The Development of Economics

CHAPTER V

THE DECLINE OF MERCANTILISM IN ENGLAND

England, as well as France, outgrew the mercantilistic policies and reacted against the doctrines of the system. The outcome in her case was the gradual substitution for these policies and doctrines of those of individual liberty and laissez-faire and the development of the system of political economy expounded in The Wealth of Nations. We shall first trace the change of policy.

A. Breakdown of the Regulative System

The regulative system in operation before and during the mercantile period gradually broke down. The process began probably as early as the fourteenth century and continued until it approximated completion by the middle of the nineteenth century. The most fundamental cause of this change was doubtless the love of liberty which is natural to all men and which shows itself in the form of resistance to, and the throwing-off of, restraint whenever the opportunity presents itself. The Black Death and the Peasants’ Rebellion in the fourteenth century supplied such opportunities, as did also the gradual substitution of money-economy for natural-economy which characterized that and the succeeding century.

One after another the various regulative measures ceased to serve the useful purposes for which they were devised and became obstacles instead of aids to progress. When the self-interest of most of the people concerned ceased to be promoted by their enforcement, they became dead letters and were ultimately, but usually much later, removed from the statute books and dropped from memory.

Probably there never was a time when the regulations were completely enforced; and with the progress of decay in the manorial and gild systems and of the development of commerce and of the middleman class, the number of unregulated people and commercial and industrial groups increased and the enforcement of regulations upon those who were subject to them became more and more lax. The progress of the movement toward individualism and commercial and industrial liberty was rapid during the eighteenth century and had advanced far even before the Industrial Revolution and the publication of the The Wealth of Nations.

B. Anti-mercantilistic Theory

Ideas out of harmony with mercantilistic theory began to appear as early as the seventeenth century and became more and more numerous and influential in the eighteenth. Chief among them were the doctrines that nature and labor rather than the precious metals are the real sources of the wealth of nations, that agriculture is more fundamental and important in a nation’s economy than foreign trade, that the goal of a nation’s economic policy should be the adequate supply of the whole population with the necessaries and conveniences of life rather than the maintenance of a favorable balance of trade, and that freedom of industry and trade will promote prosperity better than protective duties, bounties, monopolies, and privileged corporations. Pioneers of this new thought were Sir William Petty and Sir Dudley North.

Petty was born near London May 26, 1623, and died December 16, 1687. He studied at the University of Oxford and served for a time in the English Navy. In 1643 he began a three years’ sojourn in the Netherlands and France, chiefly for the study of medicine. On his return he lectured on medical subjects at Oxford and in 1650 was given a doctor’s degree by that institution. During this period he also practised medicine with success. In 1652 he received the appointment of physician to the Army in Ireland, from which position he was soon promoted to the Secretaryship of the Lord Lieutenant of Ireland. While there he made a careful survey of the country, especially of the lands which had been confiscated by Cromwell. In the accomplishment of this work he prepared maps of the region surveyed, the most accurate which had been made up to that time.

His chief economic writings were A Treatise of Taxes and Contributions (1679), Quantulumcunque or a Tract Concerning Money (1682), and Several Essays in Political Arithmetic, published originally in the proceedings of the Royal Society, of which he was one of the founders and promoters, and in book form in 1731.

Sir Dudley North was born in London in 1644 and died in the same place in 1691. He became a distinguished merchant in the Levant trade, the chief places for his operations being Constantinople and Smyrna, where he acquired large commercial establishments. He became a trusted counselor of the government and in the course of his life held the offices of sheriff, alderman, commissioner of customs, member of Parliament, and administrator of the estates of the Crown.

C. The Eighteenth Century

In the eighteenth century evidence not only of the decline of mercantilism but of the growth of individual initiative and enterprise appear on every hand. In agriculture enclosures increased, and the capitalistic system of large estates cultivated primarily for profit was being rapidly substituted for what remained of the old manorial system of peasant holdings, common fields, etc. In industry relatively large-scale units, sometimes with establishments somewhat resembling modern factories, were making inroads on the old domestic and town methods of manufacture, and inventions of machinery for spinning and weaving textiles were starting the industrial revolution which was destined completely to transform the methods of manufacture and the lives of the people engaged in that industry. Commerce was also growing rapidly, and the old trading companies and monopolies were disintegrating under the attacks of the interlopers and the enterprise of the free-lances.

In this century also the English people achieved a more nearly complete control over their government, national and local, than they had ever before enjoyed. Under the Georges of the house of Hanover, whose knowledge of England and the English was small, the power of Parliament rapidly increased, that of the king decreased, and the cabinet system was introduced. Since the civil wars local government had been left largely to the justices of the peace, the municipal authorities, and the parish vestries, Parliament intervening only when so requested and in special matters. While the franchise was limited and traffic in seats in the House of Commons was common, the system of government was nevertheless representative, governmental matters were freely discussed in public and in private, and the influence of the masses made itself felt through periodicals and at the end of the century through newspapers. Public opinion had become a potent factor in government.

The interpretor of the economic life of this new epoch as well as a product of it was Adam Smith, the founder of the classical political economy.

Footnotes

1 W. Cunningham, The Growth of English Industry and Commerce (Cambridge: Cambridge University Press, 1892), Book VIII, Part I, esp. pp. 268-272, 359, 360.

2 John Kells Ingram, A History of Political Economy (London: A. & C. Black, Ltd., 1915). p. 49.

3 Ingram, op. cit., p. 50.

• 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.