Revisions in Economic History: V. Mercantilism
Author(s): Eli F. Heckscher
Source: The Economic History Review, Vol. 7, No. 1 (Nov., 1936), pp. 44-54
Published by: Wiley on behalf of the Economic History Society
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REVISIONS IN ECONOMIC HISTORY.
V. MERCANTILISM.
T
By
ELI
F.
HECKSCHER
HE Editor of THE ECONOMIC
HISTORY REVIEW has asked me to
in the series" Revisionsin
writea shortarticleon Mercantilism
Economic History." This has proved a more difficult
task than I
had anticipated, first because it presupposes in the writera definite
conceptionof what the accepted doctrineis; and thatis not at all clear
to me. Secondly,the vastnessof the subjectmakes it literallyimpossible
even to mention,in the small space available to me, the manyinstances
whereI finda different
relationshipbetweendifferent
partsof the subject
than that usually described; or, generally,a new point of view. And
selectedpoints raised here
even with regardto the somewhatarbitrarily
it is impossibleto give chapterand verse for my conclusions.'
The general weakness characteristicof the earliertreatmentof mercantilismwas the same as that prevailingin other fields of economic
history,namely,the exclusivelynational outlook of scholars and their
lack of theoreticalanalysis. The firstdefectplaces an undue emphasis
upon dissimilaritiesbetween countries and even gives the impression
that purelynational factorswere much more influentialthan theyreally
were; the second is, in myopinion,even more damaging,as it frequently
preventsscholarsfromseeingwhattheproblemsare and how theyshould
be solved. When all is said, economic developments have followed
similarlines all over the westernworld; and all economic developments,
in whatevercivilisationtheyare found,mustraiseproblemsakin to those
economiclife,thoughtheygive the historianthe important
of present-day
advantage that he is able to see theiroutcome-which is farfrombeing
the case with contemporaryconditionsand occurrences.
As to theinternational
aspect,I thinkthatSombartstandson a pinnacle
of his own, but also Unwin (in his most importantbook) draws very
instructivecomparisonsbetweenEngland and France. With regardto a
I hardlyknow
theoreticalbackgroundto the treatmentof mercantilism,
1 I must,therefore,
confinemyselfto a generalreference
to mybook Mercantilism
(George Allen & Unwin,Ltd., London, 1935; two vols.). Theoutspokenor implied-egotismof the presentarticleis a matterof sincere
regretto me; but whathas now been said explainsit to some extent.ForI am at thesametimeable to embracetheoccasionof noticingsome
tunately,
constructive
criticisms
ofthebook in question.Besidesthosementioned
below
I shouldliketo callattention
to an articleupontheGermaneditionofmybook,
" Le mercantilisme:
un etatd'esprit,"by ProfessorMarcBloch,in theAnnales
etso'iale,vol. vi, 1934, pp. I 60-3, andto theveryvaluable
d'histoire
6monomique
Introduction
to theNuovaCollanadi Economisti,
vol. iii, " StoriaEconomica"
I
(Torino, 1936), by the editor,ProfessorGino Luzzatto.-For a summary,
in the Enyelopadiaof theSocial
may referto the articleon " Mercantilism'"
Sciences,
vol. x, 1933, pp. 333-9,thoughit containssome minorerrors.
44
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MERCANTILISM
45
of any author since Adam Smithwho possesses it, with the exceptionof
ProfessorViner. In additionto these two defectsthereis a third,i.e. the
mergingof the subjectof mercantilism
into thatunwholesomeIrish stew
called " moderncapitalism." If those two words have a distinctmeaning,
it ought to be connected with what is called in economic science
" capital"; and in thatcase mercantilism,
though of course relatedto it,
is to a greatextentoutside the subject. If, on the otherhand, " modern
capitalism" is an expressionintendedto cover everythingin economic
life thatpaved the way to modern conditions,it is simplya misleading
name for the economic historyof Europe since the end of the Middle
Ages.
