You are on page 1of 12

Revisions in Economic History: V.

Author(s): Eli F. Heckscher
Reviewed work(s):
Source: The Economic History Review, Vol. 7, No. 1 (Nov., 1936), pp. 44-54
Published by: Wiley on behalf of the Economic History Society
Stable URL: .
Accessed: 03/01/2013 12:18

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of
content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms
of scholarship. For more information about JSTOR, please contact

Wiley and Economic History Society are collaborating with JSTOR to digitize, preserve and extend access to
The Economic History Review.

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions

By F.


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
even with regardto the somewhatarbitrarily selectedpoints raised here
it is impossibleto give chapterand verse for my conclusions.'
The general weakness characteristicof the earliertreatmentof mer-
cantilismwas 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
of present-day economiclife,thoughtheygive the historianthe important
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
theoreticalbackgroundto the treatmentof mercantilism, I hardlyknow
1 I must,therefore, confinemyselfto a generalreference to mybook Mer-
cantilism(George Allen & Unwin,Ltd., London, 1935; two vols.). The-
outspokenor implied-egotismof the presentarticleis a matterof sincere
regretto me; but whathas now been said explainsit to some extent.For-
tunately, I am at thesametimeable to embracetheoccasionof noticingsome
constructive criticisms ofthebook in question.Besidesthosementioned below
I shouldliketo callattention to an articleupontheGermaneditionofmybook,
" Le mercantilisme: un etatd'esprit,"by ProfessorMarcBloch,in theAnnales
6monomique etso'iale,vol. vi, 1934, pp. I 60-3, andto theveryvaluable
Introduction to theNuovaCollanadi Economisti, vol. iii, " StoriaEconomica"
(Torino, 1936), by the editor,ProfessorGino Luzzatto.-For a summary, I
may referto the articleon " Mercantilism'" in the Enyelopadiaof theSocial
Sciences,vol. x, 1933, pp. 333-9,thoughit containssome minorerrors.

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
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
The differenttreatmentaccorded to mercantilismby, say, Adam
Smith,Schmoller,and Cunninghamis principallyrooted in insufficient
attentionto the difference between ends and means. The ends of states-
men 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 econo-
micallyand 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 fore-
most, 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
unconsciousinterpretations of the tendenciesof economic life. Through
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 considera-
tions. 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
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

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
meat all convincing, I thinkthereis something to be saidforthiscriticism
ofmyprevioustreatment ofthesubject.' It is notonlythattheattempts
at unitywere,withfewexceptions, failures-suchwas theresultof the
majority ofmercantilist measures; eventheseattempts themselves were
to a greatextenthalf-hearted. It is difficultto findmorethantwo bold
attempts in thisdirection in theleadingcountries.One is theStatuteof
Artificersof I563 in England,theotherColbert'stariff of i664. Besides
thesetwo, the unifying measuresin customsadministration in Sweden
in theseventeenth century wereto a verygreatdegreesuccessful;but
Sweden,like England,was a countrywheredisintegration had been
avoidedin theearlierperiod,andconsequently in Swedentheproblemof
unificationwas 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
mercantilism. It fellinto two ratherdistinctcategories.The one was
concernedwith" feudalism," i.e. the disintegration causedby moreor
less anarchicalmeasuresundertaken by the lawlessor self-willed terri-
toriallordsand provincialnoblesin theirown interests.Briefly stated,
therewas littleneedforanyactivity againstthistendency in Englandand
Sweden.In Germany, on theotherhand,theneedforitwas greater than
almostanywhere else; buttheefforts to overcomethisanarchycameto
verylittle.The country whereboththeneed was greatand something
was done to satisfyit was France; the Frenchmonarchy was able to
achievesome remarkable resultsin thisfield,thoughmuchof the old
disorderwas allowedto surviveuntilthegreatrevolution.
Even moreimportant than" feudalism " was thatparticular typeof
disintegration whichresultedfromtheindependence ofthetowns; and
in spiteof some dissimilarities mostEuropeancountriespresentedthe
same fundamental featuresin thisrespect.The authorwho has done
most to elucidatethispart of'the subjectis Georg von Below; and
thoughhis studieswerealmostentirely confined to Germany, and there-
foreleftaside the mostimportant countriesin themercantilist era,his
conclusions appeartometo be generally unassailable, evenwhenextended
to othercontinental countries.The medievaltownshad createdthemost
consistent,vigorousand long-livedsystemof economicpolicythathas
everexisted,themostimportant partsofwhichwerethegildsystem and
the internalregulationof industry in general,and the organisation of
foreigntrade and commerce.The fightagainstmedievalmunicipal
policywas mostsuccessful in thecountry in whichit was leastconstruc-
tive-thatis, England. There,afteran attemptat a reallyconstructive
policyunderthe earlierStuarts,the gild systemwas allowedto fallto
in thisreview
wordedcriticismof some of the utterances
1 For a strongly

see thatby ProfessorCarl Brinkmannin the Historische vol. cxlix,

1933, Pj. I23.

