Mercantilism

Eli F. Heckscher

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136157387
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Eli Heckscher's Mercantilism is a classic work in the history of economic thought, economic history and international economics. A pioneer in both economic history and trade theory, Heckscher brought a unique breadth to this study. Covering all of the major European countries, the book explores the content and significance of mercantilist ideas over nearly two centuries. Acknowledging the difficulties involved in defining mercantilism, Heckscher nonetheless succeeded in identifying a set of its key characteristics. Now available for the first time in many years, Mercantilism remains singularly relevant to a world preoccupied with maintaining its trading order. Hecksher's full text, notes and supporting material are supplemented by a new introduction by Lars Magnusson which discusses the origin, content and impact of the book.

 

PART I

MERCANTILISM AS A UNIFYING SYSTEM

I

THE HISTORICAL BACKGROUND

From the modern point of view, the political history of the West begins with the world-wide dominion of the Roman Empire. Among the institutions inherited from the latter the two most prominent and best organized were the medieval Holy Roman Empire and, much more important, the medieval Church. But alongside of these and existing in more or less close connection with them, were a host of other universal institutions, which from the practical, and particularly the economic, point of view were of greater significance.

It was not merely the fact of external agreement, but in particular the feeling of spiritual unity in Western Europe which set its stamp on all classes of medieval society—apart from, perhaps, the peasantry—and, with few exceptions, on all streams of culture. That this applies to the Church and to the intellectual world is too well known to need special mention. The secular priesthood and the monastic orders, the universities attended by students from all over the West, and the common language, Latin, gave rise in this sphere to such a spiritual community as finds no worthy counterpart in later times. The same applies also to chivalry, which, from Sicily to Scandinavia, was subject to a common code of honour and had common ceremonies. It is of particular importance from the economic aspect that these common characteristics also apply to the new economic forces in medieval society—the towns and the handicraft organizations. The Gild System and the merchant corporations, the privileges and the administration of the towns were the same over the whole of the West often down to small details, and were, what is undoubtedly significant, an expression of the feeling of spiritual community. This certainly did not mean that a harmony among all individuals of the same calling or of the same social position prevailed throughout the West. Still less did it mean the existence of universal co-operation and fraternal goodwill transcending social boundaries. But from the point of view of our argument it is sufficiently important that there did exist a kind of unity disregarding territorial boundaries, so that the inhabitants of two cities, geographically far from each other, and politically under different rulers, could be more closely bound to one another and might be prepared to concede one another greater privileges than was the case with the citizens of cities not so far apart and politically more closely allied. There were, in addition, universal economic institutions specially influencing merchants of all Western Europe. Thus in connection with the international fairs there arose a system of common legal procedure for all merchants—in England applied by what was aptly named the Court of Piepowder (Cour des pieds poudrés)—and a common law of commerce and exchange, which became the starting-point for all later legal development in this most important commercial sphere. Added to this came the influence of Roman law in its entirety as it spread across Europe, and especially canonic law, universal by its very nature.

All these factors helped the social life of the West to retain something of a universal character even after the Holy Roman Empire had become the merest shadow of a shadow and the extremely real bond of the Church had been burst asunder by the Reformation. Thus began a line of development which can be followed more or less clearly from medieval times, through the period of independent and sovereign states right up to the liberalism and cosmopolitanism of the 18th century and the attempts at the revival of that “European unity which had never wholly been eradicated”, to quote Harald Hjärne, beginning in the Holy Alliance and eventually finding expression in the League of Nations.⁷²

The above is interesting from many points of view, especially from that of the philosophy of history. It refutes, in fact, the conception that economic factors are the only ones in history. In the Middle Ages all these factors pointed in the direction of local isolation and they were difficult obstacles in the way of any kind of general agreement over wide areas. It is not this fact, however, which must be emphasized here, but something rather different. Universalism was one of the two factors which stood in conflict with the claims of the state on the individual, and opposed the state in its endeavour to express itself.