The differenttreatmentaccorded to mercantilismby, say, Adam
Smith,Schmoller,and Cunninghamis principallyrooted in insufficient
attentionto the difference
between ends and means. The ends of statesmen in the economic fieldbetween,say, the beginningof the sixteenth
and the middle of the eighteenthcenturieswere of course diversified;
but I thinkit may be said thatat least two tendenciesplayed a verygreat
part,i.e. that towards the unificationof the territory
of the State economicallyand the use of the resourcesof their countriesin the interestsof
the political power of the State-more of this below. But importantas
thiswas in itself;it does notconstitutethe most characteristic
contrastto
what came later. An illustrationmay be found in the factthat the foremost, and by far the most intelligent,among German mercantilists,
JohannJoachimBecher, gave his principal work a title which differed
only veryslightlyfromthat of the Wealthof Nations. Consequently,the
mostimportantdifference
did not lie in thechoice ofends, but in opinions
as to the best way of achieving those ends, i.e. in the choice of means.
Through this,mercantilismbecame not only a specifictypeof economic
policy,but, even more, a characteristic
body of economic ideas; for the
views as to what constitutedthe best means were rooted in conscious or
of the tendenciesof economic life. Through
unconsciousinterpretations
this, mercantilismcame to mean a discussion of the relationsbetween
causes and effectsof economic factors; it paved the way to a theoryof
economics, in spite of having startedfrom purely practical considerations. It is not, in this case, a question of a choice between theoryand
practice,but of practiceleading unintentionally
to theory. I do not think
any student with a theoreticalinsight can fail to see, especially when
studyingthe writersof the seventeenthcentury,how theycame more and
more, and almost in spite of themselves,to work out theories of the
relationbetween causes and effectsin the economic field.
Returningnow to theends pursuedby mercantilist
statesmen,opposite
views have recentlybeen expressed. A German scholar, Dr. Hugo
Rachel, in a reviewin the Forschzngengur
Brandenburgischen
andPreussischen
Geschichte
(vol. xlv, pp. i8of.), has said-in strongoppositionto his own
teacher, Schmoller-that the importantpoint of view of mercantilist
statesmenwas not theidea of economicunity,butthatof economicpower.
Though some of the factsadduced for this contentiondo not appear to
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46
THE ECONOMIC HISTORY REVIEW
I thinkthereis something
meat all convincing,
to be saidforthiscriticism
ofmyprevioustreatment
ofthesubject.' It is notonlythattheattempts
at unitywere,withfewexceptions,
failures-suchwas theresultof the
ofmercantilist
majority
measures; eventheseattempts
themselves
were
to a greatextenthalf-hearted.
It is difficult
to findmorethantwo bold
in thisdirection
attempts
in theleadingcountries.One is theStatuteof
of I563 in England,theotherColbert'stariff
of i664. Besides
Artificers
thesetwo, the unifying
in Sweden
measuresin customsadministration
in theseventeenth
century
wereto a verygreatdegreesuccessful;but
Sweden,like England,was a countrywheredisintegration
had been
in Swedentheproblemof
avoidedin theearlierperiod,andconsequently
unification
was littlemorethana questionof mergingnew territories
intothebodyoftheold. And thatwas effected
withoutgreatdifficulty.
This consideration
givesriseto a suspicionthatmercantilist
statesmen
did nottaketheirunifying
workseriously.Theywere,however,unable
to shirkaltogetherthe task of adaptingthe medievalframework
of
Europeansocietyto new economicand social conditions.This task I
havealso interpreted,
perhapsincorrectly,
as partoftheunifying
workof
It fellinto two ratherdistinctcategories.The one was
mercantilism.
concernedwith" feudalism,"
i.e. the disintegration
causedby moreor
less anarchicalmeasuresundertaken
by the lawlessor self-willed
territoriallordsand provincialnoblesin theirown interests.Briefly
stated,
in Englandand
therewas littleneedforanyactivity
againstthistendency
on theotherhand,theneedforitwas greater
Sweden.In Germany,
than
to overcomethisanarchycameto
almostanywhere
else; buttheefforts
whereboththeneed was greatand something
verylittle.The country
was able to
was done to satisfyit was France; the Frenchmonarchy
resultsin thisfield,thoughmuchof the old
achievesome remarkable
disorderwas allowedto surviveuntilthegreatrevolution.
