Mercantalism and Historiography - Mercantalism - Modern West - History DU Notes

MERCANTILE THEORY- ITS EVOLUTION AND THE HISTORIOGRAPHY OF MERCANTALISM

DOYLE

Mercantilism, empire and their enemies

Mercantilism- term came after the policy- used to describe eco policy in the seventeenth and eighteenth century- used to describe the way in which nation states sought to build their economies- positive steps taken by state to improve prosperity- material matters too grave to be left to natural law- governments intervened to maximize state wealth- wealth was treasure, gold i.e bullion- initially their store was to be augmented by preventing outflow and ensuring inflow- to sell more than is consumed- to have favorable balance of trade- manufactures encouraged for this purpose- foreign imports were discouraged as was foreign carriage of goods- thus one states gain was another states loss- war was simply an alternative economic policy- the ideal mercantilist state would be self sufficient- thus they aimed to establish foothold in a variety of fields, while confining the benefits of each to their own nationals- colonies were meant to fulfill this self sufficiency in the mother country- the benefits the colonies received from this contact such as the protection of trade and guaranteed European markets, were purely incidental.

According to Doyle, the commercial measures of the English and the French state stimulated the rise in productivity. British industry received enormous stimulus from the exclusive markets in Ireland and the thirteen colonies. When the time came for takeoff mercantilist restrictions might well have prevented the launch; however they were, according to Doyle instrumental in taking England up to this point.

EGERTON

The motives that encouraged Europeans to colonization were according to Egerton Wealth and Missionary zeal. The second died quickly, wealth became the focus
The most abundant and visible source of wealth was found in Spanish American possessions- bullion. However the Spanish were unable to use the bullion profitably, and though Spanish policy tried to control external interference and tried to stifle the flow of bullion out of the country their efforts were unsuccessful. As Thomas Mun notes, “gold and silver are so scarce in England that they are forced to use base copper money.” And then later emphasizes the necessity for proper use of bullion saying, “Treasure is obtained by a necessity of commerce.”
It is likely, as had been suggested by Egerton that mercantilist policy that followed through Europe was a lesson learnt from Spanish wastefulness. Mun was the first to propogate mercantilist policy through England. The golden rule was that of favourable balance of trade and as has been described by Adam Smith, ‘the title of Mun’s book, England’s Treasure in Foreign Trade, became the fundamental maxim of political economy.” Exports had to be higher than imports and for this manufactures had to be encouraged. The focus according to egerton was the producer and not the consumer. (the same critique was leveled by Smith.)

The mercantile system had an inalienable link with trade.

WILSON

The word mercantilist was used for the first time by Adam Smith, in the wealth of nations. He coined it since he felt it was a system created by merchants to serve mercantile ends
For smith the economic crime of the system is the accumulation of wealth, since they confused wealth with money, thus governments accumulated gold and silver
Thomas mun had claimed that the flow of money was governed by the balance of trade and thus the primary objective must be favourable balance of trade.
However soon there was, in Wilson’s words an erroneous obsession with favourable balance of trade. Soon these errors spread outwards from England and the obsession for favourable balance grew through Europe
Smith argues against the accumulation of wealth, advocating paper money and credit aa substitutes even during times of emergency
TWO GREAT ENGINES through which mercantilism was to enrich countries through an advantageous balance of trade were:
To encourage exports or rather to encourage exports of manufactures and discourage the export of raw material
To discourage imports of manufacture and encourage imports of raw material

This was ensured through governemtn interference. These policies however did not benefit the entire populace. Only selected industries recived impetus and this was opposed to the nature of universal law and equality

CLOUGH

THE THEORY OF MERCANTALISM
Every group of individuals striving to a set of common ends constitute society- each society creates its own economic theory to progress the society- the theory, as it is built for, creates changes within the society
The major factors that affected economic theory in early modern times include
The growing amount of wealth
The increasing usage of money

The expansion of trade

The acquisition of colonies
The rise of nation states
The dominant economic theory between 1500 and the eighteenth century was that of mercatlalism. Clough believes that this name was an error as the theory had little to do with trade and more with state control of economic affairs. It was the theory and practice of economic state building and the use of state to enhance the interests of policy makers.
However people soon grew bitter because of excessive state control and due to red tapism, by the eighteenth century mercantilism had been exchanged with laissez faire principles, a belief in letting natural laws govern the economy and a belief in individual rather than stat prosperity.

THE REACTIONS AGAINST MERCANTALISM

WILSON

ATTACK ON MERCANTALISM
Emerged during the latter half of the eighteenth century
Came from two quarters
From a school of philosophers who believed that it was an offence against the natural order to interfere with economic affairs
From merchants who believed that the regulations harmed their own interests
Conclusion
Mercantilism didn’t come only from the top but from a variety of positions and was in itself varied in nature
The ends too varied from immediate profit of individuals and pockets of princes to the power of state and the welfare of the people

Moreover the duality of power and wealth, economic and political power has been emphasized.

One cannot judge mercantilist thought by later ideas.
It was however based on materialism and it is possible that the comparable material progress of the west can be attriburted to it,
Mercantalist century- 1660- 1760, was in western Europe the age of economic expansion

DOYLE

However mercantilism had a number of critics.

