Elementos Liberales Del Mercantilismo

The Liberal Elements in English Mercantilism Author(s): William D.
Grampp Reviewed work(s): Source: The Quarterly Journal of Economics, Vol. 66, No. 4 (Nov., 1952), pp. 465-501 Published by: Oxford University Press Stable URL: http://www.jstor.org/stable/1882100 . Accessed: 01/02/2012 14:53
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp 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 support@jstor.org.
Oxford University Press is collaborating with JSTOR to digitize, preserve and extend access to The Quarterly Journal of Economics.
http://www.jstor.org
THE
QUARTERLY JOURNAL OF ECONOMICS

Vol. LXVI November, 1952 No. 4
THE LIBERAL ELEMENTS IN ENGLISH MERCANTILISM
By WILLIAM D. GRAMPP
I. The goal offullemployment, - II. The meansto fullemployment, 467. 473.- III. Economicfreedom mercantilist 486. -IV. The excepin doctrine, tionsto freeexchange, 492.- V. The historical rootsof mercantilism, 496. on VI. Economists mercantilism1 499.
is also customary describe to as of mercantilismtheantithesis liberal, orclassical, economic doctrine.AdamSmith usedsomeofhisstrongest invective has againstit, and sincehis timemercantilism been condemned liberaleconomists thoroughly by becauseits practices kindofinterference theyalwayshave regarded which werethevery or as useless, unwise, mischievous. of from By reasoning theactualpractices themercantilist states, and economists historians thatthedoctrines usuallyhave supposed of oftheperiod mercantilism a justification its institutions. were of in of It is common studies mercantilism theauthor explain, for to say, of both therestriction imports referring to thetariff by dutiesofthe doctrine a favorable of age and to the concurrent balanceoftrade, himto movefreely of orfor among expressions publicofficials, laws, and tracts discourses, to suppose and economic thatbecauseparticuwereexercised, pricefixing, lar controls like theymusthave been in of justified the economic writing the time. No one, of course, of would write recent this be economic policy way. It would unthinkthe able to describe New Deal by an indiscriminate to reference the of andHansenandto thepublic works Keynes of D. papers Franklin and of and Roosevelt theprivate memoranda Harry Hopkins always the to supposethatwhatever statedid or wantedto do foundits in rationalization economic doctrine. of of Whenstudies mercantilism a method thiskind,they use
465
in The period of mercantilism England extendedfromroughly 1500 to 1750, and it is customaryto apply that word both to the economic writingsof the period and to its economic practices. It
466
withthe readerthat in manyways is distressingly leave an impression wrong. He mustbe led to thinkthat because the mercantilist states did not believe in the marketas the mechanismfordischarging the of of economicfunctions society,the economists the age held the same beliefand werein favorof the intricatekind of regulationwhichwas practiced. More indeed than this is implied. If the practitioners of did not understandprices, money,foreigntrade, and mercantilism othermatters,it followsthat the economistsalso were wantingin a knowledgeof these matters. Especially is it impliedthat the mercantilistsdid not understandthe mechanism whichthe economic by problemis solved in a freesocietyand that this knowledgewas the signal discoveryof classical economics. From this it must be conwriters wereparticularly cludedthatthemercantilist deficient because they did not understandhow the price systemdirectsresourcesto particularemployments causes the productto be distributed a and in certainway. None of theseimpressions about mercantilist doctrine,as distinct is mercantilist from practice, correct. Yet theyare unavoidable ifthe doctrineand the practiceare thoughtto be parts of a unified system. It is the purposeofthisessay to re-examine ideas expressed the the by of mercantilist writers England betweenabout 1550 and 1750 in order to show that the mercantilists elements anticipatedmany important of classical economic doctrine,includingthe classical conceptionof the the self-interest, pricemechanism, mutualadvantage in exchange, and the place of the state in the economicorganization. To this end, to it is necessaryfirst explain that the objective of mercantilist docfromwhat it is usually thoughtto be. trinewas different AlthoughI do not know that the doctrinehas ever been interpretedas it will be here,a numberof writers have in fact suggested that English mercantilism was not whollymistaken,and that it was in some ways a necessarypreliminary classical economics. Marto shall thoughtof it thisway.' Vineris charitableto the later writings for their traces of free trade theory.2 Keynes observed that the mercantilists'monetarytheory was a valid effort connect the to moneysupplywiththe rate ofinterest.3Heckscherclearlynoted the mercantilist expressionsin favor of a free market,even though he thoughttheywerenot sincere.4 Lipson contendsthat the mercantil1. Alfred Marshall, Principles Economics of (8thed.), p. 755. 2. Jacob Viner,Studiesin theTheory International of Trade (New York, 1937),pp. 74 etseq. 3. J. M. Keynes,The GeneralTheory Employment of Interest Money, and p. 341. 4. Eli F. Heckscher, Mercantilism (London,1935),II, 323.
LIBERAL ELEMENTS
IN ENGLISH MERCANTILISM
467
ists oughtnot to be dismissedin quite the cavalier fashionin which it has been commonto treat them.' Edmund Whittakerfindseviin of dences of individualism the writings some of them.6 Although none ofthesemencame to the conclusionofthisessay, and cannotbe cited in any way to substantiateit, I mentiontheirworkin ordernot to appear to claimformyviewsmorenoveltythantheyactuallyhave. In what follows,the words "mercantilism"and "mercantilist" refer and to the Englishmen always to Englishdoctrine who expressed it, and, exceptwhenexplicitly to stated,neverrefer economic instituhistoricalcircumstances, the rulersor administraor tions,practices, tors of the age. I It is not in an obviousway that mercantilist liberaleconomic and policy are related. What indeed is obvious is the great difference between the measures which each proposed to advance its policy. The liberalswantedthefunctions economicorganization of performed by a market which was as free as possible, and the mercantilists believed the functions would be performed betterif the marketwere in controlled certainways. However,thereis anotherway to analyze mercantilist fromthe commonone of comparing doctrine,different its proposed controlswith the relative absence of controlin liberal doctrine. It is to examinethe presuppositions mercantilist of doctrine and to ask: What did the mercantilist writers believe was the objective of economicpolicy? What weretheirmeasuresof controlmeant to achieve? The answer must be taken fromdiverse writings a of some two centuries. In generalizing periodcovering from them,there is the dangerofsupposingthemto be moreconsistent than theyactually are, just in order to make the question manageable. But the hazard is worthtaking. Mercantilism was an important stage in the developmentof economicideas, and a freshapproach to it may aid in makingit morecomprehensible. Had the mercantilist writers been asked foran explicitstatement of theirobjective,theyundoubtedly would have said it was to create a strongand secure England. Althoughtheir motives were mixed (as most writers' are) the principalmotivewas the national interest. It was not this, however,which made mercantilism different from classical economics. The classical economistsalso were nationalists; they valued the political and militaryinterestof England above all
5. E. Lipson,A PlannedEconomy FreeEnterprise or (London,1944),chap.2. 6. Edmund Whittaker, History EconomicIdeas (New York, 1943), A of pp. 141-42,145-47.
468
and efficiency even justice in return thingsand werereadyto sacrifice forgreaternational power. The title of Smith's workdescribesthe purpose of his policy of laissez faire. The purpose of JohnHales's about 1549, policy is also indicatedby the title of his work,written A DiscourseoftheCommon Weal of This Realm ofEngland. Now the word "nationalism" is a piece of intensionallanguage, and when connohas applied to the economists, to be shornof its inflammatory tation. They were not like Lord Copper, who stood for "strong at self-sufficiency everywhere, mutually antagonisticgovernments abroad." Rather they were devoted to God, home, self-assertion St. George,and particularly England. from liberaleconomists the was What separatedthemercantilists theirdifferent means of advancing the national interest. The merfullyemployed, cantilistsbelieved the latter requireda prosperous, and growing economy. The connectionbetween power and wealth was expressedabout 1548 in the Pleasant PoeyseofPrinceliePractise by Sir WilliamForest:
mustaid true. For kingsoftheircommons sometime the The moretherefore publicweal dothafflow; The moreis their now. wealth:thisreasonproveth
economy mercantilthe necessary a growing for Amongthe conditions ists cited: a brisktrade,adequate domesticspending,a properwage of a and pricestructure, particulardistribution income,an excess of a class, security over imports, diligentand obedientworking exports of the fullutilization of privateproperty, elimination monopoly, the ofagricultural lands,an adequate moneysupply,a low rateofinterest, of and the fullemployment the labor force. The greatestattention was givento the moneysupply,spending, demand, and employment.Spending, in today'slanguage,effective or as mutuallydetermined:whatever and employment were regarded changedone wouldchangetheotherin thesame direction.The money of was made a determinant spendingwhile supply in some writings related to spending. To most of the in othersit was not directly was an amount of the mercantilists, conditionof national prosperity and these writers to maintain full employment, spendingsufficient subordinated the accumulation of bullion and other methods of of the increasing moneysupplyto the positionofdeterminants spendwas taken to be a measureof the quantityof ing. Full employment was the ecogoods producedby the economy,and full employment nomic objective of mercantilist policy, as distinctfromits political objective whichwas national power. was expressed early in the The objective of full employment
LIBERAL ELEMENTS
469
by period of mercantilism John Hales, who wrote that the state should adopt measureswhichwould assure a "great plenty"of goods in and the towns and that this requiredthe employment agriculture of all those able to work.7 At the time Hales' workappeared, there also appeared an anonymous tract called Policies to Reduce This Realme Unto a ProsperousWealtheand Estate,in which the author and domestictrade would be increased"if every stated that foreign laborerand artificer, all other[of]the commonpeople werewell and its objective of full employment, set at work."8 The mercantilist with a flourishing trade, and the importanceof trade to connection the nation,weresummarizedby Edward Misselden in 1622:
to of of And whathas morerelation matters state,thanCommerce merchants? lands and rents For when trade flourishes, King's revenueis augmented, the is the improved, navigation increased, poor employed. But if tradedecay,all thesedeclinewithit.9
of was expressedby WilliamPetty The importance employment (1662) in his familiarpropositionthat as the nation's population (on the assumpincreasedits wealth increasedin greaterproportion increasedas muchor morethan the tion,it is clear,that employment population). He believed the state should take the greatestcare to utilizethe labor forceand to keep its skillsin order. If necessarythe idle workers should be
to upon Salisbury Plain, bringthe stonesat employed build a uselesspyramid thiswould mindes a to or at to keeptheir Stonehenge Towerhill, thelike,for worst and bodiesto a patience more of and labours profitable discipline obedience, their
when need shall require it.1
Petty's expedient was ridiculed sixty-sixyears later by the on authorof the anonymousConsiderations theEast India Trade,but Petty's principlewas accepted. The later authorwrote:
and withgreat A peoplewouldbe thought extravagant onlyfitforbedlamwhich to stonesfrom itself remove stirand bustleshouldemploy place to place.
the later author held, Yet as a method of increasingemployment, was no moresillythanthe restricting imports. If trade of such a shift were free,"every individualman in England mightbe employedto
Weal of This RealmofEngland, of 7. JohnHales, A Discourse theCommon 1893),pp. 59, 98. ed. ElizabethLamond (Cambridge, ed. III, Economic Documents, R. H. Tawneyand EileenPower, 323. 8. Tudor 9. Edward Misselden,Free Trade, or theMeanes to Make Trade Florish (London,1622),p. 4. Writings, CharlesHenryHull (Camed. 1. Sir WilliamPetty,Economic bridge, 1899),I, 31, 35.
470
of some profit the kingdom."2 It is clear that the later author believeda wiseeconomic policysoughtto maximizethenationaloutput, whichof coursewas exactlywhat Petty believed. Wheretheirviews differed was on the means of achieving the objective. The later author must have assumed that labor was mobile,or possiblythat freetradewould make labor mobile,and he thencould arguethat the greatestoutputrequiresthe specializationwhichfreetrade provides. and therefore Petty, on the otherhand, made no such assumptions, of the maximizing outputseemedto himto requirethe fullutilization of labor by whatevermeans were appropriateto the circumstances of the moment. William Temple (1671) maintainedthat the riches of a nation wealthin werein its people and that theywould add to the country's proportionto necessity'sdrivingthem to industryand enterprise.' was moreimporNicholas Barbon (1690) believed that employment tant than efficiency consumptionand in the use of resources.4 in Josiah Child (1690) believed that the obstacles to greaternational freeexchangeand consequently wealth were those which restricted he reduced employment, and the reforms submittedgave attention to increasing employment.5Sir Dudley North (1691), who has been called one of the first freetraders,wrote: "Commerceand trade, as the labour of man, but as the stock hath been said, first springfrom increases, dilatesmoreand more." As trade expands,or "dilates," it it "never thrivesbetterthan when riches are tossed fromhand to of hand."6 Charles Davenant (1695) reasonedthat security employment increased the industryof the worker,encouragedhim to be and thrifty, therebywas favorableto economicgrowth.7 JohnLaw (1720) argued that one of the main benefitsof an increase in the moneysupply would be an increasein employment.8Daniel Defoe in his famousdefenseof tradesmen(1732) held that the main benefit oftradewas in the numbers employed.9 JohnCary (1745) believed it
