Mercantilist Theory and Practice The History of British Mercantilism

In England at the beginning of the seventeenth century, according to the economic historian Charles Wilson, ‘[g]overnments, administrations and merchants were fumbling their way towards a new and aggressive conception of a mercantile economy, protectionist, self-sufficient, exclusive’. Without doubt this had a background in the increasing importance for England of its foreign trade which was felt everywhere in the context of the remarkable economic upsurge taking place in Europe during the latter half of the sixteenth century. England had of course been an important trading nation since the high middle ages. Of special importance was her overseas trade, with raw materials such as wool, tin and leather being sent to north European ports. Unfinished wool cloth was probably the single most important English export commodity from the middle of the sixteenth century – mainly to Holland and Flanders. Antwerp was the main customer of English cloth until it was sacked by Spanish troops in 1576 and much of this trade moved over to the Dutch city of Middleburg at the end of the century. Much of the trade in unfinished cloth was carried out on a monopolist basis by the chartered company of the Merchant Adventurers. After a less than successful start with the famous Alderman Cockaynes project from 1613 – an ambitious but failed large-scale scheme to form a new company which would sell dyed and finished cloth to Europe to challenge the Merchant Adventurers’ monopoly (which may in fact have decided the failure of the project) – this commodity nevertheless became an increasingly important export. As a consequence English wool producers became increasingly involved in bitter competition with other cloth-producing districts and countries in northern Europe.

In 1680 a comprehensive treatise named Britannia Languens, or A Discourse of Trade was published under the authorship of ‘Philanglus’ (later identified as the author William Petyt). It was a plea for the necessity to increase England’s foreign trade in general and to increase its share of trade to the disadvantage of France and Holland in particular. Philanglus started out in a positive tone but then raised a finger of warning:

The judgement over what late nineteenth-century observers in Britain called the ‘old colonial system’ seems forever to be connected with the devastating blow Adam Smith delivered against it in the Wealth of Nations: ‘To prohibit a great people ... from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind’. However, Smith’s condemnation was not only targeted against the ‘slavery’ imposed upon the subdued colonists. He also believed that empire was negative for the economic prosperity of the mother country. Hence monopoly had for Britain led to an unnatural and dangerous concentration of capital in the colonial trades, while a more happy order would have been to invest money more widely which would have led to the creation of even more wealth. The only people who according to Smith had profited and had reaped high monopoly profits were the great merchants. Adam Smith was of course not alone at this time in regarding colonies as mostly a burden to their mother country. Josiah Tucker, Dean of Gloucester and economic writer, was another public figure who already in the 1760s had aired the opinion that the costs of empire by far outweighed the benefits.

More than perhaps anybody else the early twentieth-century American economist Edgar Furniss has helped to create a view that seventeenth- and early eighteenth-century economic writers in England regarded labourers not as human beings but merely as soulless instruments and means of production. His presentation of William Temple writing in the 1660s illustrates well his general opinion: ‘… his attitude toward the labouring class was not merely severe, it was bitter and cynical, established upon a belief that the lower classes of society were actuated by no impulse higher than that of immediate physical gratification’. To some extent this is true, of course. Most writers during this period believed in the existence of ’a backward sloping demand curve for labour’ and that workers were lazy by nature. Only by force or by the risk of hunger would the poor be tempted to work. Moreover, it is certainly true that workers were regarded as a means to enrich the country, but more seldom was it supposed that they would also act in their own interest. The view that wages should be low in order to create for England a competitive position in the international market was a view that most writers at this time shared.