The other factor exercising the same effect in this special connection was, however, the exact antithesis to universalism, in fact, particularism. The outstanding characteristic of medieval society was just this peculiar blending of these two ideas. The daily work of the corporations was governed by the narrowest parochial considerations, but they had, at the same time, a lively consciousness of belonging to an organization embracing the whole of Western Christendom. But whereas universalism had to overcome economic forces, particularism was actually and even intensely supported by them. It is not surprising, therefore, that particularism developed much greater strength than universalism, and that the difficulties which states found in eradicating the universal features from social and economic life were almost negligible, while in general they found particularism too strong for them. The reason for this is partly and perhaps largely that economic forces benefited the latter enormously, but were antagonistic to the former; for even though the economic factor may not be the only effective social force, there can be no doubt that it is one of the most powerful. A second important cause of the rapid break-up of universalism lay in the fact that it was so very firmly anchored in a purely religious unity. For when secularization came on the heels of the Reformation, it destroyed, without further ado, whatever inter-state organizations there existed. For this reason, the whole of the first part of the present book will deal in the main only with the struggle against particularism and will hardly touch on universalism, which is mentioned only to avoid painting a false background and over-estimating the achievements of mercantilism.

The disintegration of the state which particularism brought in its train was far more a factual than a legal change. For, so far as purely formal, juristic powers are concerned, it was, in the main, clear that they were invested in the state even though they were transferred to each and everyone and were exercised without any thought of a common interest.⁷³ This, in itself, is an indication that economic factors must have played an important role in leading to the disintegration of the state, and in reality they did create obstacles, surmounted only with great difficulty, in the way of every attempt to make the state in the Middle Ages an entity in anything more than name. Only where conditions happened to be particularly favourable were matters different.

One of the two main economic causes of this situation was the existing condition of communication facilities, in particular land communications, which, under primitive technical conditions, always offered greater difficulties before the great inventions than inland waterways or coastwise transport. A country such as England, with its remarkably long coast line in proportion to its land area, had, for this reason, far greater possibilities of achieving political union than continental states, and of these none was worse than Germany. In spite of this fact, the condition in Germany and the other continental countries would not have been so unfavourable if the large rivers had been allowed to fulfil their natural functions. But while on land long distances, in the backward state of technical knowledge, formed a natural obstacle in the way of intercourse, on the rivers there were also artificial hindrances, themselves a result of disintegration, namely, the countless river-tolls dealt with in the next chapter. So it came about that disintegration once begun continued to increase.

The second of the economic phenomena which were the chief causes of particularism was the prevailing natural economy, which, in turn, was closely bound up with the means of communication. It is certainly true, as has been pointed out, that what is known as Feudalism existed even without a natural economy, but this is no reason for doubting that the prevalence of this economy substantially assisted the disruption of the state.⁷⁴ The fact that the state receives its revenue in kind and not in money or other universal purchasing power means that that revenue must be consumed on the spot or, at least, that its transport is rendered difficult; and the worse the facilities for transport, the more difficult does this become. As a result, again, the revenues from each particular area form an isolated “fund” which is, of necessity, separately administered and cannot be paid into a common purse. Agents nominated by the state are remunerated by means of concessions, that is, rent or revenue from Crown property, or are given the power of disposal over royal privileges, tolls, coinage rights, etc., and in return for these payments are expected to perform public duties.

Control under these circumstances—where local representatives of the state disposed of revenues in kind on the spot, in exchange for expenditure in kind—was undoubtedly most difficult. The fact that a private person had the right to collect public incomes, which resembled private incomes in every respect, led to a confusion of both, and eventually matters arrived at a point where the duty of performing some service in exchange for income of, legally, a public character, gradually disappeared. In other words, in practice, public revenues passed into private hands. How far this transference to private individuals of obligations to the state went, may be gauged from this instance. There was in Germany, in the Middle Ages, a ceded privilege de non impignorando or de non alienando ab imperio, consisting in security for its owner against the sale, hire or pledging of one’s obligations to the state. And as late as the beginning of the 17th century, Charles IX of Sweden granted this favour to Dutch immigrants, who were to found Göteborg, because they considered it necessary, although their request for it in a country like Sweden was pointless. Under the prevailing conditions of natural economy, the central authority could not govern from a capital; in fact, capitals could not really exist at all, for there was not enough income in kind for the maintenance of the Court at any single place. Instead, the prince and his Court were obliged constantly to travel about the country in order to utilize whatever had accumulated at various places. The constant travelling also served the purpose of keeping local rulers under observation, but there is no doubt that ruling under these circumstances was not the lightest of tasks.⁷⁵