on (London,1856), 2. A SelectCollection EarlyEnglishTracts Commerce of pp. 581, 582. (Edinburgh, 1754),II, 59-60. 3. Sir William Temple,Works 4. Nicholas Barbon,A Discourseof Trade ([London: 1690] A Reprint of Baltimore, 1905),p. 32. Economic Tracts, JacobHollander, ed. A of 1751),pp. 54-56. 5. Josiah Child, NewDiscourse Trade(5thed.; Glasgow, of 6. Sir Dudley North, Discourses Upon Trade ([London,1691]A Reprint Baltimore, 1907),pp. 25, 27. Economic Tracts, JacobHollander, ed. the 7. Charles Davenant,An Essay UponWaysandMeansofSupplying War (London,1695),p. 143. with 8. JohnLaw, Moneyand Trade Considered, a ProposalforSupplying theNationwith Money(London,1720),p. 11. etc. EnglishTradesman, (London,1732),II, 9. Daniel Defoe, The Complete
109, 111.
LIBERAL ELEMENTS
471
that the wealthof the nationwas in the "labourof its people."' was that Tucker prosperous, Josiah (1750)wrote thecountry themore of in branch business."2 "themore there employed every are persons who mercantilist was quitenearthe BishopBerkeley (1751),another of thatthesatisfaction wants theultiis classical economists, argued and of and mateobjective economic organization thatthecomplete is thereto.3Malachy of efficient employment resources necessary of that wants Postlethwayt (1759)reasoned thesatisfaction individual full and required employment competition.4 of summary meant showtheimportance full is to The preceding indicated imporin how policy. Thewriters employmentmercantilist that assertion thewealthof tanttheyfeltit to be by their frequent on they thenation depended its"labor";bythesignificance attached statement that the by to the size of the population; the common of it by advantage tradewas in the numbers employed; the grave of overthe extent unemployment, and concern idleness, expressed theseproblems remedies which in wereto by poverty, thenumerous was of Most and be eliminated theproductivitylabor tobe increased. of moresimply and comof the measures policycan be explained was that fullemployment the mercantilists' pletelyby assuming thatsomeother directed their thanby supposing purpose objective ideas. of to It is, however, possible assumethatthe amount "trade" as if of was thekeystone policy, oneusestheword, themercantilists for all activity. Theirdesigns "a usuallydid,to include economic the of methods assuring maximum become amount trade"then brisk is is effort which whatfullemployment also meantto ofproductive in meaning modern "trade,"has a narrower provide. But theword, one and process, therefore usage,denoting aspectofthedistributive one the manuitsuse can mislead intothinking mercantilists ignored and whichin fact shipping, other industries, facturing, agriculture, ideas can be manyof the mercantilists' theydid not. Moreover, of more to related than directly theamount employment totheamount ideasaboutpsychological oftrade(as their motivation).Of course, but also the words"fullemployment" can be misleading, less so, can thanany others which describe objective merof the I believe, cantilist policy.
1. JohnCary,A Discourse Trade(London,1745),p. 82. on Tucker,A BriefEssay on ... Trade(2d ed.; London,1750),xii. 2. Josiah The (Glasgow,1751), Queries 3. The RightRev. GeorgeBerkeley, Querist 46, 47, 168. and Interest Explained Britain's Commercial Great 4. MalachyPostlethwayt, Improved ed.; London,1759),II, 367, 370-71,377. (2d
472
The objective was not,as often supposed, accumulation the of a balanceof trade,the advancement private of bullion, favorable the interests, subordination theworking of class,low interest rates, of of the elevation tradeat the expense other industries.Some of theseconsiderations means theendoffull were to employment; some werenotentertained themajority writers all. A fewofthe by of at mercantilists have confused withwealthand so made may money an bullionism end. Noneoftheconsiderations occupied important as a placeinthedoctrine full as employment andnoneserves well did, so the of measures control which to unify particular wereproposed. Oncefullemployment takenas the objective mercantilist is of thatpolicy's from difference liberal policy, policynarrows considerthe ably. Although differencenoteliminated, is much than is it less ifonesupposes thattheobjective mercantilism say,a favorof was, the able balanceoftrade,which liberals nevercouldhave accepted as an end. As manyof the commentaries assumea favorable balance of to of trade be theobjective mercantilist it is policy, perhaps necessary in to explain whythatviewis notaccepted thisessay. If thishad it that wouldhave beenthemercantilists' objective, is unlikely they givenmuchattention the money to supply, employment, spending, whichhave onlyan indirect domestic trade,and to other matters if tradebalance. Moreover, connection, anyat all,witha favorable would a of haveemphasized restriction imports leastas much at they in a as an increase exports, sinceby either method favorable balance of to couldhave been realized. One can try, course, explainaway their doctrine assuming were and by they ignorant illogical.But this less doesthem thanjustice. It alsoleavesonepuzzled over later why have studiedwhat theysaid so closely, theywere if generations and scribblers. merely unenlightened unreasonable to a It is myopinion their that desire maintain favorable balance of tradewas based on the assumption Englandwouldbe able that morethanit imported an to increase employment exporting by in which plausible theshort is run. In thelongrun, the assumption if domestic policywouldhave supported employment Englandhad that invested netreceipts its abroad;and it is ofinterest somemerlike this cantilists, ThomasMun (1630),recommended practice.The as balanceoftrade doctrine sometimes is favorable explained a device to it the tosecure bullion, which, is said,wasthought increase national is wealth. Sincethemercantilists' monetary theory explained below, of it needonly saidherethatthiswas notthebelief mostofthem. be
LIBERAL ELEMENTS
473
II proposed the to full In order achieve employment, mercantilists beencalled have often of a variety measures.Most ofthemeasures should not undertake. examplesof what an economy wonderful of if to sensible related the objective policy. theybecome However, (1) affected: thetotal which into can The measures be grouped those of wages,and thedistribution (2) of spending the economy, prices, of and (4) thesupply labor. The measures rates, (3) income, interest mainly employment weremeantto increase groups in thefirst three group for the by increasing demand laborwhilethosein thefourth to the were meant increase laborsupply. believedthe economywould (1) Most of the mercantilists by amountof spending indiif prosper therewas the maximum to and enterprise, foreigners, whichPettyadded viduals,business of mostmercantilists thought spending Although the government. of some support employment, notedthat on exports theprincipal as was also important. in markets Petty spending whollydomestic which publicextravajustified werecircumstances notedthatthere into he becauseit putmoney thehandsofthetradesman; did, gance, to for possible, it think moreprudent thestate,whenever however, to to spending capitalgoods(orencourage use itsfiscal powers direct (a investment)-. Barbon observedthat covetousness high proto revenues, income, government consumption, pensity save) reduced stimulant thatthe mostpowerful He and employment. submitted in it was he to trade, eventhough thought wasteful itself, spending the becameobsolete.6Defoebelieved econon goodswhich quickly of whenconsumers spenta largeproportion their omyprospered to himself be frugal in he although urgedthe tradesman income, wouldbe secure.' North was less thattradeand employment order thanwith stateof the of with concerned thesolvency thetradesman he fails, all trade,which, said, will declineif "the consumption as in do so of houses menbyreason poverty, notspend much their when were by they as formerly did." Manyofthemercantilists alarmed alarm frequent their and of by thehoarding goldand silver, showed who fancied"plate" and on thosewho on aspersions individuals to view of hoarding werecovetous. Northdeferred the common a of by to the extent defending miser sayingthateven he spends and by occasionally whenhe does "thosehe sets on workbenefit their beingemployed."8
5. 6. 7. 8. Petty,op. cit.,I, 33, II, 269. Barbon,op. cit.,p. 32. Defoe,op. cit.,II, 118. op. North, cit.,pp. 25, 27-28.
474
However, was foreign it trademorethandomestic tradewhich the because theybelievedit contributed interested mercantilists, to moreto employment, the nation'swealth,and to its power. 1600stressed inflationary of the effect an excess The writers after in and increase employment overimports theconsequent ofexports that a favorable balanceof produced inflation. by They reasoned thatthe greater tradebrought money goldand silverto England, to and spending supplycausedspending increase, thatthe greater moredirectly would increase employment. Some viewedexports meantgreater that greater and naively, employthinking exports ment. Few of the mercantilists carefully between distinguished and long-run of effects a favorable tradebalance,a dethe shortif which wouldbe morenoteworthy it werenot ficiency, however, critics also failedto makethe distinction thatmanyof their carefully. In orderto securea favorable probalance,the mercantilists commercial with posed theirfamiliar policy:duties on imports, rebateson raw materials used in making exports; prohibition the of of certain duties;subsidies imported goods;the removal export to and otherassistance the export grants to industries; monopoly in certain jointstock companies engaged foreign trade;a prohibition of of the export coinand bullion;and an aggressive foreign policy from markets by whichEnglandwouldhelp its exporters capture their competitors. who 1600 believeda favorable The mercantilists wrotebefore bullion war purfor balancewouldenableEnglandto accumulate Hales regarded export the industries most as poses. For thisreason valuableto thenation, saying:"I wouldhave themmostpreferred that bringin mostcommodity treasure the and and cherished to and here.9 country," commodity treasure beingsynonyms of Not every ofthemeasures policy one notedaboveis proposed In in all ofthemercantilist writings. sometheyevenappearto be the idea thatan increase spending in contradicted, especially central in For causes an increase employment. example, Templewas opon Otherwriters posed to indiscriminate spending consumption. and urgedtheiruse be restricted. the deplored taste forluxuries to this on rested one or more However, kindofopposition spending of three and thatthe mercantilists in did, arguments, each reveals and to regulated fact,relatespending employment wished spending in order thatit wouldincrease employment. Temple, likehis con9. Hales, op. cit.,p. 127.
LIBERAL ELEMENTS
475
temporary, Petty, believed thatEngland required morecapital, and he urgedless consumption of incomein orderthat therebe out on greater spending capitalgoods(which turn in wouldincrease the productivity labor). The mercantilists opposedspending of who did on luxuries so partly and becauseluxuries wereimported partly use because their bytheworking reduced willingness work. its class to (2) The mercantilists' ideas about wagesand priceswererelated to employment fourways. One viewwas thatwagesdein termined export pricesand the amountof exports, hencedeand termined spending employment. and Another thattherelationwas ship between moneywagesand prices, real wages,determined or the distribution incomewhichin turnaffected amountof of the and employment. thirdwas that sellingpricesdeA spending A termined amount spending employment. fourth the of and was thatrealwagesdetermined quantity laborsupplied. of the Those mercantilists regarded net exportbalance as who the the chiefdeterminant employment of a usuallyfavored policyof low lowwages, reasoning lowwagesmeant costsand prices that and increased unitsales. Some writers, however, favored opposite the policy. Carybelieved thathighlaborcostsdid notreduce exports. of Arguing from labortheory value,he statedthatthe greater the of of the theamount laborused in themanufacture exports greater in from wouldbe and thegreater return bullion their the their price which from assumeddemandconditions different sale, a viewpoint who low wages.' It those assumedby the mercantilists favored of in was Mun whomade clearthe importance demandconditions market. He said thatEngland should takecareto keep theexport in of down themanufacturethose for itscosts exports which foreigners for the was and had no great need(i.e.,those which demand elastic), abouthighcostsforthoseexthatEnglandneedbe less concerned found the was portswhich foreigners necessary which demand (for
inelastic).2
Cary also favored highwagesbecause he believedtheysupin He thought portedemployment whollydomesticindustries. wouldreducespending food and in turnthe on wage reductions who Of incomeof landlords.3 all of the mercantilists believedthe and it of determined distribution income spending employment,was Defoewhowas mostexplicit:
p. 8. 1. Cary,op. cit.,p. 12. Trade (New York, 1928), 2. Thomas Mun, England'sTreasure Forraign by 3. Cary,op. cit.,pp. 96-102.
476
increasesthe rentand value of the lands, of The consumption provisions the and thatagainincreases employment and thisraisesthegentlemen's estates, of the ofpeople,and consequently numbers them.... partofthe I wages,so they, meanthesamepoorer As thepeoplegetgreater of the and thisincreases consumption better, and furnish people,clothebetter, the increases quantity they theverymanufactures make;thenthatconsumption made, and this createswhat we call the inland trade,by whichinnumerable and by which of and are families employed, the increase thepeoplemaintained; of prosperity this nationis increaseof trade and people the presentgrowing produced.4
queries: idea in one ofhisrhetorical a expressed similar Berkeley

