of her silk and other industries. Dutch immigration was fostered for the same purpose. Special privileges were also granted in the form of patents and monopolies giving the recipients exclusive privileges of manufacture.

Thus the desire to build up a strong navy as an instrument of national defense and exploitation furnishes the key to a large part of the economic history of the time. For much of what remains the explanation may be found in another feature of the national policy, namely the attempt to maintain a favorable balance of trade.

For the acquisition and maintenance of the ships and men which the naval and military policies required there was needed a continuous increase of the national revenues and of the volume of precious metals in circulation. By this time England had definitely passed into the stage of money economy. Every increase in the revenue needs of the state, therefore, correspondingly increased the need for coin, and the state’s needs in this particular could not be met unless the volume of the circulation was constantly enlarged.

This need for coin had another source, namely the prosecution of military, naval, and commercial operations in foreign countries. Without the means of credit which we enjoy at the present day, such operations could only be conducted by means of stocks of the precious metals carried about from place to place by naval and military officers and merchant adventurers. The only alternative was the carrying from home of such quantities of supplies as would suffice for the entire expedition, a practical impossibility in most cases.

For a nation like England, which was without gold and silver mines, there was but one solution of this problem, namely such a manipulation of the foreign trade of the country as would result in bringing in a constantly increasing quantity of the precious metals. To accomplish this the people of the nation must be induced to sell to foreigners an aggregate quantity of goods of greater value than those purchased. The balance would needs be paid in coin. The maintenance of such a favorable balance thus became a primary feature of national policy.

The means employed to this end, generally speaking, were import and export duties, bounties, trade treaties, sumptuary laws, and colonies. Import duties of prohibitive height were appropriately levied on goods of which the home production should be encouraged or the consumption discouraged, and freedom of trade was allowed, with import bounties in extreme cases, for goods, like the raw materials of manufacture, incapable of home production or not producible in sufficient quantities. For the encouragement of exportation, bounties were often employed, and for its discouragement export duties. It was, of course, desirable to foster the exportation of manufactures of high intrinsic value and to discourage the exportation of raw materials of manufacture. Favorable treaties of trade were made whenever possible with nations whose commerce with England promised possibilities of manipulation of the right sort, it being of course easy for the measures of one nation to be nullified by those of another with similar aims. Sumptuary laws were freely used to discourage or prevent absolutely the consumption of certain articles, like French and Portuguese wines, the importation of which would swell the wrong side of the international balance sheet and which were likely in no way to contribute to the increase of exports.

The importance of colonies in the execution of this policy is obvious. They could be used to furnish a sure market for English manufacturers and to supply them in turn with such raw materials as England herself could not produce. They could also furnish occupation for English ships. In order to ensure their employment for these purposes, the navigation acts were passed and other measures devised to prevent the colonists from pursuing their own self-interest to the detriment of the national policy.

These uses of colonies, like the other measures above described, were designed to promote a favorable balance of trade. Another service capable of being rendered by certain of them was the direct supply of the precious metals from their gold and silver mines. In this way Spain had profited greatly from her South American colonies, and her example stimulated the other states to acquire for colonization purposes territory rich in this kind of mineral wealth and to use every possible means for finding and exploiting such wealth wherever colonies were planted.

C. Mercantilism in Other Countries

Much of what has been said in the preceding paragraphs concerning mercantilism in England will apply without essential modification to France, Spain, Prussia, Holland, and other European states. In all of them national economies dominated by mercantilistic policies developed, but the details of the process and the degree of approximation to completeness varied considerably in the different states.

In France, for example, centralization of control was carried further than in England, but many features of localism, such as provincial tariffs and tolls on rivers and highways, persisted to the time of the Revolution and retarded the development of economic processes of national scope and of unity and community of feeling and sentiment concerning economic matters. In Germany, Prussia was the only state large enough to give adequate scope to the operation of nationalistic forces, though in the smaller states and free cities these forces did operate on a small scale and to a limited extent. In Spain centralized control attained a high degree of development, but it was not directed wholly or even chiefly by economic motives, and consequently the national economy experienced a one-sided and stunted development. In Holland the rivalries of great families and factions prevented the unity of control and direction essential to the symmetrical development of the national economy, and there was also a dearth of national resources. The manufactures and agriculture necessary to the support of her commerce were therefore lacking. On account of territorial limitations, peculiarities of organization, and the vicissitudes of their political life, the Italian states and cities also lacked some of the elements necessary to the development of symmetrical national economies.