Colbert was scarcely dead before a set of French writers critiqued his policies as the source of ruin and misery that coincided with Louis II’s last great wars. The critique was largely that interference in what was the ‘natural law’ of economic life, had led the state to bring disaster
In England writers like Child, North, Davenant denounced reflationary tariffs against foreign competitors as misconceived attempts to maintain favorable balance of trade.
Half a century later full scale alternatives to mercantilism were suggested. Mercantilism was the product of the depression of the seventeenth century when resources seemed limited and when these were overcome, expansion continued and liberal policies were favored. Hume took the lead in exposing the hollowness in orthodoxies of the time. He pointed out that the true wealth of the nation lay in its peope and its industry and not in its store of bullion. All restrictions on trade were harmful as trade stimulated economic activity. Free trade would stimulate higher prices and higher prices, higher productivity thus resulting in abundance.
Physiocrats similarly emphasized the avoidance of protective tariffs. They highlighted the role of agriculture and its necessity in the development of a country. Amongst them were gournaye and quensay and turgot. They created vast propaganda and were partly successful in implementing their views. However some critics, most prominently Adam smith realized that an overemphasis on agriculture while ignoring industry would simply retard the ongoing path to progress.
SMITH- Inquiry into the nature and causes of the wealth of nations(1776)– had visited france’s physiocrats. According to him however the true basis for wealth was labor and the division of labor, i.e specialization in an environement of free trade, thus every state specialized in what it could produce, using to the best its resources and acquired the rest from outside. This would occur naturally according to smith as long as there wasn’t outside interference. He denounced the controls of mercantilism as this outside interference which was built on the greed of merchants and sought profits at the expense of the country. He argued that british prosperity had been created despite rather than because of mercantilism. He even emphasized the harm in regulating trade to and from the colonies saying that the same industries in whose favour these oppressive measures were conceived would fall under the burden of the measures. He condemned thud the apparatus of overseas empires, without even being aware of the fact that English control in America was dwindling. In this view the mother country derived nothing but loss from the management of colonies. The revolution occurred in the year Smith’s book was published, 1776 and by the time he died, American trade was flourishing, seeming to prove his theories right.
Smiths ideas were by no means the first of their kind. Josiah Tucker had been propounding the same ideas even before the seven years war through pamphlets saying that a separation between great Britain and her colonies would ebinifit both sides.
Another critic who stated the same ideas was Raynal, whose History of the two indies(1770) was an essential in his time. The book had a number of contributions and was in its own way an irrevocable text of European activity and its disastrous effects upon the world.

Recent events favored the critics, however other overseas colonies showed no change. England’s hold over india only grew stonger.Cndemnation of british subjugation, its miserable and oppressive system of slavery etc. were seen during the eighteenth century. Slave trade was criticized severly during this period raising hopes of the abolition of slave trade in the eighteenth century

No sooner had the statesman began considering the wisdom of colonization when malthus’s gloomy forecasts regarding overpopulation began to renew the fervor in favour of colonies. Veryone had read smith but were unconvinced that free trade would bring an end to the world’s problems.

And the success of great britian seemed to vindicate all that mercantalists had stood for.

CLOUGH

SMITHS CRITIQUE OF MERCANTALISM
He believed that mercantilism was a conspiracy contrived by a minority to encourage their own interests.
Mercantalism according to him pretended to regulate trade in order to obtain favourable balance but its real objective was obtaining monopoly of the home markets for certain manufacturers.
Moreover for Smith industry must be keyed to favour the consumer and any benefit to the producer must be only in so far as it does not harm the consumer. Mercantalism however it biased towards te producer and his needs, the ultimate objective is production and not consumption

MERCANTALISM IN ENGLAND

CLOUGH

MERCANTALISM OF ENGLAND
Where spain was concerned with bullion and the Netherlands with the favorable balance of trade, England and france were concerned largely with PRODUCTION both industrial and agricultural. Having no colonies to derive bullion from and did not have the trading opportunities of the dutch they were forced to focus on production
Thus in England we see all manner of devices being used to foster industry under Lord Burghey, secretary of state and Lord treasurer.
He focused on the production of ammunitions to give England a literal advantage
He gave monopolies by patent letters

He gave foreign workers metallurgical trades to encourage them to come to England and teach their arts to the English

Tried to preserve forests along the sea coast to allow for timber for ship building
Encouraged production of flax, hemp and the making of canvas
Insisted that protestant England eat fish on Friday so that the fishing industry, the training ground for sailors was not impaired.

With the whigs coming into power in the seventeenth century business interests were given importance and moreover viewing the success of the dutch the English comprehended the importance of trade as an accompaniment to industry. Thus they enacted the navigation laws of 1651, 1660, 1663, 1673

No goods produced in Africa, Amerca or Asia, could be brought into England (save from india) in anything but an English ship with an English captain and an English crew
Goods produced in Europe had to be brought into england in English ships or in the ships of an english colony, or in the ships of the country where the goods were produced
They laid higher duties on goods brought to England on non-english ships.
Certain goods, produced in an English colony were to be sent only to an English colony or to England eg sugar, tobacco, cotton, indigo, ginger and dye woods.
Goods imported from English colonies had to be imported from English ports in English ships

The purpose of these laws was not accumulation of bullion but instead was the favorable balance of trade.