" was thatparticular
than" feudalism
Even moreimportant
typeof
ofthetowns; and
whichresultedfromtheindependence
disintegration
in spiteof some dissimilarities
mostEuropeancountriespresentedthe
featuresin thisrespect.The authorwho has done
same fundamental
most to elucidatethispart of'the subjectis Georg von Below; and
to Germany,
confined
and therethoughhis studieswerealmostentirely
countriesin themercantilist
foreleftaside the mostimportant
era,his
conclusions
evenwhenextended
appeartometo be generally
unassailable,
countries.The medievaltownshad createdthemost
to othercontinental
consistent,
vigorousand long-livedsystemof economicpolicythathas
and
everexisted,themostimportant
partsofwhichwerethegildsystem
of
in general,and the organisation
the internalregulationof industry
foreigntrade and commerce.The fightagainstmedievalmunicipal
in thecountry
in whichit was leastconstrucpolicywas mostsuccessful
tive-thatis, England. There,afteran attemptat a reallyconstructive
policyunderthe earlierStuarts,the gild systemwas allowedto fallto
1 For a strongly
in thisreview
wordedcriticismof some of the utterances
vol. cxlix,
in the Historische
Zeitschrift,
see thatby ProfessorCarl Brinkmann
1933, Pj. I23.
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MERCANTILISM
47
pieces under the impact of new economic forces. When Cunningham
Colbertism" to the policy pursued in
gave the name of " Parliamentary
the period afteri689, he should have added that it was Colbertismnot
onlywithoutColbert,but also, whichis even moreimportant,withoutthe
machinerycreatedby Colbert-that it was, in fact,a
vast administrative
system almost without any administrativemachineryat all. On this
point I thinkthe views of Unwin were almost entirelycorrect. How far
this explainsthe factthatwhat is usuallycalled the IndustrialRevolution
came to England first,instead of beginning in continentalcountrieswhich were probablyless backwardthanEngland beforethattime-is of
course impossible to decide with certainty.' Many other factorsmade
theircontribution,and I can only recordmypersonalimpressionthatthe
absence of administrativecontrol was one of the most important. The
exigenciesof space preventme fromgoing into the causes of the peculiar
characterof this disintegrationof the old order of administrationin
England; but furtherresearcheshave in my opinion decidedlystrengthened the view put forwardby ProfessorTawney, that the most potent
forcewas the attitudeof the Common Law courts.2
In this respectFrance was the opposite of England; and continental
developmentsweremostlyof theFrenchtype,thoughmuchless advanced.
Frenchpolicy,like thatof the restof the continentalcountries,consisted
in a sustainedand verypainstakingattemptat regulation; but it resulted
in upholding,and greatlyenlargingthe sphereof,medievalmethods,not
in adapting them to a changingworld. The great administrativepower
of the French monarchyenabled it to perpetuatethe gild systemand to
spread it over a fargreaterarea than it had regulatedduringthe Middle
Ages. Throughout the Continentthe resultwas the same. Mercantilism
made itselfresponsiblefor what bears the imprintof the Middle Ages,
and carriedthe medievalsystem,especiallyin Germany,fardown into the
nineteenthcentury.Even the enlargementof the local organisationsinto
nationalunits-an importantpart of the policy of unification-remained
forthe most part on paper.
This policy was not altogetherineffective;and least of all in France.
If European industryhad continued on the lines of its earlierdevelopment,cateringfor the needs of the upper classes or the Church,France
would have remainedthe leading industrialcountryin Europe. When,
on the contrary,industrycame to mean mass productionfor mass consumption,the old systemof regulationhad to disappear. It is therefore
to assign any importantpositive influenceto mercantilism,as it
difficult
I It maybe noticedin passingthattheinteresting
articleby Mr. J. U. Nef,
" The Progressof Technologyand the Growthof Large Scale Industryin
Great Britain,"in this REVIEW,V, I934, ought-if at all possible-to be
by a comparisonbetweenthe extentof innovationsat different
supplemented
periodsof time; forthata new process,or theerectionof an extensiveestabof the
takesplace does not give a measureof the actualimportance
lishment,
andInvention,"byG. N. Clark,vi, i936.
newfactor.See also" EarlyCapitalism
2 See also the articleby Mr. Donald 0. Wagner," Coke and the Rise of
EconomicLiberalism,"in thisREvIEw,vol. vi, 1935.