D. The Theory of Mercantilism

We must now turn to the second aspect of the mercantile system mentioned at the beginning of our discussion, namely its doctrinal side. This will appear in a complete form only if one seeks a justification of it in detail, a task which no contemporary undertook. For our purposes, however, the complete theory is important, and we shall attempt its construction even though no one can be accused of having held it in its entirety.

Of prime importance is what may be called the theory of nationalism. This is the opposite of the theory of individualism widely held in our day. According to the one, the nation is everything; according to the other, the individual. According to the latter, government and other social institutions are simply means to the attainment of individual ends. For example, I as an individual desire happiness and well-being, and riches as a means thereto. Government and social institutions exist for the purpose of helping me to attain these. According to the other theory, the nation is the unit of consideration; individual persons constitute simply its constituent parts and are treated as subordinate to it in every respect. They may be compared to the hands, arms, legs, and various other parts of the body in their relation to the person. They have no interests apart from the larger whole.

When the ideals of the nation were military aggrandizement and the exploitation of new countries, a necessary consequence of this doctrine was the conviction that wages should be low and food cheap. Low wages were thought desirable because they diminished costs of production, made possible the underselling of foreigners in their own markets, and thus contributed toward the enlargement of the volume of exports. The fact that they would lower the well-being of the masses, thwart their life purposes, and prevent their making the most of themselves did not seem to be a matter of great concern. To be sure, it was recognized that there was a limit below which wages should not be pushed, namely that which was essential to healthy, vigorous, animal life, but this limitation was recommended not in the interests of individuals but because a healthy, vigorous population was necessary for the maintenance of efficient armies and navies.

The attitude toward cheap food and cheap raw materials was determined by the same considerations. The interests of the classes who produced these commodities were not to be considered, but that of the nation. Cheap food was considered desirable because it made possible low wages, and cheap raw materials, like low wages, contributed toward the lowering of the cost of production of manufactured products.

The mercantile theory of population was also simple. According to it, the more rapid the growth of and the larger the population of a country the better, because military power was directly proportional to population and a rapid increase in the number of the people meant a rapidly increasing supply of labor, which was also essential to low wages.

If a mercantilist had undertaken to expound the relative importance of the different industries of a nation, as later economists did, he would have put foreign commerce at the head of the list and agriculture at the bottom. As a reason he would have explained the relation between foreign commerce and naval power. Of course this statement does not mean that mercantilists considered agriculture unimportant, but simply that they did not consider it as contributing so directly to the strength and greatness of nations as does foreign commerce. In their scheme manufacturing industry occupied a middle place, being more closely connected with the supreme national interest than agriculture, but less so than foreign commerce, to which, however, it was a necessary ally and deserving, therefore, of the fostering care of government.

Regarding the precious metals, the theory implied (and in this case held) was that they constituted the most important category of national wealth. The reasoning here would have turned on their relation to the national economy as an internal and external medium of exchange. With them in possession in sufficient abundance the state could easily satisfy all its wants because they were universally exchangeable. This could not be said of any other category of wealth.

The balance-of-trade theory was a natural consequence. If the precious metals are of supreme importance, a nation should strive to accumulate them, and—since you can never have too much of a good thing—in as large quantities as possible. If mines are not available, and they were not in the cases of the leading nations of Europe at the time, Spain alone excepted, foreign trade must bring them in; and to ensure that, a favorable balance of trade must be maintained.

The theory of protection to manufacturers implied in the practice of this period is quite different from that held nowadays. It was not the interests of the laboring class that were considered, nor the importance of a home market to producers or of diversified industries to all classes, but the supreme importance of a favorable balance of trade and the necessity of high duties on certain products as a means of lowering the debit side of the international balance-sheet. The influence of duties in encouraging the manufacture of certain goods was also considered, but only to the end that such goods might be exported and thus help to swell the credit side of the balance-sheet.

