The new textile and mining industries supplied England with that vast wealth 1 which enabled her to endure successfully the long years of war at the close of last century and the beginning of this. The Industrial Revolution came only just in time, for after the repose of 1763 to 1792, during which this silent Revolution matured and took root, England engaged in a struggle which she certainly could never have supported without a far greater national wealth than she possessed in the first three quarters of the eighteenth century. Even as it was, the year 1815 found a large portion of her people in poverty and distress,2 while the industrial classes suffered heavily from the taxation which the war imposed.3 But owing to her industrial development, the war left England at its close, in spite of all her troubles, the foremost nation of Europe in economic development, and consequently first in other matters also. As is the case with most modern contests, this great war originated in economic causes, even to a certain extent in economic mistakes, but it had important effects upon industry, and was largely affected by industrial considerations. Hence we must consider it rather more closely.

by high rate of wages and comfort. Toynbee, Industrial Revolution, p. 88,

note.

1 Lecky, History of the Eighteenth Century, vi. 218. This is now perceived by most historians, but at one time it was ignored. But it is now recognised that at the time of the Continental War "Pitt's main support lay in the extraordinary financial resources supplied by the rapidly increasing manufactures of England." S. R. Gardiner, Students' History of England, p. 835.

2 This was the time when the Poor Rate was rising year after year, till in 1818 it was over 13s. per head; see below, p. 422.

3 Rogers, Six Centuries, p. 505.

CHAPTER XXII

WAR, POLITICS, AND INDUSTRY

§ 209. England's Industrial Advantages in 1763. If we look at the state of the European Powers after the conclusion of the Seven Years' War by the Treaty of Paris in 1763, we shall see that England had achieved a very favourable position for the growth of her internal industries.1 It is true that together with the rest of Europe she had adopted the policy of endeavouring to secure a sole market 2 for her goods, but though that policy was a mistake, in so far as it aimed at a monopoly, England was not alone in her error, and since other Powers were doing the same, it was just as well that she should hold the lead among them. Moreover, since we are now paying interest upon the heavy national bills which we ran up at that time, we may profitably examine what we gained thereby.

In the first place, England had seriously crippled her powerful commercial rival, France, both in her Indian and American possessions. The French flag had nearly disappeared from the sea. By the Seven Years' War we had gained Canada, Florida, and all the French possessions east of the Mississippi River (except New Orleans); while in India our influence had become supreme, owing to the victories of Clive. French influence in India and America was practically annihilated. Spain, the faithful ally of France, lost with her friend her place as the commercial rival of England in foreign trade. Germany was again being ravaged by the dynastic struggles, in which Frederick

1 Rogers, Economic Interpretation of History, pp. 290-291, gives an admirable summary of the state of European powers at this time. Cf. also Lecky, History of the Eighteenth Century, iii. p. 23, as to the ascendancy of England at this time.

2 Rogers, Economic Interpretation, p. 323.

Lecky, History, iii. p. 23.

the Great bore so prominent a part, between the reigning houses of Austria and Prussia. Holland was similarly torn by internal dissensions under the Stadtholder William V., which gave the rival sovereigns of Prussia and Austria a chance of making matters worse by their interference. By 1790 the United Provinces had thus sunk into utter insignificance. Sweden, Norway, and Italy were of no account in European politics, and Russia had only begun to come to the front. Hence England alone had the chance of the universal empire of a sole market."1 The supply of this market, especially in our American colonies, was in the hands of English manufacturers and English workmen. The great inventions which came, as we saw, after 1763 were thus at once called into active employment, and our mills and mines were able to produce wealth as fast as they could work, without fear of foreign competition.

§ 210. The Mercantile Theory.