D
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48
THE ECONOMIC HISTORY REVIEWF,
worked out in practice,in the creationof modernindustry,as contrasted
to industryon the old lines. In foreigntrade and business organisation
the influenceof mercantilismwas much more complicated. The Dutch
and English method of equipping trading companies with powerful
privileges,not to say sovereign powers, certainlygave a great impetus
to theirdevelopmentand was a characteristicexample of westernmercantilism. The initiativein these cases, however, was almost entirely
private,and it is hard to say how farthis policy, as embodied e.g. in the
BritishBubble Act of I7I9, retardedthe spread of new formsof business
organisation to wider circles. But this exceptionallyinterestingand
importantsubjectmustnow withreluctancebe leftaside.
Summing up the results of mercantilismas a unifyingsystem,there
cannot be the slightestdoubt that what it leftunfulfilledwas enormous
when compared with its positive results. The real executor of mercantilismwas laisses-faire,which did almost without effortwhat mercantilismhad setout but failedto achieve. The mostspectacularchange in
in I789-9i ; but
this respect was effectedby the French Constituante
English resultswere perhaps in the long run even more important,and
in thiscase verylittleof what disappearedhas so farcome to lifeagain.
The second of the aims of mercantilist
policy emphasisedby Cunningham-that ofpower-has metwitha greatdeal of criticismfromreviewers
of my book, foremostamong themProfessorViner (in this REVIEW, vol.
Vi, I93 5, pp. Ioof.). I agree withmycriticson thatpointto the extentof
admittingthat both " power " and " opulence "-to make use of the
termsemployedby Adam Smith-have been, and mustbe, of importance
to economic policy of everydescription. But I do not thinktherecan be
any doubt that these two aims changed places in the transitionfrom
to laissez-faire.All countriesin the nineteenthcenturymade
mercantilism
the creationof wealththeirlode-star,with small regardto its effects
upon
the power of the State,while the opposite had been the case previously.
I thinkCunninghamwas rightin stressingthe famous saying of Bacon
about Henry VII: "bowing the ancient policy of this Estate from
considerationof plentyto considerationof power."
The most importantconsequence of the dominatinginterestin power,
combined with the static view of economic life as a whole, was the
incessantcommercialrivalriesofthe seventeenthand eighteenthcenturies,
which degeneratedeasily into militaryconflict. One of the most serious
mistakesof Sombartin his treatmentof mercantilism
has been his iterated
statementsof the " dynamic" characterof mercantilism,as contrasted
withthe " static" one of laisse!-faire.It is truethatmercantilists
believed
in theiralmost unlimitedabilityto develop the economic resources of
theirown country(a beliefthatwas even morestronglyheld bynineteenthcenturywritersand politicians),but theyonlyhoped to do so at theexpense
oftheirneighbours.That thewealthoftheworldas a whole could increase
was an idea wholly alien to them, and in this they were " static" to a
degree. The commercialwars were the naturaloutcome of thiscombination; theycould not have playedthe same parteitherin the Middle Ages,
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MERCANTILISM
49
when economic bias was truly" static," or in the nineteenthcentury,
when it was " dynamic" throughout.1
But all thathas now been said of the aims of mercantilist
policy is less
significantto economiststhan the mercantilistattitudeto means.It must
also, I think,be admittedthat mercantilismwas more original in this
latterfield than in the field of economic unity and economic power.
This aspect of mercantilismreveals itselfmost clearlyin its relationto
two distinctthough closely allied objects, commoditiesand money. It
goes almost without saying that the need for a theoreticaltreatmentis
particularlygreatin thispart of the subject.
With regardto commodities,it is necessaryto stressthe factthatthey
can be, and actually have been, viewed from at least three mutually
exclusiveangles. In the eyes of the merchant,goods are neitherwelcome
nor unwelcome; they form the basis of his transactions,to be both
bought and sold; he does not want to exclude them,but neitherdoes he
want to keep them. The consumer,however,is a partisanof "plenty";
he is bentupon ensuringa largesupply,while sales interesthimmuchless.