It should, however, by no means be imagined that natural economy and poor transport facilities led of necessity to the disintegration of the state. Sweden happens to be a striking example to the contrary, for Gustavus Vasa succeeded in building up a state with an unusually strong central authority on the foundation of a natural economy which owed its existence not only to the governing force of circumstances but also to his conscious intention. Transport conditions do not provide the explanation in this case, for Sweden, at that time, certainly had none worth boasting about. All that can be said is that these factors, in general, only aggravated the difficulty of holding a kingdom together securely and, in the majority of cases, the obstacles gained the upper hand. To what extent the Carolingian Empire formed an exception depends on the question, so difficult to decide, of how far it preserved the money economy and other features of the economic system of the ancients.⁷⁶ Later in the Middle Ages it was chiefly countries which were not too large and which were provided with exceptionally good communications, such as Burgundy, Aragon and England, that escaped disruption. In France, the growing royal power was fortunate, eventually, in gradually becoming master in the land, but in Germany disintegration had gone so far that the original unity could not be re-established when, towards the end of the Middle Ages, natural economy was superseded and a salaried officialdom created. Instead, towns and territorial states had grown up on the ruins, as social entities of smaller magnitude.

From the point of view of our argument it appears appropriate to consider the disintegration of the power of the state which came about in this way as a twofold phenomenon.

The one aspect of disruption which is fairly thoroughly explained by what has been said consisted in the transference of the power of the state to spiritual and temporal vassals. It led to the independence of large and small territories, which were indifferent as to whether their authority was legally grounded on ceded state powers or whether it was, legally speaking, usurpation—a distinction of rather small moment from an economic point of view. In the economic sphere, the result of this tendency was essentially negative—the enrichment of the lords, tyranny and lawlessness—without any positive economic policy worth mentioning. In the disintegration of the customs system, the coinage system and the system of weights and measures, to be dealt with in the two following chapters, the innumerable measures were not, in the majority of cases, part of a system with positive economic and political aims. They had as their sole object merely the production of the largest possible yield for the possessors of the respective powers in these fields. However devastating an effect this had on trade and other peaceable activities, it cannot be taken to be an economic system competing against the power of the state, but merely anarchy built up on the disintegration of the state. Although the expression “feudal” is very ambiguous and easily misunderstood, yet I venture to define this aspect of disintegration as feudal, without implying more by this word than follows from what has just been stated.

Side by side with this kind of aimless plundering, however, there existed a far more serious form of disintegration based, as it was, on ideas, and consciously and consistently striving to direct economic life along a definite line. The economic policy thus created did produce a competing system in conflict with the power of the state. The policy referred to is that of the towns and it follows from what has been said, that it cannot be explained by merely negative influences, such as natural economy and poor means of intercommunication. It must have had its basis far more in the rise of those new social structures, the growing towns, which represented almost everything that was really new in the economic life of the early Middle Ages. That the new economic policy originated in these active, new, social structures was only to be expected, and, in fact, the policy of the towns in the Middle Ages was probably the first attempt in Western Europe, after the decline of the ancient world, to regulate society on its economic side according to consistent principles. The attempt was crowned with unusual success, for we should have to search long in the period before and after before finding anything comparable with the policy of the towns in its consistent pursuit of a definite object. Economic liberalism or laissez-faire, at the time of its unchallenged supremacy, is, perhaps, such an instance, but in regard to duration, liberalism was a small, evanescent episode in comparison with the persistent tenacity of the policy of the towns.