even so as Whether feedequallyscatteredproducetha goodlyharvest, of an equal distribution wealthdoth not cause a nationto flourish.5
equal distribua also Davenantand Postlethwayt favored more or tionofincome ofwealth.6 a A policyof highreal wagesimplies policyof low pricesfor one that Therefore shouldthink wagestructure. any givenmoney reductions. Many,howwere mercantilists notaverseto price these becausehe believed to were. Defoewas opposed pricecutting ever, position who of the it damaged interests thetradesman byhiscentral of on influence theamount employment. in theeconomy greatest had and and wages, prices high in high to seems havewanted Defoe, fact, him. of bothdoes not seemto have troubled the difficulty having avoiding thatwagesbe kepthighby the tradesman's He proposed in whichwouldreducethe amountof labor required all practices he "Thereis a maxim," said, "thatthe morehandsit enterprise. it the advantage istothecountry." public goes [trade] through, greater that production be he In orderto maintain highprices, proposed if restricted necessary:
in of which willnever fundamental theprosperity a nation, Thereis another untilit is made to yieldits improved fail to be true,viz., that no land is fully increase, utmost But ifourlands shouldbe made to yieldtheir utmost increase: or the tradetake it off your and yourpeople cannotconsume increase, foreign to hands,'tis thenno increase us, and mustnot be produced;so that the lands of to and thatis to say,a certain proportion them, left bearno mustbe laid down, is or corn, feedno cattle,becauseyourproduce too greatforyourconsumption.7
and aboutthirty yearslaterby Postlethwayt, Thisidea was revived of the power the from he developed notion maintaining spending it in the received a particular proportion offarmers fixing prices they by
4. Defoe,op. cit.,I, 318-19. op. 5. Berkeley, cit.,Q. 214. op. 6. Davenant,op. cit.,p. 103. Postlethwayt, cit.,II, 389. 7. Defoe,op. cit.,II, 109, 115-16.
LIBERAL ELEMENTS IN ENGLISH MERCANTILISM
477
of prices,a notionwhichcontainedthe rudiments to nonagricultural prior to Defoe, Gerard Malynes paritypricing.8 About a century (1656) wrote that the national interestrequiredhigh prices.9 Still earlier,Hales wrotethat spendingshould be directedto high-priced imports, to produced goods in preference lower-priced domestically was too highand shouldbe reduced believedthepricelevel he although the price of silver.' by lowering attachmentto high prices came of the inflaThe mercantilist tionarypersuasion common to most of them after 1600. (Before 1600,therewere several proposals to increase the silver contentof have been deflationary.)They the coin,which,it was believed,would was accompanied by seem to have observed that unemployment decliningprices and severe price competition. They probably reapriceshad to be soned that in orderto keep the economyprosperous by supported an adequate spending kepthigh,by means ofmaximum moneysupply. Misselden wrote:
of to dearwithplenty money, for Andit is muchbetter thekingdom, have things than to have things cheap with menmay live in theirseveralcallings: whereby whichnow makeseveryman complain.2 wantof money,
It is importantto note that it was by monetarymeans that most believed pricesshouldbe raised and supported. Almost mercantilists organizaall ofthemwereopposed to raisingpricesby a monopolistic tion of the market. Althoughthis device would have raised prices or it also would have reducedemployment, at least would have made were to moredifficult achieve. As the mercantilists fullemployment theywere much in favorof competition. against monopoly, strongly is How they conceived of competition explainedbelow, but it is in of orderhere to note what they thoughtwas the effect competition on prices,wages, and employment. in markets, Childbelievedthatcompetition domesticand foreign would increaseemployment freeentryinto all occupations, including and the national wealthY Tucker reasonedthat a freeprice system withinwhollydomesticmarketswould producegreateremployment than any othersystem.4 Similarideas were expressedby the author of the anonymousPolicies, etc.,by Hales, Malynes, Petty, Barbon,
op. 8. Postlethwayt, cit.,II, 405. Law Or vel, 9. GerardMalynes,Consuetudo, Lex Mercatoria: theAncient (London,1656),p. 65. Merchant 1. Hales, op. cit.,p. 67. op. 2. Misselden, cit.,p. 107. 3. Child,op. cit.,pp. 54-56, 127. 4. Tucker,op. cit.,p. 83.
478
North, Davenant, Berkeley, and Postlethwayt.5 In view of the writers supportedthe mercancommonbeliefthat the mercantilist it to tilistpracticeof pricefixing, is interesting note the observations of ofthe authorofPolicies,etc.,about the fixing foodpricesin London half of the sixteenth century. It was his view that price in the first fixing reduced the supply of farmproductsbroughtto London and therebymade worse the conditionit was meant to alleviate. He wonderedhow anyone could believe "this presentdearth of victual may be redressedby settingprices upon victual," and continued: amend "but surelyit is not the settingoflow pricesthat willanything the matter. But it must be the takingaway of the occasion of high prices," whichwas, he said, the small supply of goods. The author by experienced buyers. Whenprices observedalso the inconvenience are set below theirmarketvalue, "what throngand strifeis there catch upon that which cometh." He then like to be who shall first all concludedthat it is muchbetter"to suffer kind of personsquietly to sell all kind of victual in the marketat what price he can."6 Anotherargumentadvanced fora freemarketwas its salutary believed that competion effect the laboringclasses. Postlethwayt responsible,and tion among workersforced them to be efficient, holding and enterprising, that it loweredwages.7 The mercantilists this view associated low wages with competitionand high wages on and with restrictions the labor supply, such as apprenticeship of rules. They arguedfora marketdetermination wages journeymen of and not, as sometimes asserted,forthe subordination the working should who did believe the workers class. There were mercantilists for in be disciplined orderthat the amountoflabor offered sale would be increased. Petty and one of his eighteenthcenturyadmirers, Thomas Man (1739), argued that as real wages exceeded a certain if amountthe quantityof labor supplieddecreasedand therefore the was maximumamountof effort to be obtainedreal wages should not exceed this amount.8 full by (3) In additionto achieving employment measuresrelated wished to spendingand to wages and prices,some ofthe mercantilists for to use the rateofinterest thispurpose. Therewas moreagreement
of 5. Hales, op. cit.,p. 60. GerardMalynes,The Maintenance Free Trade op. (London,1622),p. 79. Petty, cit.,I, 9, II, 243. Barbon,op. cit.,p. 16. North, op. op. cit.,p. 12. Davenant,op. cit.,pp. 56-60. Berkeley, cit.,Q. 47. Malachy (London,1774), The Dictionary Tradeand Commerce of Postlethwayt, Universal "Regrating." "Engrossing," cap. "Forestalling," 6. Tawneyand Power,op. cit.,III, 340, 342. etc., Interest, II, 425. Britain'sCommercial Great 7. Postlethwayt, of 8. Petty, op. cit., I, 274-75. Thomas Man, The Benefit Procreation (London,1739),pp. 20-21.
LIBERAL ELEMENTS
479
about the rate of interestthan about the correctwage and price policy but less than about the importanceof adequate spending. Those who wishedto use the interestrate believed a low rate would enable the merchantto increase his inventories, that it would lower the price of exports,and that both these effects would in turncause an increasein employment. Those who favoreda low rate included Misselden, Malynes, Temple, Barbon, Child, Law, and the author of BritanniaLanguens (1680).9 Except forBarbon who proposed a maximumrate of threeper cent to be fixedby law, these mercantilists favoredindirectmeans ofreducing rate. Most believedthat the development financial the of institutions, bankingand the moneymarket, like wouldexerta downward influence the rate. One of the most interesting on ideas held that the rate varied inversely with the money supply and was expressedby Misselden,Malynes,and Law. According Misselden to "The remedyfor usury may be plenty of money," and Malynes wroteof "the abundance of moneywhichmakeththe price of usury to fall,morethanany law or proclamation ever do."' Law wrote: can
. . . indeed,if lownessof interest werethe consequence a greater of quantityof the money, stockappliedto tradewouldbe greater, merchants and wouldtrade from easiness borrowing, thelowerinterest money, the of cheaper, and of without
any inconveniences attending it.2
(The "inconveniences"are those of usurylaws.) This view of the interestrate was not whollyshared by Petty and North. Petty conceded that an increase in the money supply would lower the rate on loans, but he was averse to this sort of manipulation, probablybecause he believed that as many economic mattersas possible should be regulatedby "the laws of nature," by which he seems to have meant a free market. He held that the intereston a sum of money at loan must be equal to the net rent which the same sum would yield if used to purchase land, except where the risk in the two transactionsdiffered.3 This implies that the money rate of interestmust conform the real rate and can to fall only as the productivity capital declines. This was a longof term view which does not preclude the possibilityof short-term differences between the two rates. There was, therefore, necesno
9. Misselden, cit.,pp. 29-30. Malynes,TheMaintenance FreeTrades op. of p. 39. Temple,op. cit.,I, 129. Barbon,op. cit.,p. 41. Child,op. cit.,p. ix. Law, op. cit.,p. 17. EarlyEnglishTracts, 318. p. 1. Misselden,op. cit.,p. 117. Malynes,The Maintenance Free Trade, of pp. 39-40. 3. Petty,op. cit.,I, 48, II, 445.
2. Law, op. cit., p. 17.
480
sary contradictionbetween Petty's theory and the conventional themselvesmight very well have one (although the mercantilists insistedthere was). North, too, believed the long-rundeterminant of rate was the productivity capital and that the rate of the interest could fall only as the "stock in trade" (capital) increased. A low the rate was therefore consequenceof an increasein the quantityof opcapital and not the cause of the increase. North was strongly the posed to regulating rate by alteringthe moneysupply,believing that the moneysupply adjusted itselfto the volume of trade rather it. He also was opposed to usury laws, which he than determined believed would decrease the quantity of loans supplied.4 One can observe that the proponentsof a low rate based theirargumenton that a decreasein the ratewould increasethe quantity the assumption of loans demanded while North argued fromthe assumption that a decrease in the rate would decrease the quantityof loans supplied. Neither seemed to want to considerthe other's premises,and so it that the debate was inconclusive. is not surprising the rate of interest, In addition to believingthat it determined attended so there were two other reasons why the mercantilists closelyto the moneysupply. One was the beliefthat forany given amount of trade therewas an appropriatesupply of moneyand that as the supply increasedtherewould be an increasein trade and employment. In this conception,a change in the money supply was through on rather thanindirectly to thought operatedirectly spending changingthe interestrate. It happens that Law used both ideas to support his scheme for increasingthe money supply. About the directeffect an increasehe wrote: of
morepeople quantity employs Domestictradedependson the money:A greater of sum can onlyset a number peopleto work thana lesserquantity. A limited the to proportioned it, and it is withlittlesuccesslaws are made,foremploying the where money scarce;goodlaws maybring money is poorand idlein countries it it that to thefullcirculation is capable of,and force to thoseemployments are to But nor mostprofitable thecountry: no laws can makeit go further, can more so without moremoney circulate as to pay thewagesofa to peoplebe set to work, number.5 greater
The argumentassumes a downward rigidityof prices such that a decrease in the moneysupply,by causing less spending,producesa and output. decreasein employment attentionto moneywas The otherreason forthe mercantilists' the beliefthat an accumulationof bullioncould be desirablein itself.
4. North, cit., pp. 17-19. op. 5. Law, op. cit.,p. i1.
LIBERAL ELEMENTS
481
Those whoheld thisbeliefincludedHales, Temple, Cary,and Tucker, the last of whomsaid:

a in ultimately procuring consists, . . . the whole scienceof gainfulcommerce othernations.' from balanceofgold and silverto ourselves
This has been taken to mean, by Smith and John Stuart Mill for example, that the mercantilistsbelieved money was wealth and that they made no distinctionbetween things exchanged and the mediumby which they were exchanged. Some of the mercantilists may have believed this, but it is very doubtful that many did. Hales observed that accumulation was desirable because treasure was the "sinews of war."7 Petty believed that the nation should accumulategold and silver,
for but are becausethosethings not onlynot perishable, are esteemed wealthat all timesand everywhere.8
of The statements Hales and Petty do not implythat a nationshould accumulate specie because it is wealth but because it is a store of to wealth. Even Mun, who has come down to us as one of the first conceded therewere circumstances expose the fallacy of bullionism, in whicha princewould be wise to lay by a store of treasure. It is debatable whetherthe accumulation of bullion would have given England a more certain command over the goods of other nations than would its commodity exports. However, the mercantilists assumed that it would, and in this assumption,howeverunrealistic or otherwise, therewas no logical confusionof money with wealth. Nor was there in the alternative conceptions which related the money supply to the rate of interestand to spending. Moreover, were opposed to when it is realized that some of the mercantilists on accumulation,or to restrictions the export of bullion and coin, fallacyof thereis no warrantat all forstatingthat the characteristic was the confusionof money with wealth. North and mercantilism Berkeley were opposed to accumulation; Child opposed restriction and of the exportof coin because he thoughtit reducedemployment, Petty because it was "against the laws of nature,and also impracticable."9 (4) There was a finalgroup of measuresby which the mercantilistsmeant to increase employment. It consistedof means of inof creasingthe quantityoflabor supplied (the relationship real wages
6. Temple,op. cit., I, 131-32. Cary,op. cit., p. 2. Tucker,op. cit., p. iii n. 7. Hales, op. cit., pp. 87, 127. 8. Petty,op. cit., I, 269. op. op. 9. Mun,op. cit.,p. 66. North, cit., pp. 25-26. Berkeley, cit.,passim. Child,op. cit., p. 55. Petty,op. cit., II, 445.
482
was explained to which the and above),ofincreasing laborsupply, of increasing productivity labor. That the mercantilists the of lookedat employment from supplyas wellas demand the side of themarket their indicates to of policy sought increase quantity the for resources was nota make-shift creating and jobs. Their methods increasing laborforce harsh today's of the are by an standards often interpreted revealing animosity and are as toward the lowerclasses. Those who interpret mercantilists way the this thatthe classicaleconomists a moreenlightened usuallyimply had viewoftheworking class.' Certainly more was sympathy expressed was by theclassicists; there lesscarping, preaching theearlyless of and therewas moretolerance disto-bed, early-to-rise variety, of humanbehavior.But whenall this is said, therestill tinctively remains factthattheclassical the economists notmakeanyimdid to income otherwise ameliorate or portant proposals redistribute to of the condition thelower classesexceptto urgethatthebesthope forthem, forall other as was thesteadygrowth national of classes, a output, goal whichthe mercantilists as persistently just sought means. although somewhat by different mostof the mercantilist Actually, laborpolicycame from the that self-interest assumption governsindividual conduct,an asas entertained sumption fully hundred todayas it was twoand three which yearsago. The principle directed mercantilists believe the to thattheunemployed shouldreceive onlya subsistence allowance is no different from that whichleads modern economists believe to shouldbe set muchbelowprevailing unemployment compensation thattheidleshallnotcometo prefer wagesin order leisure work. to The pointwas made veryclearby J. S. Mill whoarguedthatthe the bestwayto treat pooris to makethem wishthey were rich. The mercantilist laborpolicyconsisted measures increase of to thepopulation; increase size ofthelaborforce to the within given a in of population, numbers workers intheamount work and of supplied and to increase productivity thelaborforce. by each laborer; the of In orderto increasethe population some writers proposedthat subsidies givento largefamilies; occasionally be and theyattached theingenious scheme financing subsidies a taxonbachelors of the by (which makesone wonder whatwouldhave happened thesubhad sidies beensuccessful).Other methods wereto encourage immithe of gration skilled workers tradesmen and which, wasbelieved, it would be easierif thereweregreater religious tolerance.The percentage
1. See EdgarJ. Furniss, Position theLaborer a System NationalThe of in of im (Boston,1920).
LIBERAL ELEMENTS
483
of the labor force to the total population was to be increased by children intoemployment. Pettyestimatedthat ifall those bringing between six and sixteen were employed the national income of England would be increasedby fivemillionpounds (about the year more consideredways of bringing 1662).2 Almost all mercantilists personsinto the labor force. They wishedto reduce the enlistments in the army and navy and to directmen into gainfulemployment, to activity, and, above all, to rehabilitate to turncriminals legitimate or the poor and indigentwhom circumstances choice had deprived of the will to work. could be reduced by raisingwages Petty held that enlistments were to be rehabilitated in civilianemployments.3The unemployed by workhousesintowhichtheywereto be forcedon pain ofreceiving no public assistance whatever and in which they would learn the virtue of work. More severe treatmentwas thought proper for criminals who, it was believed, had to be shownthat crimewas not should to theirinterest. Temple thoughtthe formsof punishment be made morelasting,and he proposed "to change the usual punishment by short and easy deaths, into some others of painful and uneasy lives," a change which involved branding the cheeks of criminals,slittingtheir noses, and condemningthem to slavery in the colonies.4 Berkeleybelieved that all who would not workshould be impressedinto labor gangs and used forpublic projects.' Howwereas ruthless. Child pleaded forunderever,not all mercantilists of standingand patience. He proposed a reconstruction the system to ofproviding relief thepoorin orderto helpthemand to demonstrate to othersthat the lower classes were an asset and not a liabilityto the nation.' In orderto increasethe amountof workoffered, was proposed it whichkept the workers that the state removethe many distractions frombeing industrious. Drinkingwas the firstto be attended to. According Defoe:' to
In Englishale their dear enjoyment lies, For whichthey'llstarvethemselves families. and An Englishman fairly will drink much as As willmaintain twofamilies Dutch. of 2. Petty,op. cit.,I, 308. 3. Petty,op. cit.,I, 23. 4. Temple,op. cit.,II, 380-81. 5. Berkeley, cit.,Q. 381. op. 6. Child,op. cit.,chap. 2. 7. Daniel Defoe, TrueBornEnglishman Essays and StudiesbyMembers in oftheEnglishAssociation, collected C. H. Herford by (Oxford, 1913),IV.
484
Tucker would have done away with cockpits,skittle-alleys, stages forcudgelplaying,makingbook on horse races, the sellingof liquor, cakes, fruit,"or any like temptations draw people together"and to away from their jobs.8 Other mercantilistsasked for sumptuary control, because theythoughtthe wearingof ribbonsand ruffles and the drinking tea made workers of and lazy. It is interesting prideful that such proposalshardlyever expressedthe fearof insubordination into sedition. It was sloth whichalarmed the mercantilists. turning For the purposeof increasing labor productivity, was proposed it the workersbe shown that industry,skill, and enterprisewere to theiradvantage. Rewards were to be given forexcellenceof work, some in money,some in the formof distinction. Industriousand skilled immigrants were to be attracted to England in order to set an example to native workers. Childrenwere to be trainedto the habit of workfroman earlyage, and olderpersonswere to be shown in a varietyof ways the rewardsfromindustry. In his programfor improvingthe poor, Tucker asked that courts be formedin each district supervisethe working to class, each courtto be presidedover by "Guardians of the Morals of the ManufacturingPoor." By precept, inducement, punishment, poorwouldbe transformed and the into a national asset. One of the rewardswas to be "a good book" stampedin gold on one side with"The Hand of the DiligentMaketh Rich" and on the other,"To the Praise of Them that Do Well."9 The labor policy of the mercantilists was a logical derivationof their economic psychology. Almost all believed there were three factorswhichdirectedindividualsto economicactivity:the stimulus given by physical environment, desire of men to emulate their the betters (a desire partly created by social environment),and the eagerness for pecuniary rewards. It was believed that men were the moreindustrious, more difficult the in were the conditions which they lived: the climate,soil fertility, national wealth in relation the to thepopulation. The less favorable was their the environment, more likelytheywereto become rich. Temple wrote:
I conceive trueand original the grounds tradeto be, a greatmultitude people of of intosmallcompassofland,whereby things crowded all to necessary lifebecome whohavepossessions, induced parsimony; those, dear,and all men, are to but who have none,are forced industry labour,or else to want. Bodies that are to and fall vigorous to labour;suchas are not,supplythatdefect somesortofinvenby tions or ingenuity. These customsarise first fromnecessity, but increaseby and imitation, growin timeto be habitualin a country.' 8. Tucker,op. cit.,pp. 53 ff. 9. Tucker,op. cit.,p. 57. 1. Temple,op. cit.,I, 119.
LIBERAL ELEMENTS
485
Postlethwayt summarized idea by saying,"The greatestindustry the has ever been the effect the greatestnecessity."' of was theirdesire The second factorwhichmade men industrious to emulate those above them in social position and income. Petty wrote that men always seek to excel, and when placed together, as in large cities, their emulative instinctbecomes all the keener, evoking their industry,increasingspending,and providingopporlike Defoe, doubted tunityforstillgreaterindustry.3Otherwriters, of thebeneficence emulation, believingit oftenmade men imprudent, but theyadmittedthe motivewas a strongone.4 The thirdfactorwas the desire for monetaryreturns. It was and that the greater thoughtto be the principalcause of industry, the greater were the money returnsfroma particularemployment usually would be the quantityof resourcessupplied to that employment. The idea was expressedquite early and repeateddown to the end of the mercantilist period when it was carriedforwardby the classical economistsin their doctrineof self-interest.Hales wrote that "profitor advancementnourishesevery faculty;which saying is so true,that it is allowed by the commonjudgmentof all men."5 among them Petty, The idea was expressedby othermercantilists, North, Davenant, and Defoe, the last of whom said, somewhat prodigally:
Gain is the tradesman's life,'tis the essence of his being,as a qualified for tradesman. Convenience, supplyof necessary things life,werethe first and causesindeedoftrade;but thereasonand end ofthetradesman to getmoney: is 'Tis the polestar and guide,the aim and designof all his notions;'tis the center and pointto which hisactionstend;'tis thesoul ofbusiness, spurofindusall the the of and try, wheelthatturns within wheels hiswholebusiness, givesmotion all to the rest.6