Lastly,to the producerunder a systemof exchangesales are everything;
in his eyes an over-supplyis the ever-presentdanger, while he sees
nothingobjectionablein keepingthe marketunderstocked.It might,no
doubt, have been expectedthatthesethreeaspectsof commoditiesshould
have existed side by side, either blended judiciously in the minds of
ordinarysane people or representedby different
social groups. To some
extentthiswas so; but much less so thanmighthave been expected.
The merchant'spoint of view can never have prevailed throughout,
for the number of merchantsmust always have been small in comparison with the whole population. Still, it played a very important
part, especiallyin medieval and sixteenth-century
towns like Hamburg,
Antwerp, Amsterdam, etc., which were made " staple towns " for
different
commodities; and that type of policy may thereforeproperly
be labelled " staple" policy. The citizenswere afraidof theircitybeing
depletedof necessitiesby unlimitedexportson the part of the merchants.
The dominatingfeelingthroughoutthe Middle Ages, mostlyin towns,
which were almost the only repositoriesof medieval economic policy,
was the one naturalto consumers; theywanted to hamper or prevent
exportsbut favouredimports; theirtendencywas a " love of goods ";
their policy may be called one of provision. It is easy to show, even
statistically,how measures directed against exports were predominant
throughoutthe Middle Ages, and how difficultthis tendencywas to
overcome,especiallywith regardto foodstuffs.But however long-lived
the medieval view was, it did not preventan opposite tendencyfrom
gaining ground, a " fear of goods," a policy directed against imports
instead of exports-in one word: protection. This became the mercantilist policy when concerned with commodities as distinct from
1 The terms" static" and " dynamic" areusedin a ratherdifferent
connotation in present-daytheoreticaleconomic discussion; and theirambiguity
would makeit desirableto give themup in thesocialsciencesaltogether.
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50
THE ECONOMIC HISTORY REVIEW
money; and I do not thinktherecan be any doubt thatit constitutedthe
most original contributionof mercantilismto the development of
economic policy. It became more and more all-pervading,carryingat
last also the citadelof the "policy of provision,"the encouragementof a
great supply of foodstuffs;introducingin its stead importprohibitions
or importduties on foodstuffs,
as well as bounties on exports of food.
It is importantnot to overlook the factthatprotectionhere does not
mean simplyinterference
with foreigntrade. All the threepolicies now
underconsiderationwere in agreementabout interference;none of them
was anythingapproaching laisse!Z-faire. The characteristicfeature of
mercantilismin this respect went much fartherthan that; it meant a
particularattitudeto commodities. The protectionistattitudemay even
be said to be naturalto the man in the streetin a moneyeconomy,where
the connectionbetween purchasesand sales disappears,being concealed
by the cloak of money. If so, the gradual advance of money economy
duringthe laterMiddle Ages explainsthe likewiseprogressivespread of
protectionfromthe more to theless advanced countries.
It is well known fromlaterdiscussionson commercialpolicy thatone
of the greatestdifficulties
of protection,froma political point of view,
consistsin the factthatthe protectionof one branchof productionmeans
an increasedburdenupon those brancheswhichmake use of its products.
In otherwords, the question ariseshow the factorsof productionshould
is insoluble in principle,but various practical
be treated. This difficulty
solutions are always attempted. What is interestingfrom the present
point of view is the solutionfoundby mercantilismon two pointswhich
appear in moderneyes to be perhapsthe most importantof all, those of
foodstuffsand labour. With regard to agriculture,the European continentlong continuedto regard it simplyas a prerequisiteof industry
and thereforeto keep down the prices of its products; but the opposite
tendency,that representedby England, triumphedin the nineteenth
centuryin almosteverycountry.With regardto labour the earlyattitude
retainedits influence; for labour was not at all " produced " and thereforethe quantityof it could be kept down withoutany disadvantageto
" production." The outcome was the " economy of low wages," which
had a host of advocates among mercantilists
and dominatedactual policy
almost throughout; this aspect of the subject has been studied (froma
from mine) by Edgar Furniss in his far too littlestandpointdifferent
known but reallybrillianttreatise,ThePositionoftheLaborerin a Systenof
It should be added, however,that this view was not quite
Nationalisnm.
universalamong mercantilistwriters,because it clashed with some other
tenetsof theirmercantilism; and especiallynoticeableis an utteranceby
Daniel Defoe, who is otherwisethe reverseof profound; almost alone
writershe stressedthe view thatit is meaninglessto
among mercantilist
be able to sell goods ifthismeansimpoverishingthosewho are producing
them. This paved the way for the position taken up by Adam Smith.