In 1621, THOMAS MUN, director of the company wrote A discourse of trade from England into the indies which was followed by England’s treasure from foreign trade or the balance of our trade is the rule of our treasure.He argues here for the use of bullion for the purpose of trade rather than pilling it up- a large number of his countrymen were won over.
Sir William Petty- Political Arithmetic– contends that the real sources of wealth are land and labor
Nicholas Barbor- discourse on trade (1690), discourse on making money lighter (1696)- shows how a useful stock of goods serves a country better than a store of bullion
Sir Josiah Child- Governor of the east india company – Discourse on trade- Supply of gold and silver within state is of no importance. Low interest rates are necessary for investment which causes movement of the economy
Charles Davent- Inspector general of imports and exports, Tory- Discourses on the publis revenues and trade of England (1698)- Real value of money is contained in it being a medium of exchange and therefore in it being allowed to serve its appointed function.

IN THE LIGHT OF THESE ARGUMENTS< ENGLAND ADOPTED ALMOST FREE TRADE OF BULLIO IN 1663.

A number of measures were undertaken to forward indigenous industry, amongst these was the exportation of woolens at a loss, the banning of import of calicoes, while allowing their production at home. Customs duties were raised, such policies enabled industrial growth and inevitably led to to the industrial revolution
However a number criticized england’s trading and industrial policy. Sir Josiah Child claimed that economic laws were non-sensical and made by gentlemen who couldn’t run their own estates. David Hume attacked the idea of accumulation of bullion, stating that this would lead to price rise and that favourable balance of trade should not be directed towards further accumulation of bullion. He emphasized instead the necessity for movement of goods through trade and favored measure s that improved multilateral trade between nations.

GREATEST CRITIC ADAM SMITH- WEALTH OF NATIONS (1776)

Marked break between mercantilist and laissez faire theory
Smith was opposed to Mercantalism- to bullionism, favorable balance of trade, imposition of tariffs and colonial monopolies
He believed the measure of a countries wealth was the goods it produced or obtained through trade.
He believed in Division of labour i.e specialization. At the individual level this would mean that the individual would produce what he was best at producing and what he was more suited to producing rather than trying to cater for all his needs and then would obtain the rest through trade.
He favored the same specialization at the international level for the complete utilization of the world’s resources. This goal would require the economy to be controlled by natural laws of demand and supply rather than by governmental control.
Smith’s doctrines were agreed with, however only much later In the nineteenth century

WILSON

The system in England

Despite the multiplicity of views regarding mercantilism, one common point remains the notion of balance of trade.
Mercantalist thought was implemented in English state policy between the 16^th and the 18^th
The English idea of balance was probably drawn from Italian double entry book keeping.
The discourse of the Common wealth of this realm England, insisted on the necessity of selling more through foreign trade than what is bought. This as stressed later by William Lambarde, would mean that the foreign nations would have to pay England In gold and other precious metals.Precious metals were useful since they were universally accepted, were imperishable and could be broken into many pieces.
These thoughts were later emphasized by Thomas Munn in his englands treasure by foreign trade, probably written as an answer to the economic crisis and trade depression of the time.
Sir Matthew Decker reasserted this principle a century later in his essay Essay on the causes of decline on foreign trade
Despite the danger of inflation through favorable balance which was perceived even at the time, the dangers of an unfavorable balance were perceived as graver.
Mercantalist though was not merely philosophocial treatise and was implemented closely by state during the 17^th The economic crisis of 1622 necessitated this. The depression was in part a result of the failure of a venture to cut off dutch finishing industry by taking English unfinished cloth and finishing it inside. This failed disastrously
In order to deal with it, thinkers like Thomas Mun adumbrated a considerable part of mercantilist policy
The six main percepts include
TO reserve English raw materials to the cloth industry by prohibiting export
To injure the Dutch industry by preventing the English from carrying supplies of Turkish or Spanish wool
To reduce need for imports and the drain on natural treasure by developing manufactures
The fisheries were to be ousted from dutch control
Foreign merchants who exported English goods would be forced to use their wealth in England
Goods imported must come either in English ships or in ships of the nation exporting.

IMPLEMENTATIOn

These policies were a join strategy of attack on the dutch to oust them
England did not have many natural resources, the dutch had profited and progressed entirely through artifice of mercantile measures. Thus mercantilism in England found its thrust in Jealousy, Ambition and common sense- prohibitions on export of raw cloth were repeated year after year. Plans to pre-empt wool from other sources too were occasionally succesfull
New industries were encouraged as was indigenous growing of raw materials such as linen and flax as well as the production of finished linen. Only by the end of the century, through constant accumulation of knowledge and development of indigenous industry, the English had a cloth industry to rival the dutch
The English developed schemes for “waste grounds” to make use of all resources. These were to be ‘drained and converted into a land of plenty’. Soon the reclaimed land was to provide abundant sources of agricultural raw material.
Another source of envy were the dutch fisheries. The fishing was carried out of the shores of England. The English understood the significance of the fisheries however were unable to imitate the dutch skills of catching, drying and salting fish.