The growth of the power of the towns was thus, on the whole, synonymous with the decline of the power of the state, and from the time of the Crusades onwards, when a money economy once again grew up, it was the towns rather than the territorial states which profited by it, especially where the power of the state was already in decline. In North Italy, the Eldorado of independent towns, the result was often an absolutely sovereign city—Venice, for example, la città dominante, the ruling city, whose character was outspoken, consistent, municipal egoism survived the French revolution and was only broken down by Napoleon. In other cases, territorial states certainly arose in Italy, but developed around the most powerful city as their centre, as, for example, in Milan and Florence-Tuscany. Germany had nothing comparable, and the difference is due to the fact that in very few instances did German territorial states develop out of independent cities or around them. They were, on the contrary, a form of organization rivalling the towns and, eventually, politically superior to them. Most German cities were obliged to submit to territorial authority. Even the free imperial cities, which were directly and solely under the emperor, never obtained political power comparable with that of the Italian cities. To this extent the break-up of the central power in Germany was due less to the cities than to the territorial states. However, this is a purely external, political aspect. On the economic side, the territorial power in Germany, too, was of fleeting significance in comparison with the consistent policy of the towns. In France, the king and the towns were, to some extent, in alliance against the big vassals, but there, too, economic policy was essentially the work of the towns. The country in which towns mattered least was probably England. And if foreign merchants enjoyed there unusually extensive privileges it was not an expression of the weakness of the royal power, but, on the contrary, of its capacity to express itself in the face of the commercial enviousness and the exclusiveness of the native burghers. Even there, however, the economic policy of the towns exerted a determining influence for a considerable period.

There were also, in addition to these two principal tendencies, other disrupting forces, more difficult of adequate explanation. They are, perhaps, soonest comprehended if considered in this wise—transport difficulties produced local differences, which, thanks to inertia and absence of rational thinking, persisted without any logical cause other than that they already existed. The confusion in the system of weights and measures certainly owed its origin to such unintentional planlessness, even though the “feudal” disintegrating forces were simultaneously at work. Economic policy in the Middle Ages offers sufficient examples of conservatism, but one of the best that I know is that the Florentines retained for 85 years, that is, from 1406 to 1491, the tolls against their own textile industry, set up by Pisa before its incorporation in the Florentine state.⁷⁷ We shall come across many other examples in later chapters.

In all these spheres, the new states had awaiting them great problems of decisive importance for the development of economic life. Before the state could be united it was necessary to cleanse the Augean stables; the question was only whether it would be done successfully, according to tradition, in the Herculean manner, or whether it would prove a Sisyphean labour, an insoluble or, at least, a recurringly unsuccessful undertaking.

At first sight it might appear that the task of the reorganized state was an easy one, at least, so far as the haphazard flinging away of state rights and powers to any lord or local authority was concerned. Here was something which, in principle, could hardly be defended from any point of view and, it might be assumed, would fall to pieces at the lightest onslaught. But in reality circumstances were quite different. For there existed, in the first place, very strong interests deeply concerned that the power of the state should not be unified, and the state consequently had to overcome correspondingly powerful forces. Nor was this all. So long as the state could not rid itself of the social institutions which had created disruption, it lacked the authority necessary to overcome it, and from what follows it will be seen that, in many instances, instead of overcoming them, it sought far more to make a profit out of the existing disruption. On the other hand, ...

Table of contents

• Cover
• Title page
• Copyright page
• Contents
• Introduction by Lars Magnusson
• PREFACE
• NOTE
• INTRODUCTION: THE ARGUMENT
• PART I Mercantilism as a Unifying System
• I: THE HISTORICAL BACKGROUND
• II: THE DISINTEGRATION OF THE TOLL SYSTEM AND THE EFFORTS TO OVERCOME THE CONFUSION
• III: THE STRUGGLE AGAINST LOCAL DISINTEGRATION IN OTHER SPHERES
• IV: THE IMPORTANCE OF THE CHANGE FROM MUNICIPAL TO NATIONAL POLICY
• V: THE INTERNAL REGULATION OF INDUSTRY IN FRANCE
• VI: THE INTERNAL REGULATION OF INDUSTRY IN ENGLAND
• VII: FOREIGN TRADE AND BUSINESS ORGANIZATION
• The position of capital
• VIII: THE EXECUTORS OF MERCANTILISM
• PART II: Mercantilism as a System of Power
• PART III: Mercantilism as a System of Protection
• PART IV: Mercantilism as a Monetary System
• PART V: Mercantilism as a Conception of Society
• CONCLUSION: AFTER MERCANTILISM
• INDEX TO BOTH VOLUMES