We have now to considerthe mercantilistattitudeto money. Everybody knows the old definitionof mercantilism,which identifiedwealth
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MERCANTILISM
51
withmoney. Though thereare manyexpressionsin mercantilist
literature
which make this evident,it is necessaryto interpretthemin the light of
theircontextsand to give themthe benefitof everydoubt,forthe writers
were mostlypracticalpeople, unversedin difficult
theoreticalproblems
and oftenunused to puttingtheir ideas on paper. It is easy to see the
close relationbetweenan eagernessfor an excess of importsof precious
metals and a policy favouringexportsand hamperingimportsof commodities; forthe excess value of exportsmust be paid for by bullion or
money. It is, however, a fact that mercantilismdid not break new
ground in wanting to increase the stock of money within a country.
That was common beforeits time; it existed duringthe Middle Ages,
side by side and inconsistently
with an eagernessto retaincommodities
otherthan precious metalsat the same time. What mercantilismmeant,
so far,was the reconciliationof the commodityaspect and the money
aspect of the problemby a new policy withregardto commodities. It is
clear thatin thisconsistsits most fundamentalinnovation.
But, on the other hand, mercantilismas a systemof money led to a
more profounddiscussion of economic " theory" than can be found in
any otherpartof its intellectualactivity.The generalresultof an analysis
of its teachingis thatveryfew of its tenetscan be explainedby particular
externalconditionsexistingat the time,but that,on the otherhand,most
of its conclusions follow more or less naturallyfrom quite plausible
suppositions. It was thereforeonly to be expectedthatthis firstattempt
to grapple with these difficultproblems should resultin the treatment
theyreceivedat the hands of these earlywriters. I am afraidthat what
can be said withina short space on this part of the subject will appear
even more dogmaticthan the restof this article; but it is impossibleto
leave aside what to economists is perhaps the most interestingside of
mercantilism; and an attemptto explain these views must thereforebe
Theory
made. Mr.J.M. Keynesin hisrecentbook,TheGeneral
ofEmploy-
ment,Interestand Money,has based a considerable part of one chapter
(ch. xxiii)upon mytreatmentof some of theseideas, concludingthatthey
were much more in accordance with a correcttheoryof economics than
has been thoughtduringthe last centuryand a halfand thanI have been
led to thinkmyself.It could be wished thatthe discussionto which this
book of Mr. Keynes, like all its predecessors,has given rise should be
made to embrace the views of mercantilists; but here I must confine
myself to an explanation of how they arrived at their conclusions,
withoutexaminingthe correctnessof theirviews.
It is difficult
to understand,or at least to explain,themonetaryviews of
mercantilistswithoutdistinguishingbetween theiropinion of money or
precious metals outside and inside the mechanismof exchange. Outside
thatmechanismtherearose theview thatmoneywas more or less identical
with capital. JohnLocke, the philosopher,is perhapsthe best exponent
of theseideas, as he is able to expresshimselfwithmuch greaterclearness
in substancefromthem. He
than most of the writers,withoutdiffering
explicitlysaid thatmoneyhas a double function.First,it yieldsan income
by giving interestand is of the same natureas land, which gives rent;
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5z
THE ECONOMIC HISTORY REVIEW
here money is consideredas a factorof production,as interest-bearing
capital. When it was believed that money yields an annual income like
thatof land, nothingwas more naturalthan thatit should be coveted to
an unlimitedextent. That the inflowof precious metals was considered
to be of utmostimportancelikewisefollowedfromtheoreticalconsiderations, which are easy to explain without the assistanceof a supposition
that they had in actual fact some (unknown) specificpurpose to fulfil.