What Defoe said of the tradesman (and Lamb describedmore economicallyas "the quick pulse of gain") was believed true of all in the economyand truein a special way of the worker. An increase in real wages would be accompanied by an increasein the quantity of labor supplied until real wages reached a certain amount, and if theywent beyondthis amount the quantityof labor supplied would decrease. The mercantilists thought the labor supplyfunction who of in this way believed that pecuniaryself-interest less of an effect had
2. Postlethwayt, Great Britain'sCommercial Interest, II, 367. etc., 3. Petty,op. cit.,I, 32. 4. Defoe,The Complete EnglishTradesman, 56. I, 5. Hales, op. cit.,p. 57. 6. Petty,op. cit.,I, 48. North,op. cit.,p. 13. Davenant,op. cit.,p. 109. Defoe,Complete EnglishTradesman, II, 79-80. etc.,
486
on the workerthan on others in the economy; or that beforethe the pecuniarymotive could operate effectively workerhad firstto to become accustomed to high real wages. It had, therefore, be reinforced other factors. One was emulation. This trait could by be exploitedby placing beforethe workingman the rewardswhich and so developinghis wants. othershad acquired by theirindustry, for Wants, however,had to be guided prudently, they could turn men towardthe ale houses as well as the shops and factories. Most was environment. certainof all conditionsleading them to industry If the poor could not be broughtto gainfulactivity by monetary rewardsor enticedto it by the desire to excel, they could be forced to it by necessity. Moreover, as Temple explained, the habits they formedwhile overcomingnecessitywould remain with them, and they would continueto be industrious when the originalcause had disappeared. III In these observationson individualmotivation, mercantilist the writersanticipated the economic psychologyin classical doctrine. In addition,theyanticipatedtwo otherof its important features:the of nature of the price mechanismand the political presuppositions economicpolicy. It was the classicalview that self-interest operatingin a competemployments itive market directedresourcesto their most efficient and enabled individualsto spend theirincomein a way whichwould maximizetheirsatisfaction consumers. Whateverinterfered with as as the operationof self-interest, it directedthe choicesof individuals in their capacity as producers or consumers,usually reduced the of efficiency the economyor, what is the same thing,its real income. The classicistsdid make exceptionsto laissez faire,some of them insistent,but laissez faire was certainlytheir rule of policy. So of great was theiremphasison the efficiency resourceuse whichthe market created that one must suppose they believed the market would provideforthe full employment resourcesas well as their of direction to the best particular uses. Apart from Malthus and betweenefficient Sismondi,none of the classicistsadmitteda conflict and fullemployment. employment was similar The mercantilists' conceptionofthe pricemechanism to that of the classicists on these matters: the directivepower of self-interest (that is, its economic as well as psychologicalaspect); the determination prices by supply and demand; the desirability of of competition; and the mutual advantage of exchange in domestic
LIBERAL ELEMENTS
487
however,did not believe that universal markets. The mercantilists, efficiency could be establishedby the price system;they did believe that a limited operation of the system was desirable. They also held a qualified notion of the harmony of self-interest.On the between issue of full employment, there was the greatestdifference the mercantilistsand the classical economists. It was the mercantilist view that free internationaltrade would reduce employto systemwould have the same ment,that inattention the monetary of result,and that a highly unequal distribution incomecould reduce spendingwhichin turnwould reduce employment. followedthe From the mercantilist conception of self-interest beliefthat under certain conditionsthe freeallocation of resources and employment. It is would yield the greatestpossible efficiency noteworthy that the mechanicsof the price systemshould have been Hales, and it is especially explained by one of the earliest writers, interesting that he should have suggestedthat the idea was a common one in his age. His work is a dialogue between a doctor and a knight. At one point they considerthe best means of eliminating the scarcityof corn,and the doctor says its price should be freeto findits marketvalue just as the price of wool is free.
to bettercherished Knight:How wouldyou have them[thehusbandmen] use the plough? to from thantheyhave,and liberty sell Dr: To let themhave moreprofit it it at all times, as otherthings. But then and to all places,as freely mendo their more thanat thelength; no doubttheprice cornwouldrise, of at specially thefirst to yetthatpricewouldprovoke everymanto set ploughto theground, husband waste grounds, to turnthe lands whichbe enclosedfrom pastureto arable yes and follow thatwherein manwillgladder theysee themoreprofit land; forevery of mustneedsensuebothgreatplenty corn,and also much gains. And thereby into thisrealmby occasionthereof; besidesthat treasure and shouldbe brought of amongst us.7 plenty other victualsincreased
If these remarkswere taken out of context,they easily could be interpreted an argumentforthe unrestricted as operationof the price system. That "every man will gladder follow that wherein they see the more profitand gains" is in agreementwith Smith's statementthat "every individual is constantlyexertinghimselfto find out the most advantageous employmentfor whatever capital he can command."8 Hales also anticipated the classical economists in his statement that "the workmannevertravailsbut as the master provokes him with good wages"; in his belief that the common
7. Hales, op. cit.,P. 59. 8. Adam Smith,The Wealth Nations,ed. Edwin Cannan (New York, of 1937),p. 421.
488
ownership capital is less productivethan individualownershipof "that whichis possessedof manyin commonis neglectedof all"; and in his conviction that many forms economiccontrolare ineffective of before the power of self-interest "for many heads will devise many ways to get anythingby."9 So long as only the positive aspects of Hales' ideas are compared with those of Smith, the two writersare in agreement. Both held the same view of the fact of and self-interest of its powerto directlabor and capital to theirmost uses. The agreement impliedin the above passages and is profitable it is clear when the passages are placed in theircontext. About the normative aspect, however, there was disagreement,and this is explainedfarther along. Many of the mercantilists explainedhow prices are determined by supply and demand. Malynes, in a passage arguingagainst the of fixing pricesby the state,wrote:
thatin the buying and selling commodities of thereis Everyman knoweth, and agreeduponbetween bothparties, an estimation pricedemanded and accordin by grounded ingto a certain equality thevalueofthings, promoted a truereason use else is uponthecommodious ofthings. So thatequality nothing buta mutual estimation things equality voluntary of made in good orderand truthwherein or is not admitted known.'
This statementactually goes beyond an expressionof the fact of supply and demand. It suggests that utilityis the basis of value ("commodious use"), that utilityis a subjective magnitude ("estimation ... whereinequality is not admitted or known"), and that thereis an advantage in exchangeto both buyerand seller("a mutual voluntaryestimationof things"). both for The words "true reason" have a special significance, Malynes statementand forthe doctrineof othermercantilists. In to the quotationabove, truereason shouldbe interpreted mean accuwhich makes the statement an rate perceptionor understanding, of by expression the idea that price or value is determined individual evaluation and that this evaluation is the only true kind. It is the idea that individualsare the best judges of theirwelfare. Malynes again remarkedon true reason in his expositionof the Law of Merchants, which, he said, was the only law that was universal and and at all times,and that it had its absolute, the same everywhere originin Cicero's conceptionof true law as rightreason agreeable to nature.' Malynes' remarksanticipate the conceptionof natural
9. Hales, op. cit.,pp. 46, 49, 99. etc., 1. Malynes,Consuetudo, p. 67. (trans.C. W. Keyes), etc., 2. Malynes,Consuetudo, p. 2. Cicero,De officiis
i, 4.
LIBERAL ELEMENTS
489
naturallaw law heldby the classicaleconomists.They identified was in contrait, which and madereasonan individual withreason law an of trastto conceptions natural thatmade reason immanent power. The doctrine or qualityof socialinstitutions of a supernal or of was thedoctrine natural rights ofindiby suggested Malynes whichare beyondthe powerof the stateor of vidualprerogatives was enunciated theStoics, applied by to society abridge.It wasfirst by to socialphilosophy Cicero,and thenwas allowedto lapse for by of to manyhundreds yearsuntilit was returned socialthought in That of century.8 the philosophers liberalism the seventeenth in if by policy, only intimation, which incorporatedeconomic Malynes economic wasnotnatural law,sui generis thishadbeendonewhen versionof firstwere recognized but that particular problems of naturallaw whichwas the touchstone politicaland economic liberalism. of was rights doctrine a policy result thenatural The practical for against economic freedom.Petty, example, argued ofindividual controls the manyeconomic imposed the state,and attributed by to havebeen difficultiesthefactthat"too manymatters England's and consent nature, longcustom, general by regulated laws,which oughtonlyto have governed." Positivelaws, he stated,should of is reasonand the Law of Nature,"a consist "whatsoever right "therefore" is which bestinterpreted placing word, the statement by sincePettydidnotmakea substantive "theLaw ofNature," before law.4 between reasonand natural distinction and to by pricesought be determined supply As theybelieved and mostofthemercantilists opposedto pricefixing were demand, control. Barbonstatedthat "the forms market of to manyother their use," thata "plenty"of wares value of all waresarisesfrom makesthemexpensive.He makesthemcheap,whilea "scarcity" "the is asserted concluded, market thebestjudgeofvalue."5 North maxim" priceis thata "plenty anything of of makes the"universal that Law stated is it cheap,"on theassumption demand constant.6 is offered thatthepriceofa commodity determined thequantity by to and offered forsale in relation thedemand, thatas thequantity the most the increases, priceorvaluedeclines. He illustrated point that and diamonds, were explaining diamonds by interestingly water of "usefulness" the despitethe greater morevaluablethanwater,
doctrine, in of 3. See my studyof the elements Stoicism liberaleconomic LXI, 2. "The Moral Hero and theEconomicMan," Ethics, 4. Petty,op. cit.,I, 9, II, 243. 5. Barbon,op. cit.,pp. 13, 16. op. 6. North, cit.,p. 34.
490
latter, becausethequantity supplied diamonds lessthanthat of was of water. This paradoxwas notedindependently Smith, by about fifty yearslater,and illustrated the same commodities, he by but did notas explicitly resolve as Law did.7 Berkeley it expressed the of principle price in determinationoneofhisqueries:
Whether value or price of things,be not a compounded the proportion, as and reciprocally theplenty?8 as directly thedemand,
The opposition market to control was made explicit Child, by whopresented listofninelawswhich said wereimpediments a he to tradeand employment. Includedwerelaws whichprohibited the of export coin,raisedthepriceofexports, reduced priceofbeer, the forbade no engrossing ("there being moreuseful tradein a nation"), andlimited supply labor restricting intoskilled of the by entry trades. He stated:
It is thecareoflaw makers first principally provide thepeoplein and to for not gross, particulars.'
Davenant expressedthe same conclusion:

Trade is in its naturefree, its finds ownchannel, and bestdirecteth own its course:and all laws to giveit rulesand directions, to limitand circumscribe and it, may servethe particular ends of privatemen,but are seldomadvantageous to thepublic.'
mostthoroughly: exchange
Petty (as noted above) believed that economicrelationsamong individualsshould be directedby "whatsoeveris rightreason" and not by the state. Of all the mercantilists, North endorsed free
Now it may appearstrange hearit said, to That thewholeworld to trade, butas one nationor people,and therein as is nationsare as persons. That the loss of a tradewithone nation,is not that only,separately conbut of sidered, so much thetradeof theworld rescinded lost,for is combined and all together. That therecan be no tradeunprofitable the public;forif any proveso, to menleave it off; and wherever traders the the thrive, public,ofwhichtheyare a also. part,thrives mento deal in any prescribed That to force manner, may profit suchas do one happen to servethem;but the public gains not, because it is takingfrom subject,to giveto another. That no laws can set prizesin trade,theratesofwhichmustand willmake 7. Law, op. cit.,p. 4. Smith, cit.,p. 28. op. 8. Berkeley, cit.,Q. 24. op. 9. Child,op. cit.,pp. 55-56,80. 1. Davenant, An Essay on theEast India Trade, quoted by Whittaker, op. cit.,p. 147.
LIBERAL ELEMENTS
491
impediment it to but such lawsdo happen layhold, is so much themselves: when prejudicial.2 to trade, therefore and conceptionof freeexchange had a political as The mercantilist wellas economicaspect,and both anticipatedthe ideas ofthe classical about the originof differed economists. Althoughthe mercantilists they agreed upon the extent of its powers,which,they government said, should be limitedby law; and the consequenteconomicliberty would be favorableto the growthof the economy. Temple said the economy could prosper "under good princes and legal monarchies, as well as underfreestates" and that it must declineundera "tyrannical power," "free states" here meaning republicangovernments.3 whose The words also were used to mean any formof government power was limited,as when Barbon wrote that trade could flourish monarchy only in a "free government,"of which a constitutional wheretheyare most free was one form. "Men are most industrious and secure to enjoy the effects theirlabours," he stated.4 In its of economicapplication,the doctrineof limitedpowermeantthat regulation of the marketshould be minimizedand made to apply unito formly all personsand trades. "All favorto one trade or interest against another,is an abuse, and cuts so much of profitfromthe public," North observed.5 therewas amongthe mercanAs amongthe classical economists, of about thefoundation government. disagreement tilistsconsiderable Some mercantilists insisted,as Hume did later, that the authority of government restedupon the "greatestand strongest"among the people. This was Temple's conception. Others,Defoe amongthem, which then enjoyed its accepted the contracttheoryof government did eminenthour. But these differences not lead to disagreement were over the proper structureof government. The mercantilists unitedin opposingabsoluteruleby a single individual and unlimited rule by the people, and the oppositionto both autocracyand democracy came of a profounddistrustof power per se. Temple wrote: ill when are when men good esteemed they private, andhated are and Many men and are . they they inoffice.. andmany comeout,when comeintogreat public employments." Barbon and Davenant were forciblein advocating constitutional
op. 2. North, cit.,p. 13. 3. Temple,op. cit.,I, 121. 4. Barbon,op. cit.,pp. 27-28. Philip W. Buck, The Politicsof 5. North,op. cit.,p. 14. See, however, (New York,1942). Mercantilism 6. Temple,op. cit.,II, 366.
492
of that asserting onlyby thesemeanscouldtheliberty procedures, be theindividual secured.7 did government not makethe to Theiropposition democratic and for apoligists an aristocracy; theydisapuncritical mercantilists theysaw which of forms illiberalism of proved manyofthe grosser intolerance, about them. Most of themwereopposedto religious to each person seek of uponthepracticability allowing and insisted of in his salvation his ownway. Defoewas verycritical theruling theirattitudetowardtrade was an obstacleto classes,believing
English Tradesman,parts of The economicprogress. The Complete and EnglishGentleman, the parabolicalmeaningofRobinson Complete
of to the can be read as an effort persuade aristocracy the Crusoe nationalvalue of trade and the tradesman. Othermercantilists and of the of of wrotepersuasively the usefulness the tradesman social powerand a higher him greater political of wisdom giving
position.
IV have a curious and The ideasofpolitics ofthepricemechanism advanced. to policywhichthe mercantilists relation the economic liberty, and abouteconomic political expressions If onereadonly their faire. If, mustbe laisser thattheir policy oneeasilycouldconclude of they on the other hand,one lookedonlyat themeasures control laissezfaire. There one proposed, wouldhave greatdoubtsoftheir manyofthe positive anticipating is a paradoxin themercantilists' and of elements classicaleconomics at and someof the normative from a the same timeproposing policyquite different the classical of the were to policy. The mercantilists reluctant follow principle it which theythought would results to freedom all ofthe practical to their and, it is equallyclear,theywerereluctant modify bring, results wanted. in to the they ideasofliberty order achieve practical the to It is illuminating compare ideas ofHales and Smithon that observed exchange.WhenSmith thenormative aspectsoffree "the most advantageous each individual alwaystriesto discover he for capitalhe can command," concluded employment whatever or leads of naturally, necessarily, him thatthe"study hisadvantage to which mostadvantageous society." is to prefer employment that colloquy, Hales did not think thiswouldalwaysbe so. In another it is said:
7. Barbon,op. cit.,p. 20. Davenant, An Essay on Waysand Means, etc., pasuim.
LIBERAL ELEMENTS
493
of and Knight:Everymanis a member thecommonweal, thatthatis profitto if able to one may be profitable another, he would exercisethe same feat. to to may be profitable all, Therefore that is profitable one, and so to another, and so to the commonwealth.... Dr: That reasonis good (addingso muchand moreto it). True,it is that to (so to thing whichis profitable each man by himself it be notprejudicial any or and other) profitable thewholecommonwealth, nototherwise; elserobbing is to to to whichperchance profitable some men,wereprofitable the is and stealing, wholecommonweal, whichno man willadmit.8
Malynes, too, was unable to endorsefreeexchange completely. with the "good of the commonwealth, He believed it mightconflict are whichis the cause that princesand governors to set at the stern of the course of trade and commerce." He held that to allow meras chantsto set the courseof trade would be as imprudent to consult vintnersabout laws against drunkedness.9 A similar qualification was made by Child:
of and whichare so far ... the profit the merchant, the gain of the kingdom, one to the other, theyrun counter from beingalways parallel,that frequently the mostmen. .. do usuallyconfound two.' although
favorableto competition Postlethwayt hesitatedto approve Although for is of it wholly. "Exchange of merchandise merchandise advantato geous in general;but not in cases whereit is contrary the foregoing maxims,"he wrote,the maximsbeing that trade should increasethe North was moneysupply and employment.2Even the enlightened of of doubtful theuniversalharmony self-interest, althoughhe viewed from usual way. He was less troubled the the disharmony oppositely that the individualcould gain at the nation's expensethan interested of in the possibility the nationgainingat the expenseofthe individual . (as when unwise investmentled to greater employment) Some believed the economycould prosperat the expense of mercantilists which,howindividuals,if they engagedin extravagantexpenditure ever damagingto them,was a stimulantto trade. The idea was set forth Mun in a chaptercalled, "Of some Excesses and Evils in the by which not withstanding decay not our Trade nor Commonwealth, by Treasure."4 The idea was made notorious Mandeville in his fable of the bees whose private vices were public benefits. It was not, however,quite as widely accepted as the notorietyof Mandeville's verse suggests. Davenant, while admittingthe possibility,denied
8. 9. 1. 2. 3. 4. Hales, op. cit.,pp. 50-51,myitalics. of Malynes,TheMaintenance Free Trade,pp. 3-5. Child,op. cit.,pp. xxvi-xxvii. etc., Interest, II, 371. Great Britain'sCommercial Postlethwayt, North,op. cit.,pp. 27-28. Mun, op. cit.,chap. xv.
494
that privateextravagance was the way to wealth,and submitted that a wise levyingof excises would give the lie to the notion that "riot and expense,in private persons,is advantageous to the public."5 These passages indicate that the mercantilists were aware that some of theirmeasures of policy would abridge economicfreedom. It can be shown that they were aware of why freedomshould be limited. One reason was that a freemarket was not entirelyfavorable to an increase in the nation's wealth. The other reason was less and the limitationit impliedwas in no way inconsistent significant with classical policy. When, for example, Hales denied that selfinterest always produceduniversalharmony, cited the act of theft he as a proof(actually he had morethan this in mind,and the example does not illustrate positioncompletely). The prohibiting crime his of is not,ofcourse,a denial offreedom. Othermercantilists arguedthat the unlimitedfreedomof the tradesman would lead eventuallyto whichagain was a trivialexceptionbecause freeexchange monopoly, is, by definition, competitiveexchange. Indeed the mercantilists' opposition monopoly an affirmation liberaldoctrine, to is of and many of themanticipatedthe doctrine theirendorsement competition. in of Tucker excoriated the regulated companies (which had certain monopolistic powers) in language suggestiveof Smith at a peak of indignation:
This is thegreatest mostintolerable all theevilsofmonopolies.It is and of a prostitution the tradeand welfare the publicto the merciless of of ravagesof greedy individuals.'
Postlethwaytanticipatedthe classical conceptionof the advantages of competition, writing:

in Domesticrivalship tradeproduces and plenty plenty; of cheapness proviof sions,ofthefirst and ofmoney. Rivalship one ofthemost is materials, labour, of important principles trade,and a considerable part of its liberty. Whatever it to crampsor hurts in thesefourpointsis ruinous the state,and diametrically to whichis the happiness the greatest contrary its intent, of number possibleof
7 men.
North warned of the devious formswhich monopolycould assume:

For whenever menconsult thepublicgood,as fortheadvancement trade, for of wherein are concerned, usuallyesteem immediate all the they interest their of own to be thecommon measure good and evil.8 of 5. Davenant,op. cit.,pp. 56-57, 139. 6. Tucker,op. cit.,p. 74. 7. Postlethwayt, Great Britain'sCommercial Interest, II, 377. etc.,
8. North, op. cit., p. 12.
LIBERAL ELEMENTS
495
It will be remembered that Smith said dryly:"I have never known muchgood done by thosewho affected tradefor the publicgood."9 to When they insistedthat one individual should not be freeto depriveanotherofhis freedom mercantilists not take importhe did tant exceptionto the principleof the freemarket. When,however, theyinsistedthat the marketcould not be reliedupon to guarantee fullemployment, exceptionwas important. They believed that the if the economyweredirectedby the market,even a competitive one, spendingwould not always be sufficient, specie could be lost through excessive imports,the supply of money for other reasons could be inadequate,the rate ofinterest mightbe too high,and the labor force too small and insufficiently productive. Hence, instead of the classical policy of laissez faire,the mercantilists proposeda policywhichwould utilizethe marketwherever possible,supplement and controlit wherenot, and whichwould have full employment its proximateobjective. There was, then,this as and the classicists:the difference meansbetweenthe mercantilists of formerproposed a relatively controlledmarket and the latter a in relatively uncontrolled one. There also was a difference emphasis on proximateends: the mercantilists stressed the full employment of resourcesand the classicistsstressed the efficiency the use of of particularresources. much farther. The Yet it will not do to carrythese differences difference about means was not a fundamentalone. The mercantilistsdid not believe in an economywholly or mainly directedby the state, and the classicistsdid not believe in an economyentirely about means controlledby a competitivemarket. The difference was a difference over the amount and kinds of control. Both classicistsand mercantilists believed in what we now call a mixed econin omy, and they differed over the ingredients the mixture. This hard to defineand kind of difference, know today, is singularly we to resolve. on The difference immediate ends - full employmentversus is one which must not be made of -also efficiency employment nor fundamental. It is very probable that neitherthe mercantilists the classicistswould have admittedsuch a distinction. The former, I suspect, would have insistedthat their policy achieved a greater than a policy which ignored output, and therefore more efficiency, the problem of full employment. Their implicit assumption was that a nationwas not freeto choose betweenusingall of its resources of in one way or another,in orderto satisfythe criterion maximum
9. Smith, op. cit., p. 423.
496
output, but that the nation must choose between a policy which would produce full employmentand one which would not. The classicistsprobably would have insistedthat once the market had and the conditions establishedforan efficient been made competitive use of resourcesthere would be no problem of full employment. perhapsinsisted,that unwiseinterference They would have granted, but withthe marketcould create underemployment theywould not as have admitted underemployment a problem once the market was properlyorganized. It is only a later age which can make the employmenta distinctionbetween full employmentand efficient each oftheseobjeccertainone; and in orderto do thisit mustdefine from by tives differently the way theyweredefined the mercantilists and the classicists. It must assume that a policy which provides full employmentprobably would be accompanied by some inefin ficiency the use of particularresources,and that a policy which in yields efficiency the use of employedresourceswould be accompanied by a conditionof some idle labor and capital. When the objectives are so defined,a choice can be made between the two policies, and that will be chosen which yields the largest national product. No clear choice is, however,implied by the distinction and the classical policies. Not only is it between the mercantilist but, it seems to me, to unnecessary speculateoverwhichwas correct, the speculationis a littlepointless. V to It is morepromising speculateover the reasonsforthe differand the liberal objectives. The most ence betweenthe mercantilist plausible reason is that the two policies were developed in different economicproblems. The great periodsin whichthereweredifferent of particularly labor, over employment, concernof the mercantilists of may have been forcedon them by the unemployment the sixand earlyeighteenth which,economic centuries, teenth,seventeenth, historians tell us, and we can infer from contemporarytracts, was considerable. The enclosuremovementseems to have been the in major cause of unemployment the firstpart of the mercantilist period. By replacing tillage with grazing,the enclosuresreduced and drovelargenumbers the amountof labor requiredin agriculture the ofpersonsoff land into ruralslumsand into the townsand cities. of The transfer large numbersfromone occupation to another is in and circumstances difficult even under favorable circumstances; werenot favorable. The craftguildswerenot the sixteenth century eagerto increasetheiroutputat any time,and one can easily suppose
LIBERAL ELEMENTS IN ENGLISH MERCANTILISM
497
thattheywerenot pleasedby the hordes who weresweptoff the in landand sought employment thetowns. Another cause of unemployment the frequent was commercial which their must the crises by strangeness havebaffled earlyeconomists(no less thanthe later). Although fluctuations not the seem as tohavebeenofregular movements occurrence, latercyclical were, yet these were more than occasionaland sporadicchanges. In which addition thesetwo typesof unemployment, to todaywould and be calledfrictional cyclical, seemsalso to havebeenmuch there on seasonalunemployment. Petty'sstatistics annual and weekly of wagesin the third quarter the seventeenth century suggest that was employed about thirty-five the averageworker weeksof the
year.'
and It is fairly clearthatunemployment extensive quite was was common.The management thesetwo of clear that poverty problems made morethanusuallydifficult a circumstance was by fromthe Reformation. When the powerof the Catholic arising was destroyed therewentwithit an organized method of church for was caring thepoor. An effort madeto place theresponsibility on localgovernments, thiswas notsuccessful. but The craft guilds, lookedoutfortheir but it is true, members, wereunableto care for had even to. thenewly created poorfrom agriculture ifthey wished for Not onlywas thereless provision the lowerclasses,but after middleof the seventeenth there was less interest the century in their welfare lessconcern theproblem unemployment. and over of UndertheTudorsthere seemsto havebeena genuine for solicitude whichperhapscame of the knowledge the lowerclasses,a feeling with an absolutemonarch can have disastrous that disaffection results. After revolution 1688,the monarchy severely the of was and was for abridged therefore less responsible thegeneral welfare, could be onlya diffuse whileParliament object of resentment to the thosewho thought statewas not looking after themproperly. Elizabethcouldsay withreason,"Yet thisI accountthe glory of my crown, thatI have reigned withyourloves." It is difficult to imagine wordsof thesamesincerity coming from sovereign a after 1688. It seems,to use today'slanguage, that the unemployment of and of thesixteenth seventeenth centuries theresult immobility, was of seasonalfluctuations, the rigidity certain of of pricesand wages which produced themonopolistic was of and by practices theguilds, of frequent severedeflations. and The nonseasonal unemployment
1. Petty,op. cit.,I, 244, 305.
498
mighthave been eliminated(it now is easy to say) had it been possible to move labor fromareas whereit was abundant to where it was scarce and to forcea reductionof certainwages and prices in to orderto make increasedemployment profitable the entrepreneurs of the age. But it does not seem, from their writings, that the mercantilists thought such measures would have been adequate. Although they made proposals for increasinglabor mobility and formakingwages and pricesmoreflexible, theydo not seem to have put much reliance on them. Instead, it seems they had greater in confidence inflationary measures: those which,by increasingthe moneysupply,would have increasedspendingand employment. It is interesting observe that Great Britain had a similar to unemployment problemabout 200 years afterthe close of the mercantilistperiod and solved it by methods quite suggestiveof the mercantilists' World War therewas conproposals. Afterthe first siderablefrictional and unemployment moneywages could not easily have been lowered. A few years afterthe second World War, after the inflationary measuresof the Labor Government had showntheir it effect, was observed by a United Nations report on economic stability,that the frictional unemployment "which had previously been attributedmainlyto lack of mobilityof labour, melted away, leaving an acute labour shortage."2 This reportwas written mainly fromthe viewpointof Keynesian economicswhich,it is clear, has an affinity mercantilist to doctrine. In the periodwhen liberaleconomicdoctrinedeveloped circumstances were much different fromthose of the mercantilist period. There was no longer the problemof managinga large amount of as of permanent unemployment, this effect the enclosuremovement had disappeared. The internalmarketof Great Britain was much betterorganized,in the sense of therebeing less immobility comof moditiesand capital as well as of labor. By 1750, the government no longerenforced any important controlsover the internalmarket. The obstaclesto priceand wage flexibility weremuch less formidable than theyhad been in the preceding threecenturies. Improvements in transportation, especially after 1800, brought the parts of the and made competition morefeasible. economyinto closerconnection Finally, there was an expansion of British foreigntrade, resulting fromthe decline of the Dutch empireat the end of the seventeenth century,fromthe weakeningof the imperialpower of Spain, and the from increased efficiency manufactures shipping of whichgave and