NAVIGATION LAWS

These were the chef d’ouvre (masterpiece) of English mercantilist policy
The English colonies were important in that they could supply raw material and other imports in order to prevent the English ffrom needing to import from other countries
However the dutch displaying their ususal acumen had placed themselves in between the colonial producer and the English buyer.
The Navigation law of 1652 looked to eliminate this
Laws were implemented again in 1660, 62 and 63, making administration of these controls more efficient
Thus the movment of goods between English colonies and the mother country were canalized
The attempts to conserve treasure were abandoned in favor of efforts to ensure positive balance of trade
Thus forty years after mun had expostulated mercantilism , it came into use. Its architecht in England was Sir Geroge Downing
THE SIGNIFICANCE OF GLITTER
Balance of trade was created with a mind for treasure
Mercantalists did identify with treasure however, as even professor Heckser concedes, they did not idolize it.
The question of how much importance they gave to precious metals must depend upon what the uses were of the same at ths time.
Smith’s critique was based on the fact that precious metal storage was not important and that fears of a lack of precious metal were absurd
Wilson however insists that the necessity for a sound currency backed by sufficient precious metal was not an absurd one. They required precious metal most of all for trade. Particularly in trade of spices. Though there was paper money present, often trade into the more distant and unworn routes into asia and Africa, required the use of “capital in a solid and ponderable form”.
Thus Wilson suggests that the desire for treasure may have been borne by the particularly undertain and violent climate of the time accompanied by the lack of skilled measures of currency

Mercantalism, according to Wilson Is not a unidirected economic policy and did not have only one end. The creation of mercantilist policy saw a compromise between merchants like MUn and government officials like Downing who colluded to achieve the dual interests of the merchants and the state.
Kings and governments and bearaucrats saw in mercantilism the drawing of revenues which allowed them and the citizens a more comfortable life
Merchants saw in it a protective hand for them- protection from pirates and belligerents at sea and from foreign competition at home.
Incentives and bounties were provided to indigenous industries as well as to skilled foregieners to encourage them to settle.

EGERTON

The mercantilist system was preceeded by a medieval Europe which was largely a disintergrated union of localities and cheifdoms. It was, according to egerton the work of the seventeenth century to up nationalist policies and unity. Mercantilism was a system of commerce developed, according to egerton to support this rise of national policy. This national policy however distinguished between the nationality of the motherland and the colony and here the seeds of disunity were sown. The colonies were regarded henceforth as ‘foreign plantations. The mercantile system , or the colonial pact as it was called in france, restricted trade and commerce in a number of ways. Each of them has been discussed by egerton

GOODS COULD ONLY BE IMPORTED OR EXPORTED FROM THE COLONY IN SHIPS BELONGING TO THE MOTHER COUNTRY OR TO THE COLONY

This effort to secure the trade of England for English ships was attempted many times as the numerous acts of parliament reinforcing the same indicate. The dutch had secured the carrying trade for most English goods between the motherland and the colonies. The English introduced the Navigation act of 1651 to control the same. Every ship heading to England, Ireland or the colonies or from these places had to be English and had to have an English captain and an English crew. Moreover European goods could not be imported into England or the colonies in any but an English vessel or a vessel belonging to the country that manufactured the goods. The intention was clear; the dutch did not manufacture, this cut them off from the English carrying trade all together.

THE EXPORT TRADE OF THE COLONY WAS CONFINED TO A GREAT EXTENT TO THE HOME MARKET

English regulations regarding the export of products from the colony compared favourably with those of other countries. Only certain colonial products were limited in export to the mother country, these commodities were referred to as enumerated articles and included; sugar tobacco, cotton-wool, indigo, ginger, fustic or any other dyeing material. Later hides and skins, naval stores were included amongst enumerated articles. The non-enumerated products could be exported for many years to any part of the world. By the time of George the second the export of all non-enummerated articles was limited as well.

THE GOODS OF THE MOTHER COUNTRY OBTAINED A TOTAL OR PARTIAL MONOPOLY IN THE COLONIAL MARKET

The impotation to the colonies was generous. Though many foreign goods were first sent to the mother country before export to the colonies, there were drawbacks placed even at the risk of underselling while exporting to the colonies. However as has been stated by Adam Smith, before matters were placed on a less indulgent footing, most foreign products could be obtained cheaper in the colonies than in England.

COLONIAL PRODUCTS RECEIVED PREFERRENTIAL TREATMENT IN THE MOTHER COUNTRY

Preferrential duties were placed in England on the importation of foreign sugar, tobacco and pig iron in order to encourage the same industries in the colonies. With the same intention, cultivating tobacco had been strictly forbidden in England. The manufacture of certain products was encouraged by giving bounties upon their export to England. Of these the most important bounties were given to the production of naval stores.