For, as is still often the case in popular discussion, consumptionwas
consideredto be of no value in itself,and a surplus over consumption
was considered equivalent to an increase in wealth. This increase was
naturallybelievedto consistin an additionto the stock of moneyavailable
withinthe country; and as money,in a countrywithoutgold and silver
minesand makingno use of paper money,could onlycome fromoutside,
the conclusion necessarilyfollowed that only by an excess of exports of
commodities over imports and a consequent influxof money could a
countrygrow rich.
Consideredinsidethemechanismof exchange,i.e. as meansofexchange,
money had the all-importantfunctionof increasing circulation,from
which followed innumerablebenefits. In the eyes of many mercantilist
writers,one of these was risingprices; Samuel Fortreygave a succinct
expressionof this view when sayingthat " it mightbe wished, nothing
were cheap amongst us but only money." It is easy to understandthat
the gospel of highpriceswentwell togetherwiththatof scarcityof goods,
or with fightingthe danger of " a dead stock,called plenty." Besides, it
was believed that a countrywhich had low prices as compared with
neighbouringcountrieswould " sell cheap and buy dear," i.e. that the
prices prevailingin the respectivecountriesof productionwould determine those at which the commoditieswould be sold abroad-without
consideringthat if e.g. English goods sold in France more cheaplythan
the Frenchgoods themselves,theywould be in greatdemandand thereby
be raised in price. The easily explicableeagernessforan ever increasing
circulationat last gave rise to a particularlyinterestingvariant of the
theory,namely,paper-moneymercantilism,
representedin the firstplace
by the famousJohnLaw. It is easy to see thatthistenetwould do away
with a great deal of the usual theoryof mercantilism; for the need for
precious metals,and consequentlyfor an excess of exports,would disappear. But, beforeour own times,paper moneywas normallyregarded
withgreatsuspicion,so thatthe old typeof theorygenerallyprevailed.
had a side which has untilnow been mostlyoverLastly,mercantilism
looked. That may be called its general conception of society. The
remarkablefeatureof this conceptionwas its fundamentalconcord with
that of laissez-faire; so that, while mercantilismand laissez-fairewere
each other's opposites in practical application and economic theory
proper,theywere largelybased upon a common conception of society.
No less remarkableis the characterof this common conception,which
is one thathas usuallybeen consideredtypicalof laissez-faire
and appears
to be almost the opposite of mercantilism,as usually understood.
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MERCANTILISM
53
Especially noticeable is the likeness between writerslike Sir William
Petty and Thomas Hobbes on the one hand and the leaders of English
utilitarianism,
such as Bentham,Austin,and James Mill, on the other.
From other points of view the existenceof ideas common to mercantilismand its successor ought to be less surprising,for theywere in
harmonywiththe generaltrendof thoughtdominatingEurope since the
Renaissance. Philosophically,theirbasis was the concept of naturallaw,
and connectedwiththatwas a beliefin unalterablelaws governingsocial
life in general,a growing tendencyto stress social causality,and consequently to deprecate interferencedirected against effectsinstead of
causes. On principle, mercantilistauthors and statesmen not only
believed in but actuallyharped upon " freedom,"especially " freedom
of trade"; the expression,la libert6
estl'dmeducommerce,
occurs hundreds
of times in the correspondenceof Colbert. To some extentthis was
doubtlessdue to theinfluenceof the merchantclass,thoughthatinfluence
was much weakerin a countrylike France thanin England and Holland;
and the fundamentalidentityof outlook between these three countries
shows the existenceof otherfactorsbesides. The mostimportantof these
undoubtedlywas the influenceof what may be called, by a somewhat
hackneyedword, emancipation-emancipationfrombeliefin traditional
political and social institutions,and the contrarybeliefin social change.
Closely allied to this was the emancipationfrom religious and ethical
ideas in the social field, a secularisationand an amoralisation. Mercantilistscame more and more to recommendamoral means to amoral
ends; theirmost typicalexponentin thatrespectwas the Dutch-English
physicianMandeville, but Sir William Pettybelonged to the same category; both, it should be noted, were entirelyunconnectedwith the
merchantclass. Non-religiousand amoral views came to lightin every
in the recommendationof
direction,in the treatmentof interest-taking,
luxury,in the toleranceof hereticsand Jews as favourableto trade,in
oppositionto celibacy,alms-giving,etc.