A theory of the relation of the state to industry was also implied in the practice of mercantilism. It might be called the entrepreneur theory. In his relation to the nation the sovereign may be compared to a great landlord or the head of a great business. It is his duty to see to it that the nation’s resources are developed to the extent required by the needs of the state, and to this end he must supervise its various industries, checking this one and promoting that as circumstances may demand. There was nothing that he might not undertake directly, and any interference with private enterprise was justified if the realization of the state’s policy was at stake. Indeed, men and property were simply tools to be used as needed.

The theoretical aspects of mercantilism were reflected in the literature of the period but imperfectly. No writer of the time treated the subject systematically, and many writers expressed ideas which were out of harmony with mercantilism, though in the main their thoughts ran in the ordinary channels.

The so-called mercantile literature was fragmentary in the sense that it treated certain aspects of the subject only. A fruitful cause of literary production was the East India Company, whose interests frequently clashed with those of the government as then conceived and with those of other traders. In defense of its plans and projects it was able to command some of the best talent of the time. Thomas Mun, who had acquired wealth as a merchant in the Levant trade and became a member of its board of directors in 1615, defended its practice of exporting the precious metals in A Discourse of Trade from England into the East Indies, published in 1621, in which the balance-of-trade doctrine was fully developed. Another cause of literary activity along mercantile lines was Holland, which led Europe in commercial matters during the mercantile era. In many respects she served as a model to other nations, but as an aggressor and thwarter of their plans she also provoked discussion and literary production. Among the writings which may be attributed to this cause are Mun’s The Petition & Remonstrance of the Governor & Company of Merchants of London Trading to the East Indies, published in 1628; Temple’s Observations upon the United Province of the Netherlands (1672), Raleigh’s Observations Touching Trade and Commerce with the Hollander and Other Nations (1603), and Child’s A New Discourse in Trade (1690).

Beside the books, or rather pamphlets, already mentioned, in 1630 Thomas Mun published England’s Treasure by Foreign Trade, addressed to his son, which is probably as good a sample of a typical mercantile book as could be found. Adam Smith so refers to it, and most historians of political economy have so regarded it. Other noteworthy writers were Sir Josiah Child, Sir Thomas Culpepper, Sir Dudley Diggis, G. De Malynes, E. Misselden, and John Pollexfen.

France produced some of the most noted of the mercantile practitioners, among them Maxmillian de Béthune, Baron de Rosny, and later Due de Sully, one of the chief advisers of King Henry IV, and Colbert, Louis XIV’s famous finance minister. While both these men were administrators primarily, they left in literary form expositions of their ideas on economic subjects. During his retirement subsequent to the death of Henry IV, Sully had drawn up by his secretaries a series of mémoires, which, under the title Économies royales, were published in part in 1638 and in full in 1665. They are based upon letters which passed between him and the king, reports and accounts, and papers and documents which he took with him into retirement, and upon his recollection of events. They constitute in no sense a treatise on political economy, but they reveal the principal economic results of the reign of Henry IV and the reasons which actuated the King and his great minister. It was during that reign that the foundations were laid for the national economy of France which later was developed on more strictly mercantilistic lines. The Économies royales, therefore, reflect that stage of thought which was contemporary with the growth of the great national economies rather than the one in which these economies were directed into strictly mercantilistic channels.

Another French mercantilist worthy of mention is Montcretien de Watteville, who published in 1615 a book entitled Traité d’économie politique, probably the first book ever published bearing that significant title. The subject-matter was arranged under the four following heads:

“Part I.—Economic Arts, their order and their utility, the regulation of manufactures and the distinction between the various trades or handicrafts from the point of view of their profitableness to the community.”

“Part II.—Domestic and Foreign Commerce.”

“Part III.—Navigation, Colonies and Oriental Trade.”

“Part IV.—Advice to the Prince on a variety of topics, such as piety, charity, malice and the finances.”

While this writer did not display great originality and while some of his ideas were in advance of and opposed to mercantilism, in the main he was a mercantilist and his treatment of the subject was more systematic and complete than that of most writers.

The mercantile writers of Germany were Cameralists, the name applied to a much larger group of economists, including some belonging both to earlier and to later periods.