THE COLONIES WERE PREVENTED FROM SETTING ON FOOT MANUFACTORIES SO AS TO COMPETE WITH HOME INDUSTRIES

Initially this would not have hampered due to the lack of labor and scarcity of native industry. However there was certainly, early small scale manufacture such as linen, wool and other cloths as well as for hats. For engalnd the woolen industry was a favorite and it prevented export of wool even from one plantation to the other. In new England and new York, however the scarcity of gold led to the encouragement of wool industry.

This essentially was the system of mercantilism in relation to the mother country and its colony. The system was made to encourage the production of raw material by the colony, to be processed by the mother country. However this conception denied the equality of colonial Englishmen and Englishmen at home and thus caused a disparagement of patriotism. Despite the hampering effects of the mercantile system these disowned, disenchanted colonies were to rise to independence. The laws were evaded successfully until finally a battle was born. The problems that America faced immediately after the war were those of lawlessness. Quack establishments found monstrous growth.

Where the mercantilist system helped in the step from the medieval locality to the Modern nation, it seemed it was stymed in conception when the next step towards a grand marine empire may have been conceived.

MERCANTALISM IN FRANCE AND THAT IMPLEMENTED BY COLBERT

WILSON

FRANCE
Like the English the French fell a sense of competitive satisfaction over their resources, and like the English they knew actual limits as well and realized the importance of improving resources. Thus the following measures were implemented
Aimed at importing raw materials. An edict of 1572 bans manufactured importes
Skilled foreigners were enticed to set up new industries especially those which would increase stocks of gold and sivler.

iii. Just as the English blamed the dutch, the French blamed the Italians for the offence of draining away treasure. Industries such as the silk industry which were to compete with Italy were given impetus

There was a strong emphasis on drainage and reclamation of land
Monchreiten added thrust towards exploitation of fisheries

Colbert

Under Colbert what were, according to Wilson “naïve inspirations of other writers” were turned into effective and stringent regulations.
Colbert aimed at irradicating poverty in France

Trade was high in his scheme of things and along with the attack on the Italians he added an attack on the dutch

He believed in manufactures as the true source of wealth
He therefore set to develop skilled entrepreneurs and artisans
Production was believed to be individual but was supervised to minute detail

Colbert was no pacifist and shared fully in schemes of ousting the Dutch and had moreover the beuraucrats contempt for the businessman

Colbert saw himself as the servant of the king unlike the English mercantalists who were most of them merchants. Colbert would, according to Wilson have been only minimally affected by merchant’s advice.

Curiously however France did not have direct and explicit focus on trade uptil much later

England had an inspector general of customs by 1696, France had one only half a century later.

EFFECTS OF COLBERT”S SYSTEM

Encouraged technology, however in some industries such as cloth, the guild system prevented entry of newer technology and thus resulted in ossification.
Despite this france led the world in terms of volume of industrial production, foreign commerce and domestic trade till 1763- this was because of the vast resources france possessed

However it may also have been because of the methodical approach instilled by the use of mercantilism.

CLOUGH

FRENCH MERCANTLISM
Intially the French too favored the policy of accumulation of bullion and favorable balance of trade, forbidding the export of bullion
Yet the French realized early that national economic well being depended on a nations productive capacity and on the goods it could produce or acquire. Thus in the sixteenth century production was advanced through subsidies and by raising indigenous tariffs.
Soon a number of French theorists such a jean Bodin criticized the amassin of wealth on the ground that it resulted in an increase in prices. Theorists like Bodin encouraged the development of agriculture and industry by state.
These mercantilist principles in france reached their climax with Jean Baptiste Colbert (1619-1683). Was a son of a cloth merchant and became the economic adviser to Louis XIV.
Staunch believer in productivity, opposed to bullionism which he said was a narrow principle.
Gave subsidies to industries to foster manufacturing

Did his best to introduce new industries

Forbade emigration of skilled workers
Encouraged early marriage to increase labor capacity
Families with more than ten were exempted from paying taxes

Conducted a severe campaign against beggary, indolence and charity
Foreign Trade- believed the quickest way to increase share was to take away from other states through combat. He knew that france’s 500 merchant fleet paled when compared to the dutch 16,000 but encouraged snatching of this away from the dutch. Thus was pleased when Louis XIV waged the first war against the dutch in 1669.

In 1664 he set low tariffs for the ‘five great farms’ in central france, these were soon raised due to peasant fears of external competition.
He founded the French east india company to compete with the English and the dutch and attempted to colonize Canada

His efforts however weren’t a great success. Clough feels this was because:-

He placed too much emphasis on luxury goods
Economic planning suffere from military comquest, france wasn’t able to handle the pressures of the two simultaeneously

Despite the development of the merchant marine france was to realize prosperity through production and not through trade like the dutch or snatching away of bullion like the Spanish

Colbert’s views were soon taken on by
The Neomercantalists
Among them were John Law, Francois Melon and Francois Vernon. They believed that since money was the life blood of economic activity there should be a very large supply of it to allow greater exchange of goods and greater division of labour. This view was untenable due to the limited use of means of exchange
Others attacked government economic regulations.
Among them Pierre de Peasant de Boisguilbert- believed in the natural law of the economy and that it should be allowed free at all times.
Another was Richard Cantillon an Irish banker in paris- attacked favorable balance of trade on the same grounds as hume