As I said just now, the remarkablethingis not the existenceof these
views, but the fact that while theywere common to both mercantilism
mercantilist
and laissez-faire
and laissez-faire,
policies were poles asunder.
I thinkthe explanationof this apparentantinomyis to be found in one
fundamentaldifference,
namely,in the mercantilists'disbeliefand the
liberals' beliefin the existenceof a pre-establishedharmony. In the eyes
the desired resultswere to be effected" by the dextrous
of mercantilists
managementof a skilfulpolitician"; theywere notexpectedto follow
from the untrammelledforces of economic life. And the result was
remarkable. If I may be allowed to quote a previous conclusion of my
own: it was preciselythis general mercantilistconception of society
which led statesmento even greaterruthlessnessthan would have been
possible without the help of such a conception; for though they had
rationalisedaway the whole social heritage,they had not arrived at a
belief in an immanentsocial rationality.Thus theybelieved themselves
justifiedin theirinterference
and, in addition, believed in its necessity,
withoutbeing held back by a respectforsuch irrationalforcesas tradition,
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54
THE ECONOMIC HISTORY REVIEW
ethicsand religion. The humanitarianoutlook was entirelyalien to them,
fromwritersand politicianslike
and in this theydifferedfundamentally
Adam Smith,Malthus,Bentham,Romilly,and Wilberforce. Lastly,the
influenceof theirsocial philosophyupon theiractions was weaker than
thatof theirotherconceptions.
There remainsthe question,whetherit is admissibleto speak of mercantilismas a policy and as a theorygoverned by an inner harmony;
thishas oftenbeen denied in lateryears,and quite recentlyby Mr. T. H.
Journal
(vol. xlv, I 935, p. 7I 9). As to
Marshallin a reviewin the Economic
a systemof protection,
those parts called, in my sketchof mercantilism,
money,and society,it appears to me beyond doubt thatsuch a harmony
existed. This does not, of course, mean thatall statesmenand all writers
were in completeagreementin theirarguments,and even less that they
all advocated the same measures. In the choice of practicalissues they
were greatlyinfluencedby personal and class interests; but what shows
the fundamentalunity of their underlyingprinciplesis that opposite
measureswere advocated on the basis of a common body of doctrine.
Also the factthatwritersoutside the clash of commercialinterests,such
as Pettyand Locke, argued on exactlythe same lines as the protagonists
as well as the opponentsof powerfulcommercialinterestslike thoseof the
East India Companyseems to prove it.
Needless to say,the relationbetweenopinions on economicmeans and
those on economic ends-the latter identical with commercial and
monetarypolicy as applied to a unifyingsystemand a systemof powerwas less intimate.However, the connectionwith the power of the State
was quite clear to numerous statesmenand pamphleteerswhen they
advocated protectionand an increasein the supply of money; colonial
enlighteningin thisrespect,as can be seen,e.g. from
policyis particularly
the books by G. L. Beer. On the otherhand,withregardto mercantilism
thatin England, where ideas
as a unifyingsystem,thereis the difficulty
on protectionand money supply were for the most part elaborated,the
was of smallimportance.On theContinent,
unifyingside of mercantilism
however, Colbert presents a clear-cutexpression of all sides of mercantilismas hereunderstood; and he is not onlythe one greatstatesman
who completelyadopted mercantilism,
but he was also given to working
out on paper theprinciplesunderlyinghis actionsto an extentuncommon
among practicalpoliticians. I thereforethinkit admissibleto considerall
aspects of mercantilism,as defined here, as interconnected,while
admittingthatthe unifyingaspect was more independentof the restthan
the otherswere among themselves. This, of course, does not mean that
what has here been called mercantilismbelonged in all its ingredients
exclusivelyto the period between the end of the Middle Ages and the
nineteenthcentury.Like all otherhistoricalrealities,it drew largelyupon
ideas and externalrealitiessurvivingfromprevious ages, and in its turn
influencedlater developments. Mercantilismis simply a convenient
termforsummarisinga phase of economicpolicyand economicideas.
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