The word camera, whence the name of the group was derived, in the early middle ages meant the place where the royal treasure was kept, and later the treasure itself. German princes appointed special officers to administer their financial affairs, and these were called camerarii. In the process of time these camerarii, especially the ablest among them, developed rules and regulations for their business, and, when the financial affairs of princes expanded into those of states, these constituted the political economy of the time, a political economy, however, in which political, juristic, technical, and economic ideas were mixed. This body of knowledge in Germany is called Kameral-wissenschaft.

During the mercantile period Kameralwissenschaft was thoroughly saturated with mercantilistic ideas, although few of the Cameralists were pure mercantilists. Typical writers of the period were Johann Joachim Becher, Philipp Wilhelm von Hornig, and Wilhelm von Schröder.

Regarding the importance of a supply of the precious metals he says: “All the money in a country should be kept, and continually more brought from foreign places, since money is the soul and the nerves of a land.” In explanation he adds that money helps in the employment of men and in the exchange of their products. He speaks of hoards of the precious metals as the foundation pillars of all classes. “On them lives the Handicraftsman, on him the Peasant, on him the Prince of the land, and on all these the Merchant.”

The greatest evils to be combated in a land are Monopolium, Poly-polium, and Propolium, since the first hinders populousness, the second the nourishing of a community, and the third the binding of the community together. Monopoly interferes with populousness by making a few rich and the many poor; Polypolium interferes with the nourishment of the community by interfering with the equilibrium between the different trades or branches of industry and commerce, i.e., by bringing more people into a trade than can live from it; and Propolium promotes enmity and opposition among buyers and sellers, and thus tends to rend the community asunder.

As a means of preventing these and other evils and of curing the ills of states, Becher favored the strict regulation by the state of all commercial intercourse, and he discussed the details of such regulation. When he comes to foreign trade, he recommends the usual mercantilistic regulations and gives mercantilistic reasons for them.

Philipp Wilhelm von Hornig was a counselor and minister of the cardinal Bishop of Passau, who wrote a book of great repute in its day, entitled Oesterreich über alles, wann es nur will, in which among other things he maintained the proposition that the power of a nation depends primarily upon its means as compared to those of its neighbors. Consequently in order to hold her own with or to rise superior to England, France, and Holland, Austria must adopt the measures which had made those nations great. In the discussion of these measures he showed himself to be a thoroughgoing mercantilist, particularly in his views on the relation of the precious metals to the interests of states. His chief thesis, however, was self-sufficiency, and he therefore appreciated the importance of other forms of wealth.

In discussing the subject of national wealth, he said: “The land becomes richer as money is brought into it, either out of the earth or from any other source, and it becomes poorer as money flows away from it. The wealth of a land must then be estimated according to the amount of gold and silver that it contains.” The usual way to bring gold into a land is through foreign trade, “the gain from which comes from the surplus which others have to buy from us, and the loss, from the lack of indispensable things which necessity forces us to buy from them. . . . The most fruitful land cannot be esteemed in the least unless it has commerce, a superfluity of products being a blessing only when we can turn them into money through our neighbors.”

His other doctrines were strictly derived from these—to him—fundamental principles and were for the most part narrowly mercantilistic. His treatment of banking, however, may be cited as an exception to the rule. On this subject his views were quite modern and much in advance of his time.

The most noteworthy of Italian mercantilists is Antonio Serra, who in 1613 published Breve trattato delle cause che possono fare ab-bondare gli regni d’oro e d’argento dove non sono miniere. In this book mercantile doctrines were quite systematically developed, and the date of its appearance is earlier than that of any other equally systematic and comprehensive treatment of the subject. On this account it deserves especial attention, although it is probable that it did not directly influence the other writers who have been mentioned.

From the foregoing discussion the reader will see that it is difficult to put the theory of mercantilism, as it was reflected in the literature of the subject, into the form of generalizations. Roscher summed up the matter by saying that mercantilistic writers tended to overestimate the importance of (a) a large and dense population, (b) the amount of money in a country, (c) foreign trade, (d) manufacturing, and (e) the state. Sufficient evidence of the justification of this summary has been adduced in the preceding pages, and it is probably not worth while to attempt to go further. The arguments used in support of the propositions in which these tendencies are reflected were far from identical in the different writings, though there was much similarity between many of them, especially those pertaining to the money supply and foreign trade.