The physiocrats- believed in the rule of nature. They were men impressed by the focus on natural laws on phsics and the anatomy expounded in the works of Newton etc, felt the same natural laws should apply to polity, society and ecnonomy

Francois Quensay- profoundly impressed by newton believed in natural laws for economy. He set about to discover these laws which he described in his Encyclopedie – he believed in agriculture as the primary source of wealth. Agriculture produced things, industry combined them and commerce moved them around. This movement according to him had to be governed by natural laws and not by state. He believed that man should adopt the policy of Laissez faire
These ideas grew popular and were propogated and implemented by the likes of Turgot, chief minister of france, who abolished many old regulations and tried ousting guilds but was removed from office before he could.

Thus in france traditional mercantilism came in for severe critique

French colbertism was followed in a number of European countries such as Russia and Germany until much later their own indigenous physiocrats would critique them. The application fo Laissez faire theory was retarded however because of the rapid advances of the English through the English revolution.

SPAIN

WILSON

SPAIN
In Spain there was a mounting body of taxation that drowned any economic measures that were taken.
Spain, according to Wilson is an example of how fiscal necessity and private privelge frustrated mercantilist policy

Only in the 1720’s were voices raised, asking for imitation of English and dutch mercantilist principle

BY now there was little hope for the businessman who was an untouchable in Spanish society
Under Charles II a mercantilist policy was followed, the results however were negligible, Spain remained obstinately traditional

CLOUGH

SPAIN
These principles were firmly extablished with spain
All commerce with the new world declared a national monopoly

Casa de Contracion to keep foreigners at bay regulated the flow of trade between a few ports- Vera Cruz and Porto Bello in New Spain and alternatingly Cadiz and Seville in Spain

Licenses were required for access to the new world and these were not provided to muslims and jews
Ships sailed in fleets to the new world and carried with them interlopers to prevent priacy
Great pains were taken to prevent currency from leaking out through payments, to foreign countires

However the accumulation of bullion was not a boon and raised prices. So apathetic was spains plight that when involved in cpnflicts it did not have the money to buy what was required for victory
Several treaties were signed giving trading privelges to other countries

Treaty of Munster (1648) dutch given trading priveleges in the west indies
Treaty of Utrecht (1713) English given monopoly of slave trade to Spanish colonies
Thus this strain of mercantlaism was ineffectual and did not bring prosperity to spain as it focused on the accumulation of bullion and not on the production of goods.

PORTUGAL
CLOUGH

MERCANTALISM OF SPAIN AND PORTUGAL
Use of poltical control over economy apparent in middle ages- control was required to prevent famine and other emergency, to hire merceneraries for was, to assist business and to further the guild system,
Such control worked well into the middle ages, as even the guild system carried on in france etc., till the time of the French revolution
Moreover we see the development and intergration of nation states such as Portugal
PORTUGAL
Formed by a set of princes
Soon trade route to the east discovered

Royal claim on trade route- aim of royalty was to ensure bullion through favorable balance of trade

Portugal established certain basic percepts of mercantilism
Colonies were to be a state monopoly
All trade regulated so that the metropolitan country had an excess of imports over exports
National wealth measured by the amount of bullion the state had

NETHERLANDS

WILSON

THE DUTCH
In the Netherlands, the merchants having replaced a dangerous monarchy ensured that none came to replace it. The dutch were governed instead by a lose and decentralized administration of merchants. This was disadvantageous militarily, as was seen in the wars against England, such as the one in 1652- but the powerful trading classes remained convinced that this was the ideal form of government for their needs.
Thus to a large extent mercantilism was not appropriate or necessary for the dutch situation
However towards the end of the seventeenth century we see a battle arising between the mint masters and the traders

The republic moreover had to rely on policy rather than on force to defend itself

CLOUGH

NETHERLANDS
Dutch built an economic empire from trade
They traded raw materials and indigenous goods with Baltic goods
They also gained commerce from the transportation of goods
After the split of Spanish occupied Netherlands into the northern Netherlands and the southern Belgium, the Netherlands, now debarred from eastern trade, sought direct trade with the east, establishing a well spread colonial empire there.
The Netherlands levied almost no customs on imports, realizing that free trade was favorable for them
They remained dominant with these policies till the 1770s
The dutch unlike the Spanish and portugese realized that hoarding of bullion served no purpose and focused instead on movement of bullion, realizing that export of bullion was necessary to acquire goods
However like the spainsh and the portugese the dutch wanted to keep the benefits of eastern trade to themselves. Thus the dutch east india company was given monopoly of trade in the east indies. In other areas though the dutch established companies they were willing to forgo monopoly
Their inevitable decline was not at the hands of inefficient trade but in fact due to inept military
From the middle of the seventeenth century the dutch faced the constant onslaughts of the british, the French and the portugese
They left brazil in 1661, new Netherlands in 1667 and Ceylon during the napoleanic wars
The east india company dissolved in 1798 due to excessive control
Duth trading supremacy lasted for little more than a century.