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
pieces under the impact of new economic forces. When Cunningham
gave the name of " Parliamentary Colbertism" to the policy pursued in
the period afteri689, he should have added that it was Colbertismnot
onlywithoutColbert,but also, whichis even moreimportant,withoutthe
vast administrative machinerycreatedby Colbert-that it was, in fact,a
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 continentalcountries-
which 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 decidedlystrength-
ened 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 earlierdevelop-
ment,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 con-
sumption,the old systemof regulationhad to disappear. It is therefore
to assign any importantpositive influenceto mercantilism,as it
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
supplemented by a comparisonbetweenthe extentof innovationsat different
periodsof time; forthata new process,or theerectionof an extensiveestab-
lishment, takesplace does not give a measureof the actualimportance of the
newfactor.See also" EarlyCapitalism andInvention,"byG. N. Clark,vi, i936.
2 See also the articleby Mr. Donald 0. Wagner," Coke and the Rise of
EconomicLiberalism,"in thisREvIEw,vol. vi, 1935.

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
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 westernmer-
cantilism. 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 mer-
cantilismwas laisses-faire,which did almost without effortwhat mer-
cantilismhad setout but failedto achieve. The mostspectacularchange in
this respect was effectedby the French Constituante in I789-9i ; but
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 Cunning-

ham-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
mercantilism to laissez-faire.All countriesin the nineteenthcenturymade
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 bynineteenth-
centurywritersand 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 thiscombina-
tion; theycould not have playedthe same parteitherin the Middle Ages,

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
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 com-
parison 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 mer-
cantilist policy when concerned with commodities as distinct from
1 The terms" static" and " dynamic" areusedin a ratherdifferent
tion in present-daytheoreticaleconomic discussion; and theirambiguity
would makeit desirableto give themup in thesocialsciencesaltogether.

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
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
be treated. This difficulty is insoluble in principle,but various practical
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 con-
tinentlong 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 there-
forethe 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
standpointdifferent from mine) by Edgar Furniss in his far too little-
known but reallybrillianttreatise,ThePositionoftheLaborerin a Systenof
Nationalisnm. It should be added, however,that this view was not quite
universalamong mercantilistwriters,because it clashed with some other
tenetsof theirmercantilism; and especiallynoticeableis an utteranceby
Daniel Defoe, who is otherwisethe reverseof profound; almost alone
among mercantilist writershe stressedthe view thatit is meaninglessto
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. Every-

body knows the old definitionof mercantilism,which identifiedwealth

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
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 com-
modities; 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
made. Mr.J.M. Keynesin hisrecentbook,TheGeneral
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.
to understand,or at least to explain,themonetaryviews of
It is difficult
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
than most of the writers,withoutdiffering in substancefromthem. He
explicitlysaid thatmoneyhas a double function.First,it yieldsan income
by giving interestand is of the same natureas land, which gives rent;

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
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 utmostimportancelikewisefollowedfromtheoreticalconsidera-
tions, 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 deter-
mine 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 dis-
appear. But, beforeour own times,paper moneywas normallyregarded
withgreatsuspicion,so thatthe old typeof theorygenerallyprevailed.

Lastly,mercantilism had a side which has untilnow been mostlyover-

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.

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
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 mer-
cantilismand 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 con-
sequently 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. Mer-
cantilistscame more and more to recommendamoral means to amoral
ends; theirmost typicalexponentin thatrespectwas the Dutch-English
physicianMandeville, but Sir William Pettybelonged to the same cate-
gory; both, it should be noted, were entirelyunconnectedwith the
merchantclass. Non-religiousand amoral views came to lightin every
direction,in the treatmentof interest-taking, in the recommendationof
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
and laissez-faire,mercantilist policies were poles asunder.
and laissez-faire
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
of mercantilists the desired resultswere to be effected" by the dextrous
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,

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions
ethicsand religion. The humanitarianoutlook was entirelyalien to them,
and in this theydifferedfundamentallyfromwritersand politicianslike
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 mer-

cantilismas a policy and as a theorygoverned by an inner harmony;
thishas oftenbeen denied in lateryears,and quite recentlyby Mr. T. H.
Marshallin a reviewin the Economic Journal(vol. xlv, I 935, p. 7I 9). As to
those parts called, in my sketchof mercantilism, a systemof protection,
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 power-
was 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
policyis particularly enlighteningin thisrespect,as can be seen,e.g. from
the books by G. L. Beer. On the otherhand,withregardto mercantilism
as a unifyingsystem,thereis the difficulty thatin England, where ideas
on protectionand money supply were for the most part elaborated,the
unifyingside of mercantilism was of smallimportance.On theContinent,
however, Colbert presents a clear-cutexpression of all sides of mer-
cantilismas 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.

This content downloaded on Thu, 3 Jan 2013 12:18:57 PM

All use subject to JSTOR Terms and Conditions