Criticism of the mercantile system in either or both of its aspects would be easy but useless. Its defects as an economic policy of universal application or as a body of doctrine to guide statesmen and economists are obvious to present-day students. When considered with reference to the problems of the time in which it flourished, however, it is difficult if not impossible to find fault with the system. It certainly played an important role in the history of European civilization. It helped to build up the great states of England, France, and Germany and was a most efficient means of economic progress in the sixteenth and seventeenth centuries. It was also a great stimulus to reflection on economic matters and in this capacity contributed toward the progress of the science of political economy along lines which we shall subsequently indicate.

Footnotes

1 Gustav Schmoller, The Mercantile System and Its Historical Significance (New York: The Macmillan Company, 1896), p. 51.

2 Ibid., p. 50.

3 W. J. Ashley, An Introduction to English Economic History and Theory (New York: G. P. Putnam’s Sons; London: Longmans & Co., 1893), Part II, secs. 29-30.

4 Clive Day, A History of Commerce (New York: Longmans, Green & Co., 1907), pp. 202-204.

5 The complete collection published by Pierre Clement during the years 1860-1871 fills seven large volumes.

6 The quotations which follow are from Wilhelm Roscher, Geschtchte der National-Oekonomik in Deutschland (München, 1874), pp. 273-277.

7 This and the following quotations taken from Roscher, op. cit., pp. 295 and 296.

• 1Professor Schmoller found the key to the explanation of this aspect of the system in the development of the national economies of the various European states. These succeeded (in order of time) territorial, municipal, tribal, and family economies, each representative of a certain stage in the history of European civilization, and each produced by the struggle of contending forces, a higher and broader organization in each case subordinating to itself lower and narrower ones. “The essence of this system,” he says, “lies not in some doctrine of money, or of the balance of trade; not in tariff barriers, protective duties, or navigation laws, but in something far greater, namely, in the total transformation of society and its organization, as well as of the state and its institutions, in the replacing of a local and territorial economic policy by that of the national state.” More specifically he says, “The whole internal history of the seventeenth and eighteenth centuries, not only in Germany but everywhere else, is summed up in the opposition of the economic policy of the state to that of the town, the district, and the several estates; the whole foreign history is summed up in the opposition to one another of the separate interests of the newly rising states, each of which sought to obtain and retain its place in the circle of European nations, and in that foreign trade which now included America and India. What was at stake was the creation of real political economies as unified organisms, the center of which should be, not merely a state policy reaching out in all directions, but rather the living heart-beat of a united sentiment.”
• 2Professor Schmoller found the key to the explanation of this aspect of the system in the development of the national economies of the various European states. These succeeded (in order of time) territorial, municipal, tribal, and family economies, each representative of a certain stage in the history of European civilization, and each produced by the struggle of contending forces, a higher and broader organization in each case subordinating to itself lower and narrower ones. “The essence of this system,” he says, “lies not in some doctrine of money, or of the balance of trade; not in tariff barriers, protective duties, or navigation laws, but in something far greater, namely, in the total transformation of society and its organization, as well as of the state and its institutions, in the replacing of a local and territorial economic policy by that of the national state.” More specifically he says, “The whole internal history of the seventeenth and eighteenth centuries, not only in Germany but everywhere else, is summed up in the opposition of the economic policy of the state to that of the town, the district, and the several estates; the whole foreign history is summed up in the opposition to one another of the separate interests of the newly rising states, each of which sought to obtain and retain its place in the circle of European nations, and in that foreign trade which now included America and India. What was at stake was the creation of real political economies as unified organisms, the center of which should be, not merely a state policy reaching out in all directions, but rather the living heart-beat of a united sentiment.”
• 3The industrial organization of the towns was also gradually weakened by conflicts of interest between townsmen themselves and the oppression of the weaker trades by the stronger, and by the growth of domestic industries. Increasing interference of the central government in town affairs was invited by these conditions, and the power of resistance to it was weakened. The growth of a merchant class in London and some of the other large towns also contributed to the same result. The interests of this class extended beyond the boundaries of the town in which they lived and were promoted by the breaking-down of local trade barriers. The power of this class grew rapidly in and after the sixteenth century.
