The Evolution of States

by J. M. Robertson

It was a triumph of the trading class over the upper, nothing more. As for the corporations, they were as avid of monopolies as the courtiers had ever been; and independent traders hampered by monopolist corporations were only too ready to become monopolist corporations themselves.[1222] Under Charles I, for instance, there was set up a chartered company with a monopoly of soap-making, of which every manufacturer could become a member—a kind of chartered "trust," born out of due time—the price paid to the crown for the privilege being £10,000 and a royalty of £8 on every ton of soap made. For this payment the monopolists received full powers of coercion and the punitive aid of the Star Chamber. After a few years, in consideration of a higher payment, the King revoked the first patent and established a new corporation. Similar monopolies were granted to starch-makers and other producers; the Long Parliament pursuing the same policy, "till monopolies became as common as they had been under James or Elizabeth."[1223]

Part of the result was that about 1635 "there were more merchants to be found upon the exchange worth each one thousand pounds and upwards than there were in the former days, before the year 1600, to be found worth one hundred pounds each."[1224] The upper classes, as capitalists and even as traders, were not now likely to remain aloof. But all the while there was no betterment of the lot of the poor. "That our poor in England," writes Child after the Restoration, "have always been in a most sad and wretched condition ... is confessed and lamented by all men."[1225] Child's theory of the effect of usury laws in the matter is pure fallacy; but his estimate of men's fortunes is probably more accurate than the statement of the Venetian ambassador in the reign of Mary, that "there were many merchants in London with £50,000 or £60,000 each."[1226] Howell, in 1619,[1227] expresses a belief that "our four-and-twenty aldermen may buy a hundred of the richest men in Amsterdam." Yet, though it was also confessed that among the Dutch, and even in Hamburg and Paris, the poor were intelligently provided for,[1228] no such necessity was practically recognised in England,[1229] either by Puritan or by Cavalier, though before the Rebellion the administration of Charles had not been apathetic;[1230] and a century later there were the same conditions of popular misery and vice, with a new plague of drunkenness added.[1231] By that time, too, the corporation monopolies were strangling trade just as the private monopolies had formerly done;[1232] while France, which in the latter part of the seventeenth century gave such a stimulus to English and Dutch industry by the suicidal Revocation of the Edict of Nantes, had recovered both population and trade,[1233] and was on a commercial footing which, well developed, might have given her the victory over England in the race for empire.

Everywhere in the seventeenth century, however, the new development meant new strife. Protestant England and Holland, Catholic France and Protestant Holland, flew at each other's throats in quarrels of trade and tariffs; and for the monopoly of the trade in cloves, Dutch and Spanish and English battled as furiously as for constraint and freedom of conscience. The primitively selfish and mistaken notion men had formed of commercial economy was on a level with the religious impulse as it had subsisted from the beginning of Christendom; and even as each Christian sect had felt it necessary to throttle the rest, each nation felt that its prosperity depended on the others' impoverishment. To spite the Dutch, the Cromwellian party in 1651 passed the Navigation Act, prohibiting all imports of foreign goods save in English ships or those of the nations producing them. In practice it was a total failure, the effect being to injure the English rather than the Dutch trade; but the Dutch themselves, who were fanatical for their own Asiatic monopoly trade, believed it would injure them, and went to war accordingly.

The eulogy of the Navigation Act as "wise" by Adam Smith (put, by the way, with a "perhaps") is one of his worst mistakes. Roger Coke in 1672 testified (Treatise on Trade, p. 68, cited by M'Culloch) that within two years of the passing of the Act England lost the greater part of the Baltic and Greenland trades; and Sir Josiah Child's New Discourse of Trade shows in detail that the English by about 1670 or 1690 had lost to the Dutch even much of the trade they formerly had. (See Preface to second and later editions, and compare M'Culloch, note xi to his edition of the Wealth of Nations, and McCullagh, Industrial History, ii, 340.) The one direction in which the Act seems to have been successful was in stimulating shipbuilding and seafaring in the American colonies. (See Prof. Ashley in the Quarterly Journal of Economics, Boston, November, 1899, pp. 4-6.) Joshua Gee, in his Trade and Navigation of Great Britain Considered (1730, 6th ed. p. 113), expressly ascribes a "prodigious increase of our shipping" to "the timber trade between Portugal, etc., and our plantations," one result being that English ships have "become the common carriers in the Mediterranean, as well as between the Mediterranean, Holland, Hambro', and the Baltic." He says nothing of the Navigation Act, but lays stress on the cheap building of ships in New England, and notes (p. 114) that the Dutch habitually hire English ships "to transport their goods from Spain, etc., to Amsterdam, and other places."

Even among expert merchants there was no true economic science, only a certain empirical knowledge, reduced to rule of thumb. Hence the traders were for ever tending to strangle trade, and the ablest administrators fell into the snare. Everywhere they tended to be possessed by the gross fallacy that they could somehow sell without buying,[1234] and so heap up gold and silver; and to secure at least a balance in bullion was considered an absolute necessity. This was the most serious error of the policy of Colbert, who secured a balance of social gain to France by stimulating and protecting shipping and new industries,[1235] but failed to learn the lesson that foreign commerce in the end must consist in an exchange of goods. Thus, though he resisted the ruinous methods of Louis XIV,[1236] he lent himself to the theory which, next to the hope of making the Netherlands a province of France and so an arm of French naval strength, stimulated the policy of war. By repeatedly raising his tariffs he forced the Dutch to raise theirs; whereupon France went to war. Had he known that the Dutch could not sell to France without buying thence, and vice versa, he would have rested content with establishing his new industries.