OTHERS

WILSON

PRUSSIA

The whole structure of mercantilism was soon under attack from philosophers, and even merchants, however countries with late remnants of feudalism found it convenient to use in order to move quickly to a developed economy

In Prussia to, freidrich the great emphasizes the importance of maintaining currency within the country through manufacture and trade.
In Prussia, even more than France the stimulus came clearly from state

Under able administrators like von Heinitz and von Hagen an industry was coaxed into being and a variety of trade and industry achieved

Much of it dissapperaed after Jena, the seeds were sown by Friedrich, but they germinated much later.

MERCANTALIST PRINCIPLES IN THE COLONIES AND THE COLONIAL RIVALRY LEADING UP TO THE AMERICAN CIVIL WAR

MERCANTALISM AND COLONIAL SCIENCE
Mercantalism on colonies
Regarded colonies as very useful
Colonies according to mercantalists must exist exclusively for the mother country- the colonial compact
Trade between homeland and colony should be reserved for the motherland
Commerce should be carried out in ships of the state or the colonies concerned
Colonies should buy as many homeland produced goods as possible
They should produce and sell only to satisfy the needs of the mother country

TWO SETS OF MERCANTALIST COLONIAL PRINCIPLES

ONE SET APPLIED TO CASES WHERE COLONIAL PRODUCTION WAS DEVELOPED TO A POINT THAT PROVIDED ARTICLES FOR TRADE
Mainly in the east and Spanish America
In the seventeenth and eighteenth centuries with all america
THE SECOND WAS A SET OF PRINCIPLES DEVELOPED FOR THE SETTLEMENT BY EUROPEANS WITH ACTUAL ECONOMIC DEVELOPMENT
Concerned primarily with America ans specifically with the west indies
And also with English occupied America

PORTUGESE IN THE EAST

They discovered a new trade route to the east, thus cutting of Italian monopoly on spices. They attempted to establish their own by setting up bases and controlling a few natives. The organization was carried out by Alberquerque. Their monopoly was broken by the Dutch who learned the route by sailing portugese vessels.

THE DUTCH IN THE EAST

The dutch east india company established their sway over java, Sumatra, the Moluccas and parts of new guinea and borneo. They lost this to the English in 1824 as well as Ceylon which they lost to the English in 1796. They administered east india trade through a joint stock company with monopolistic privelges. THEY WERE CONCERNED EXCLUSIVELY WITH TRADE RATHER THAN WITH SETTLEMENT AND ECONOMIC DEVELOPMENT. They established trading stations and tried to get goods into them for trade. When they wanted a product, they paid high prices for it and when production went up cut prices to the bone. THEY WERE NOT CONCERNED WITH ECONOMIC DEVELOPMENT OF THEIR COLONIES BUT ONLY WITH COMMERCE.

They like the Portuguese, were faced with encroachments by states which had greater productive capacity at home and more military strength, like England and france. They did not succeed immediately in breaking the dutch hold, but they did get established in India. Both England and france endeavoured to creat national monopolies. However French efforts were soon to be reduced to a few isolated colonies.

THE WEST- SPAIN

Policies were initially like those in the east, Spain’s primary objective was extraction of Bullion and not settlement. Spain as we have seen developed strict rules regarding the movement of commodities, especially gold, through trade and ensured the movment only between the motherland and the colony.

Over time spain did develop some colonial produce to support the activities being carried out. However the control remained even on these commodities. This meant that spain sent a precious few fleets out to trade, thus resulting in vast quantities of goods being warehoused, and increasing the expense on storage and transport. Thus the colonial prodcers were forced to trade with Dutch and English smugglers. New Englanders carried on brisk business with the indies and the dutch broke through the Spanish colonial blockade that for a time they had a monopoly on Spanish Cocoa trade. And the English asiento in 1713 was nothing more than a formal recognition of activities that had been carrying on for a long time illegally.

By 1740, Spanish had gotten sufficiently weak to liberalize their policy entirely. The number of ships sailing were increased, in 1765 trade was opened for all Spaniards , in 1775 they could trade to a number of ports in South America and in 1789 to all in mexico. In 1778 the fleet system of sending ships was aboloished. This increased trade in the Spanish Americas. Spain however was not to benefit from it. In the nineteenth centuries most American colonies fought for and won their independence.

PORTUGUESE IN THE WEST

Portuguese in brazil- made large grants of estates to nobles, large fiefs along the coastline and extending indefinitely inside. The focus was initially sugar, which brought in the negro slave trade. Later as they pushed inwards gold and diamonds were found.Brazil accounted in the eighteenth century for nearly 80 % of total gold and diamonds produced.

It paid little attention to its colonies, maintain however the ‘colonial compact’. However with the loss of eastern commerce and the finding of gold and diamonds the Portuguese focused on brazil. They made both diamond and gold trading a crown monopoly. They were however unable to keep oout foreigners due to the lack of military strength. The colony declared its independence in 1822.

