A history of commerce

by Clive Day

188. Wars occasioned by commercial interests; military aspect of commerce in this period.—Still another class of wars can be distinguished in which the religious or dynastic motive might enter to some extent, but in which the commercial motive was predominant. The reader should be cautioned against an extravagant idea of the power of government to extend commerce. At the present time this power seems very slight indeed. It was, however, far greater in the period under consideration. References in preceding sections to the prevalence of piracy and to the warlike attitude of merchants of different nations toward each other have suggested the military character of commerce, inviting the armed protection of the state. “One fact stands out clearly,” says a recent authority on the history of India, “No European nation has won the supremacy of the East which did not make it a national concern.” The prize in distant commerce went not to the best producers and merchants, but to the group of the best fighters; not size and resources, but ability to organize and willingness to risk resources in conflict, determined the question of success. The little state of Holland made her fortune by an eighty years’ war, in which she broke the power of the Portuguese and Spanish in the East. The English were still unready to embark their national resources in distant ventures, but they won their position in continental India in the eighteenth century by military support which the French kings refused their subjects.

189. Wars arising from the conflict of colonial interests in the New World.—Between 1600 and 1815 was a constant succession of wars, arising from the fact that five European powers had colonies in the New World which they were seeking to maintain or to extend. Holland and Portugal lacked the territorial basis to maintain their struggle when larger states armed for the conflict; France and Spain found their best energies absorbed by dynastic interests in Europe which tied their hands abroad; England emerged victorious from the conflict and found herself repaid, by a position of commercial supremacy, for the expense to which she had been put. Out of the one hundred and twenty-six years between 1688 and 1815 she had spent more than half, sixty-four, in wars ranging from seven to twelve years in length.

190. Political importance of commerce in this period, connected with the desire of governments for ready money.—Commercial expansion in this period depended, as said above, on the political power of the home country. Did not, on the other hand, the political power of the state depend on commerce? A statesman of the time would have answered this question in the affirmative, and with an emphasis which would seem strange now. We think nowadays that the resources of a state depend upon the prosperity of the people, no matter whether this prosperity comes from agriculture or from manufactures, from internal trade or from foreign trade. Statesmen, however, of the period under discussion, set a peculiarly high value on foreign commerce, and regarded it as a more important branch of industry than any other.

The chief reason for this view lay in the fact that most of the European states produced little or none of the precious metals, and could get them only by trade with a neighbor or with a distant country. Now money is “the sinews of war,” and when states were constantly at war with each other, a good supply of money seemed to the statesman a matter of the first necessity. We regard money nowadays only as a means of procuring other forms of capital by exchange, and do not worry about the money supply so long as capital in other forms is abundant. It may have been the fact, however, that in the early period of the modern state the fiscal and military systems operated more smoothly when the stock of money in the country was abundant.

191. The mercantile system, aiming to increase the stock of ready money in the country.—Whether rulers were justified or not in the anxiety that they showed about the money supply, they made it a cardinal point in their policy to regulate commerce so as to increase, if possible, the stock of the precious metals in the country. They argued that the country would make money if it sold more merchandise to foreigners than it bought of them, for then the foreigners would have to make up the balance in coin or bullion. This was called “a favorable balance of trade,” as tending to bring money into the country. On the other hand, if the country became indebted for foreign merchandise to an amount greater than could be offset by the exports, the country would owe a cash balance abroad, and this was an “unfavorable” balance of trade. At the beginning of the period the government tried to effect its object simply by prohibiting the export of bullion (gold and silver); this was the “bullionist” policy.

Prohibitions were found to be ineffective, however, and were a serious hindrance to some branches of commerce, that with the East especially, in which the foreigners demanded considerable supplies of the precious metals. The export of bullion, therefore, was generally permitted, and the government contented itself with a regulation of the commerce in merchandise which, it hoped, would bring more bullion into the country than was carried out.

192. Features of the mercantile system; restriction of imports.—If the student will remember that the main object of the mercantile system, as it was expressed in the commercial policy of the seventeenth and eighteenth centuries, was to increase the credits in a country’s foreign trade, and diminish the debits, so as to get a balance in cash, the main features of the policy will be easily intelligible.

In the first place, imports were discouraged. A Spanish mercantilist thought that his country suffered “an infinite wrong” from the importation of fish from abroad, which, by his reckoning, cost the country three million piasters a year; he suggested either that home fisheries should be built up so that the money need not leave the country, or that permission be obtained from the Pope to eat meat on Saturdays, which would diminish the necessity for importation. A typical example of the ideas underlying the policy is furnished by an appeal of the English salt-makers in the seventeenth century, urging that the use of foreign salt in the curing of fish be prohibited on the ground that it was the “wisdom of a kingdom or nation to prevent the importation of any manufacture from abroad which might be a detriment to their own at home, for if the coin of the nation be carried out to pay for foreign manufactures and our own people left unemployed, then in case a war happen with our potent neighbours, the people are incapacitated to pay taxes for the support of the same.”

Mercantilism and modern protectionism easily ran together, as is apparent in the quotation, but the spirit animating restrictions was in this period mainly mercantilist, based, that is, on consideration of the flow of precious metals. The methods of tariff regulation, moreover, differed from those of modern protectionism; statesmen did not, in most cases, attempt to scale the duties so as just to balance the advantages of the foreign producer, but resorted to downright prohibition of the wares which they desired to exclude from the home market.