• 4By the seventeenth century a national commercial and industrial organization had developed, the chief organs of which were middlemen who intervened between producers and consumers and between different classes of producers. Among those of chief importance were the wool-staplers, the clothiers, the drapers, and the foreign trading companies. The wool-staplers purchased the farmers’ wool, their most important staple, and sold it to manufacturers or foreign merchants. The clothiers acted as middlemen between the carders, spinners, weavers, and other handicraftsmen engaged in transforming the wool into cloth. They purchased the wool from the staplers, delivered it to the carders and spinners, distributed the yarn among the weavers to be woven into cloth, and then placed the cloth in the hands of the “fuller,” “walker,” or “tucker” to be fulled and cleansed. The spinners, carders, weavers, and fullers were scattered throughout the hamlets and villages as well as the cities of the country, in many, perhaps most cases, doing agricultural work as a main or a side occupation. The drapers purchased the cloth and sold it to consumers or to foreign merchants; some of them were themselves connected with one of the trading companies. Foreign commerce was chiefly carried on by these latter organizations, to each of which a charter had been granted conferring the exclusive right to trade in a specified part of the world. The Eastland Company, for example, had the exclusive right to trade with Scandinavia and the Baltic region; the Russian Company, with Russia; the Merchant Adventurers, with the Netherlands; the Levant Company, with the Mediterranean region; the Guinea or African Company, with Africa; the East India Company, with the countries of Asia; and several other companies with portions of the American field. At the beginning of the seventeenth century France, Spain, and Portugal were the only countries with which trade could be carried on by an Englishman not a member of one of the companies.
• 5The literary remains of Colbert are of the same general character as those of Sully in that they consist of letters, instructions, and memoirs. They differ from Sully’s, however, in the extent to which they reflect mercantile doctrines. Colbert was the chief executor of the mercantile policy of France, and among his letters, instructions, and other papers may be found expositions and defense of nearly every feature of it. Much more completely than the English writers he reflected the doctrines of nationalism and of the entrepreneur relation of the state to industry. To a greater extent than in any other country these doctrines were realized in the practices of France during the reign of Louis XIV, and for this fact Colbert was largely responsible. Louis XIV aspired to be not only absolute sovereign in France but the dictator of Europe, and he fully realized that foreign commerce and command of the world’s supply of the precious metals would assist in the accomplishment of his purposes.
• 6Becher was at one time a court physician and professor of medicine in Mainz, whence he went to Wurzburg, and later to Vienna. At the two latter places, he was connected with the carneræ of the reigning sovereigns. He wrote on natural science as well as Kameralwissenschaft, his chief work in the latter field appearing at Frankfurt in 1668 under the title Politische Discurs von den eigentlichen Ursachen des Auf- und Abnehmens der Städte, Lander und Republiken, in specie, wie ein Land Volkreich und Nahrhaft zu machen und in rechte Societaten civilen zu bringen. In this book he defines a city as eine volkreiche, nahrhafte Gemeine and defends the following fundamental propositions: The more populous a city, the more powerful it is; but in order to be populous, it must be supplied with an abundance of nourishment; the membership of a community consists of (a) those who serve it and are supported by it, for example, government officers, clergy, learned men, physicians, apothecaries, soldiers, etc.; and (b) those who really constitute it, namely, peasants, handicraftsmen, and merchants. These three classes are essential each to the other. In explaining their mutual relations, however, he makes the following argument: “Consumption is the soul of the three classes, the only bond which holds them together and enables them to live by each other. It is on account of consumption that the merchant class is so necessary in a community, however large the peasant class may be. . . . Since the nourishing of a community can only be accomplished through the trading [Verhandlung] and turning into money [Versilberung] of goods . . . everything which hinders these operations hinders and weakens the populousness which results from it.”
• 7Wilhelm Freiherr von Schroder was in the service of Austria as conductor of a factory according to plans outlined by Becher. He wrote several books, the most noteworthy of which was entitled Fürst-liche Schatz und Rentkammer, which was published in 1686. He was a strong advocate of absolute monarchy and admirably set forth the mercantilistic view of the relation of a sovereign to his people, in the following passage: “A Prince is like a housefather. Now a housefather must fertilize and plough his fields if he would reap a harvest therefrom. He must well stock his pond if he would have fish. He must feed his cattle if he would slaughter them, and well fodder his cows if he desires them to give much milk. Thus a Prince must first help his subjects to a good living, if he wishes to take anything from them.”