2. Nationaland International MeasuresforFull Employment (New York, 1949), ?25.
LIBERAL ELEMENTS
499
Britaina cost advantage in the worldmarket. These circumstances dictateda muchwideruse ofthe marketas the appropriate economic policy, just as the'different circumstances the confronting mercanon tilistsrequiredrestrictions the market. VI The interpretation this essay makes English mercantilist of doctrine a predecessorof economic liberalism.In order that the to meaningbe clear,it may be helpful compareit to otherinterpretations of mercantilism. It is common forworks on the historyof economicthoughtto abide by the judgmentof Smithand Mill, that the mercantilists believed moneywas wealth and therefore believed the nation became richeras its supply of monetary metal increased. It is understandablethat the mercantilists should be judged this is way. If theirgoal of full employment neglected, thereis no way to explaintheirpreoccupation withthe moneysupplybut to suppose they thought money was wealth. The expositionabove of their shouldmake clearthat fewofthemmade the simple monetary theory errorof whichtheyhave so oftenbeen accused. Another interpretation looks upon mercantilist doctrine as a collectionof mistakenideas, not onlyin the area of monetary theory but in other areas as well. The mercantilists, this view, are by regardedas rudimentary economistswho sensed the importanceof the problemstheyaddressedbut were defeatedby them. The mercantilistsdid expresscertainideas crudelyand they made mistakes (whichis not at all singular). But therewas nothing primitive about theircentralideas. The mostimportant aspects of the price mechanism,forexample,were understoodas long ago as 1549whenHales's Discourse was published,and the way in which he wrote of them suggests they were known even earlier. Modern economics has expressed theseprinciples morerigorously it has not alteredthem. but We stillbelieve that unequal rates of profit will mause re-allocation a of transferable resources. Indeed, it is only in recent years that economics has tried to reintegrate monetaryand price theory,in orderto bringtogether moneyand the real sides of the economy, the whichis a theoretical achievement soughtby the mercantilists. A third interpretation makes the mercantilists into apologists forthe kind of economyin whichtheylived. It has become increasingly common in recent years to look upon social thoughtas an of apology or rationalization the social institutions whichare dominant when the thoughtis expressed. When the mercantilists are regardedthisway,two conclusionsusually result. One is that their
500
of to doctrinewas an effort explain the circumstances theirage. If only in theirperiod,it were interested this means the mercantilists is wholly- and trivially correct. Economists always are interand ested in the problemsof the time,some of whichare transitory is othersnearlyeverlasting. The otherconclusion that the mercantilistssought to advance private interestsby disguisingthem in a can tissue of abstraction. I do not knowhow such an interpretation statementsin theirworks,there be upheld (in addition to contrary the of is the awkwarddifficulty uncovering privatethoughtsof men who have been dead 200 years and more), nor do I see just what the significance proofwould have. Perhaps JohnHales was trying to increase the income of corn growersand Thomas Mun wanted they greaterdividendsfor the East India Company. Nevertheless, of had something lasting interestto say. a makes mercantilism The most cogent of all intepretations of continuation the ideas of medieval society. This is the view of Schmollerand of Heckscher.A Schmollerstated that the principal was the identitybetween political and ecotenet of mercantilism such that the economicconductof the individual nomicinstitutions, to was made to conform the objectives of the state. Mercantilism was thus a systemof national power and one of a numberof forms which idealism as a political philosophycan take. Prior to the of the dictatorships, most notable expression idealtwentieth century ismwas medieval society. In their remarkson economicconduct, the Schoolmenstated that freeindividualbehavior was inimicalto the welfareof society. They adopted the Aristoteleanidea that exchangewas "unnatural"because it caused men to lose sightof the and to make an whichwas consumption, properuse of commodities, use of them,which was unlimitedaccumulation.4 In the improper if exchange is condemned its Aristoteleanand medieval conception, of more than the satisfaction limitedwants. It purposeis anything if acquisitivedesiresbecause is wrong it becomesa meansofexpressing are thesein themselves improper. In its practicalaspect,the conception makes exchangea useless,or barren,act, and imposesnumerous controls over it. This was the medievalview afterabout the twelfth century,although there were exceptionsto it. I In Englishmercantilist writings have foundonlyone statement which in any way suggeststhe medieval notion of exchange. It is Cary's assertionthat the buyingand selling"wherebyone man lives
Significance and System Its Historical The 3. GustavSchmoller, Mercantile op. (New York,1896),p. 7. Heckscher, cit.,II, 324. I, Politics, 9. 4. Aristotle,
LIBERAL ELEMENTS
501
bringsno advantage to the public."'5 Howof by the profit another, ever, it is not certain that Cary endorsed the medieval idea. His observationson the price mechanism are anythingbut medieval. was inimical stated that self-interest the mercantilists Admittedly, to the public good, but the statementis, I believe, of no significance. The kindofeconomytheyproposedcould not possiblyhave operated just of withoutthe expression self-interest, as the economyproposed by the classicists could not have operated without it. They too but neither they nor the mercantilists condemned self-interest, believed it whollybad or even mainlyso, and they did not want it suppressed. Both wanted the power it gave to men to be used in the national interest. Hales wrote:
cause thereof it To tellyou plainly, is avaricethat I take fortheprincipal men? maybe takenfrom but [ofenclosures]; can we devisethatall covetousness without gladness, ire, No, no morethanwe can makemento be without without menthe Whatthen? We musttakeaway from all fear, and without affections. lucre in occasionof theircovetousness thispart. What is that? The exceeding morethanby husbandry.And thatmay thattheysee growby theseenclosures, the by be done by any of thesetwo meansthatI willtellyou: either minishing of of or lucrethatmenhave by grazing; else by advancing theprofit husbandry, is.6 as to tillit be as goodand as profitable theoccupiers grazing
in To exploit the selfishness men, to rewardthem forit, to see in it a powerforgood as well as harm,wereideas as remotefromthe rulingthoughtof the Middle Ages as ideas could be. It is quite doctrine. thereto discoverthe rootsofEnglishmercantilist impossible They took hold after the power of medievalism in England had of passed. The direction the doctrinelaid not to the past but to the to future, the ideas of the classical economists,howevermuch they disdained theirpredecessors. It is ironic that the doctrineshould have been disparaged most by the men whose ideas it anticipated and that it should have been pushed back into an age with which it could have nothingin common.
WILLIAM D. GRAMPP.
THE UNIVERSITY OF ILLINOIS IN CHICAGO
5. Cary, op. cit., p. 4. 6. Hales, op. cit., p. 122.

Elementos Liberales Del Mercantilismo

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Elementos Liberales Del Mercantilismo

Încărcat de

Drepturi de autor:

Formate disponibile

The Liberal Elements in English Mercantilism Author(s): William D.

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

queries: idea in one ofhisrhetorical a expressed similar Berkeley

LIBERAL ELEMENTS IN ENGLISH MERCANTILISM

QUARTERLY JOURNAL OF ECONOMICS

any inconveniences attending it.2

QUARTERLY JOURNAL OF ECONOMICS

Those whoheld thisbeliefincludedHales, Temple, Cary,and Tucker, the last of whomsaid:

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

Davenant expressedthe same conclusion:

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

Postlethwaytanticipatedthe classical conceptionof the advantages of competition, writing:

North warned of the devious formswhich monopolycould assume:

QUARTERLY JOURNAL OF ECONOMICS

LIBERAL ELEMENTS IN ENGLISH MERCANTILISM

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS

5. Cary, op. cit., p. 4. 6. Hales, op. cit., p. 122.

S-ar putea să vă placă și