3

But in some points our statesmen and merchants made a mistake in their policy. The commercial mind of England at this epoch was dominated by what is known as the Mercantile Theory.2 It was a theory that had grown up naturally out of the spirit of Nationalism, of selfsustained and complete national life, that was our heritage from the Renaissance and the Reformation. It was not altogether wrong, for its object was national greatness, an object laudable and harmless enough; but the believers in the policy of increasing our national greatness also believed that it could only be attained in one way, and that was at the expense of our neighbours. It was not sufficiently understood that commerce, if properly carried on, is productive of benefit to both the trading parties; and that though one side may seem to gain an advantage, there must be also an advantage to the other side, since other

1 Rogers, Economic Interpretation, p. 291.

2 Cf. Toynbee, Industrial Revolution, ch. vii. p. 72 (on The Mercantile Theory); Cunningham, Growth of English Industry, ii. pp. 16 899. Rogers, Economic Interpretation of History, p. 323; also Adam Smith, Wealth of Nations, Bk. IV. chs. i.-viii.

3 Toynbee, Industrial Revolution, p. 76.

wise no one would be willing to trade. The advantages gained by the two parties to a bargain are not always identical or even necessarily similar, but advantage of some kind must exist, for it is the essence of a bargain that each of the contracting parties should benefit by it. The benefit gained by one party may seem to the other insignificant or even illusory, and doubtless it often is; but unless that second party imagined that he was obtaining something at least equivalent to what he gave to the first, he would hardly conclude the exchange. A Hudson's Bay fur-trader is no doubt amused at the folly of the Indian hunter who barters a valuable skin for a few drops of inferior brandy; but so long as the Indian considers the doubtful joys of firewater superior to the solid merits of the fur of the sable, the bargain is to both commercially profitable. But as long as the principles of barter, which underlie even the most complicated transactions of international commerce, were imperfectly understood, as indeed they still frequently are, it seemed to English legislators and merchants that foreign commerce must result in a loss to one side or the other, unless it was very carefully regulated; and, fearing lest the loss should fall upon them, they naturally took what seemed the best method to avoid it.

Nowhere, perhaps, is this seen more clearly than in the excessive care that was taken to prevent England from losing on the balance of trade by letting gold and silver go out of the country in exchange for foreign commodities. The use of the precious metals in commerce has at all times been imperfectly understood by very many of those who employ them, and by not a few of those who undertake to write about them. Hence it is not surprising to find that politicians and traders from the sixteenth to the eighteenth century believed that the country was suffering a severe loss when it allowed too much bullion to be exported in payment for foreign goods. This loss seemed to occur when the value of our exports did not more or less exactly balance the value of the imports; and when it did not, the difference which England paid to the foreigner in coin or bullion was said to be a national loss, and the

"balance of trade," as it was called, was said to be against was was to us. This was thought to be especially the case in the trade with East India, since large quantities of bullion were exported to buy the Indian commodities which were brought back to England. Only the more thoughtful writers of the seventeenth century perceived that the bullion exported to India was, so to speak, a seed which ultimately brought back a rich harvest in coin by our sale of spices and other Eastern commodities in the European market.1 But the average politician thought that, in order to secure and retain wealth, it was necessary that on every article exported a balance in coin should eventually be paid to the English dealer; and hence came those frequent legislative prohibitions of the export of bullion which continued, at least in form, till 1816.2

§ 211. The Mercantile Theory in Practice.

This is, however, only one example of the results of a theory which maintained that regulation was a vital necessity for commerce. The whole of English industry and commerce was permeated by the influence of this theory. Regulation was its keynote; but it was regulation with a definite and avowed object. That object was, as hinted above, not only mercantile profit but political power; and to political power the necessities of industry were to be strictly subordinate. Even in the case just quoted of the export of bullion, there were two motives at work in men's minds the commercial desire to obtain a visible profit in money, and the political desire to keep in the country an accumulation of treasure, which might be useful in case of war. Of these two motives the political was frequently

1 For this trade see Mun's valuable Discourse of Trade from England unto the East Indies, in Purchas's Pilgrims (1625); also Misselden, Circle of Commerce (1623), p. 34; Malynes, Center of the Circle (1623), p. 114; Craik, British Commerce, ii. 109, 172-179; also Adam Smith, Wealth of Nations, Bk. I. ch. v., and Bk. IV. ch. i. (Vol. I. p. 45 and II. 12, Clarendon Press edn.).

2 Rogers, Economic Interpretation, p. 187.

3 Adam Smith, Wealth of Nations, Bk. IV. ch. i. (Vol. II. p. 13, ed. cit.), shows that even in case of war the accumulation of treasure is unnecessary