M. Dussieux (as cited, p. 127) frames a deplorable demonstration that Holland was impoverishing France and destroying all industry there by selling more articles than she bought. As if any country could go on buying in perpetuity without selling in payment. M. Dussieux goes on to admit that France before Colbert had some great industries, and a great agricultural export trade, as must needs have been. His argument shows the survival of the mercantilist delusion that trade can drain a productive country of its bullion. It is evident that Colbert helped trade more by checking fiscal abuses and promoting canals and roads than by protecting new industries. On the whole he seems to have gravely injured agriculture (id. pp. 89, note, and 133); and Adam Smith's criticism (Wealth of Nations, bk. iii, ch. ii; bk. iv, ch. ix) remains valid. He was "imposed upon by the sophistry of merchants and manufacturers, who are always demanding a monopoly against their countrymen," and by prohibiting export of grain he depressed agriculture, the natural and facile industry of France, and so promoted the rural misery which at length inspired the Revolution. It was essentially by way of reaction against his error that the Physiocrats fell into theirs—the denial that any industry was productive except agriculture. Even if he had not prohibited export of grain, his import duties, in so far as they excluded foreign products, would have checked the grain exports which had formerly paid for these. Thus, as M. Dussieux admits, Colbert failed to secure prosperity for the peasantry while he was helping industry. (Cp. Brandt, Beiträge, as cited.) Colbert in the nineteenth century had the benefit of the doctrine that monarchism prepared for democracy in France, and there is some truth in the protest of Morin that on this and other grounds he became the object of "un culte ridicule qui brave les notions les plus élémentaires de l'économie publique" (Origines de la démocratie, Introd.—written in 1854—p. 48). Morin goes so far as to charge on Colbert equally with Louvois the misfortunes of France under Louis XIV (id. pp. 88, 120).

Of course the rival nations were equally self-seeking. Prohibitive tariffs were necessarily lowest with the most specifically commercial State, the Dutch; and the free trade doctrine began early to be heard in England.

E.g., from Dudley North. Macaulay, ed. cited, i, 253. See the quotations in M'Culloch, as above cited. Pepys, in his Diary, under date 1664, February 29, tells how Sir Philip Warwick expounded to him the "paradox" that it does not impoverish the nation to export less than it imports. For earlier instances of right thinking on the subject see the author's Trade and Tariffs, p. 65 sq. The repeal in 1663 of statutes against exporting bullion was carried in the interests of the East India Company, and apparently on a false theory; see it in Child, New Discourse, p. 173. Cp. Shaftesbury, Characteristics, Treatise II, pt. i, § 2, end, as to the advantage of a "free port." This had been partially insisted on, as we have seen, by the Merchant Adventurers in the days of Elizabeth and James; and Raleigh strongly pressed it in his Observations touching Trade and Commerce with the Hollander and other Nations, presented to James. Works, ed. 1829, viii, 356-57. Raleigh, however, was a bullionist.

But whether rulers leant in the direction of free trade or strove to heap up import duties as did France, they went to war for monopolies and for imposts. Holland had as determinedly sought the ruin of Antwerp as England did that of Holland. And as the race-principle embroiled nations on the score of trade, so the class-principle set up new feuds of class in all the nations concerned. The new trading class fought for its own hand as the trade gilds of the Middle Ages had done; and the fact of its connections with the gentry did not prevent animosity between gentry and traders or investors in the mass. Thus were the old issues complicated, for good or for ill.

Prof. Cunningham (English Industry and Commerce, ed. 1892, ii, 16-17) offers an unexpected defence of the "Mercantile System," under which bullion was striven for as "the direct means of securing power." "The wisdom of the whole scheme," he writes, "is apparently justified by the striking development of national power which took place during the period when it lasted. England first outstripped Holland and then raised an empire in the East on the ruins of French dependencies." After this argument Dr. Cunningham falters, observing: "But even if the logic of facts seems to tell in its favour, there is a danger of fallacy: success was attained, but how far was it due to the working of coal, and the age of mechanical invention, and how far to the policy pursued?" There is really no need to suppose such an antinomy between "the logic of facts" and any other logic. The only legitimate logic of facts is that which takes in all the facts. Now, seeing that France was as much devoted as England to the Mercantile System, and that in the terms of the case she failed, it cannot have been the Mercantile System that secured success to England. The logic of facts excludes the hypothesis. As for the "outstripping" of Holland, a country with perhaps a fourth of England's population in the eighteenth century, we have seen that the Mercantile System, as operating in the Navigation Act, totally failed to attain its purpose, and that Dutch decadence was largely due to monopolies—i.e., to acceptance of the Mercantile System. The working of coal, on the other hand, was a real wealth-making force, certainly conducive to naval and other empire. But more allowance is to be made for the fact that France had heavy continental quarrels on hand while she was fighting England in Asia and America.