DUTCH IN THE WEST

Similar policies as the east. They Acquired trading colonies, with the purpose of carrying on trade with the natives and of having bases whence they could conduct a smuggling business with the colonies of other powers. No emigration in large numbers, showed relatively little enthusiasm for coloial agriculture, other than sugar. Their main activity was trading with Spanish colonists to whom they brought slaves and in New Amsterdam their prmary function was trading with the Indians from whom they got furs in return for rum. However the puching of enterprise resulted in trouble with foreign powers. They were soon forced out of brazil, new Amsterdam and Guniea by the English.

FRENCH COLONIES

They understood the importance of colonies early, claiming Louisiana and Canada and grabbing some of the ess firmly held west Indian islands. They abided strictly by the policies of colonial compact. The freanch in the east and in the west attempted to develop their holdings by the creation of monopoly companies. The companies however had little success. The French west india company was liquidated by 1672 and even the Canada company and the Company of france had brief lives. Their main handicaps were thelack of capital investment and he lack of French emigration. From the third quarter of the seventeenth century the French colonial policy was steered at every turn by the French government.

Over time they were successful with getting production underway. Tobacco and sugar were grown with success so much so that the French islands became the veritable sugar bowl for france and large parts of Europe. At acadia, they developed a thriving fish trade and in Canada fur trade. In lousiana too they had attractive prospects with the establishment at the Mississippi delta in 1713. By 1787 french trade in the new world was three times its trade in the east and one fifth of its total commerce.

Losses- However national rivalries soon pulled france down. They surrendered Acadia in 1713 to the English; gave away Louisiana to their ally spain to compensate for the loss of Florida in the seven years war; Canada was given to the English in 1763 (they retained two small islands off the coast); Haiti was lost during the Napoleinic period to native revolutionaries. They fell victim to national jealousies.

ENGLISH COLONIES

Their policy was also built on Colonial Compact. The navigation act of 1651 and subsequent measures reserved shipping between England and English colonies for the English. England also paid bounties to industries in its colonies that supplied England with goods it lacked.

However the English colonial policy differed from its rivals and predecessors on two scores

Englishmen went to colonies in north America as permanent settlers in large numbers- population of 2 million in 1776
These people developed production of goods to which they were accustomed to in the new world rather than just colonial products.

They colonial population considered itself equal to the population in the motherland and undertook development that was to rival the English. The English tried to control this development and this led to resentment.

The Americans were particularly successful at ship building, having vast stores of timber and oak for the frames. This led directly to the development of shipping and amercain carriers, particularly those in new England developed a lively shipping business and a flourishinf fishing fleet and whaling industry. They developed trade in fish at new England, trade in flour from the mid-atlantic and sugar and molasses from the west indies. The latter were refined in America and then taken to England as rum. Tobacco and cotton from Virginia, Souh Carolina and Georgia were carried back to England and supplies were brought back for these commodities.

In all trade, except to India, colonial vessels were treated as English Ships. However colonial interests in amercia were affected sharply by certain acts extracting high levies on industries in America that were challenging English industries. Amongst these were;-

Molasses act of 1733- heavy duty levied on sugar going to the colonies on grounds that colonial sugar refining and rummaking were hurting England’s interests. The colonies were also prevented from importing Spanish or French west idian sugar and molasses.
Woolens act of 1799- Forbade transportation of wool yarn or woolen textiles from one colony to the other.
Hat act of 1731 forbade export of hats from one colony to another
Iron act of 1750- forbade export of manufactured iron and steel though pig iron imports to England were still permitted
Moreovver after the seven years war of the French and the Indians, the English demanded payment for their services.
New taxes were levied and the restrictions on colonial trade were imposed with some rigidity. Such measures led to great bitterness, though it is known that the Americans profited greatly from the privelges enjoyed by being part of the empire.

American commerce did suffer after the revolution as they no longer had access to English trading pasts. Yet they were to become the greatest economy of the new world, and a lost opportunity for England.

ENGLAND AND AMERICA

The mercantilist system was preceeded by a medieval Europe which was largely a disintergrated union of localities and cheifdoms. It was, according to egerton the work of the seventeenth century to up nationalist policies and unity. Mercantilism was a system of commerce developed, according to egerton to support this rise of national policy. This national policy however distinguished between the nationality of the motherland and the colony and here the seeds of disunity were sown. The colonies were regarded henceforth as ‘foreign plantations. The mercantile system , or the colonial pact as it was called in france, restricted trade and commerce in a number of ways. Each of them has been discussed by egerton

GOODS COULD ONLY BE IMPORTED OR EXPORTED FROM THE COLONY IN SHIPS BELONGING TO THE MOTHER COUNTRY OR TO THE COLONY

THE EXPORT TRADE OF THE COLONY WAS CONFINED TO A GREAT EXTENT TO THE HOME MARKET

THE GOODS OF THE MOTHER COUNTRY OBTAINED A TOTAL OR PARTIAL MONOPOLY IN THE COLONIAL MARKET

COLONIAL PRODUCTS RECEIVED PREFERRENTIAL TREATMENT IN THE MOTHER COUNTRY

THE COLONIES WERE PREVENTED FROM SETTING ON FOOT MANUFACTORIES SO AS TO COMPETE WITH HOME INDUSTRIES

Mercantalism and Historiography – Mercantalism – Modern West – History DU Notes

Editorial Staff