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4. To what extent is commerce a peacemaker among nations? Scribners Magazine, 31:344; CLARK, HAMILTON, and MOULTON, Economics of War, 43-54; BRYCE, International Relations, Lecture III.

5. Give examples to show how commerce is influenced by (a) racial differences; (b) stages of industrial development; (c) differences in resources of countries concerned. SMITH, Industrial and Commercial Geography, 675-681.

6. May the same trade be at one time domestic and at another foreign? Give examples.

7. Is it strictly correct to speak of commerce between nations? What do we really mean by the phrase?

8. Trace briefly the development of commercial policy in one of the following ancient lands: Egypt, Greece, Phoenicia, or Rome. DAY; CUNNINGHAM, Western Civilization (Ancient Times); ZIMMERN, 312 et seq., FRANK, Economic History of Rome.

9. What were the outstanding characteristics of commercial policy in the Middle Ages? DAY, History of Commerce, 44, 50-52, 123-127; OGG, Economic Development of Modern Europe, 65-75; LIPSON, Economic History of England, 444-509.

Io. Is there danger of underestimating the significance of trade among undeveloped peoples? Compare the so-called "commercial theory" of Greek development with the view set forth in this chapter. USHER, Industrial History of England, 38-43.

CHAPTER II

MERCANTILISM

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General Character of the Early Modern Period. There are several marked characteristics which distinguish European civilization of the past four hundred years from that of the preceding thousand years. The power and wealth of the commercial and industrial classes had been increased, largely as a result of the Crusades. Wealth had developed a leisure class, and wealth and leisure had furnished the proper basis for the growth of the finer tastes. The literary phase of this general movement found expression in the so-called Renaissance or revival of the almost forgotten literary classics of the Græco-Roman world. Dante, Petrarch, Colet, Erasmus, and More figure prominently in this connection. Artistically the movement expressed itself in the building of magnificent cathedrals, in sculpture and in painting. A galaxy of great names, such as Michelangelo, Leonardo da Vinci, Raphael, Titian, and Rembrandt, belongs to this phase of the movement. The religious side of this development showed itself in the Protestant Reformation with Martin Luther as the central figure, while the political expression was reflected in the growth of nationality. As has been stated, the Crusades hastened the downfall of feudalism by enlisting the services of the feudal barons, many of whom lost their lives in the expeditions or returned with empty purses. Their power, at first largely monopolized by the rich burghers of the cities, was gradually taken over by the central governments. States like Spain, France, and England became nations in the modern

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sense. Finally the commercial phase was characterized by three far-reaching events the discovery of America by Columbus (1492), the finding of an all-water route to the Indies via the Cape of Good Hope by Vasco da Gama (1498), and the circumnavigation of the globe by Magellan and his followers (1519-1522). These discoveries changed the great trade routes between the East and the West, which the Turks, by their conquests culminating in the capture of Constantinople (1453), had greatly interfered with, and shifted the great commercial centers of Europe from the Mediterranean to the Atlantic shores. They brought into general use many new products, such as tobacco, potatoes, and Indian corn, and increased enormously the supply of the precious metals. They also cheapened transportation by substituting ocean trade for commerce, which was largely overland or confined to inland seas. Finally they gave added importance to the industrial and commercial classes and led to two hundred years of warfare for commercial supremacy. The entire general movement was powerfully aided by three important inventions those of gunpowder, the printing press, and the mariner's compass.

General Characteristics of Mercantilism.-The changes which characterize the beginnings of modern history brought about important modifications in economic thought and action. Mercantilism is the term used to designate this general movement. It represented an effort to theorize and legislate along national rather than local or municipal lines. Both theoretically and practically it was intensively protective and derived much inspiration from the city economic policy of the Middle Ages. While Mercantilism possessed no universal theorems or regulations, it did have several more or less general characteristics, one of the most prominent of which was its overestimation of the importance of money. This is easy to understand. The precious metals had been

drained off to the East during preceding centuries in payment for eastern articles of trade, especially since the period of the Crusades. This was contemporaneous with an enormously growing demand for money payments for large standing armies, expensive courts, and salaried officials. The practical economic problem was how to meet these increasing expenses. Not to meet them meant a loss of sovereignty. Under such conditions and at a time when the principles of political economy were poorly understood, it was natural for economic writers and statesmen to reason that the wealth of a country was largely in proportion to the amount of the precious metals in its possession. Fortunate was the country possessing gold and silver mines; but, as none of the more advanced countries of Western Europe were thus favored, foreign trade must be resorted to in order to obtain the necessary supplies. This led to another important characteristic of Mercantilism an overestimation of the value of foreign as compared with the value of domestic commerce.

First and Second Phases of Mercantilism. — When nations succeeded in obtaining the precious metals, the problem was how to keep them from leaving the country. This led to strenuous governmental activity. Cossa, the Italian economist, distinguishes three phases of Mercantilism, all of them being characterized by governmental efforts to maintain or increase the nation's supply of gold and silver. The characteristics of the first and earliest phase of Mercantilism were prohibition of specie exportation, debasement of coinage, and determination by law of the course of exchange. Many nations resorted to such measures, especially Spain and Portugal, but their inutility was early demonstrated. The second phase of the Mercantile System, the so-called " Balance of Bargains," found its fullest play in England. This scheme was in effect a complex mass of provisions minutely regulating individual contracts between English and foreign traders

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with a view to making them a source of increase to the volume of coin circulating at home. Of course the usual prohibition of specie exports was a part of the scheme which further regulated the proceedings of English merchants selling at staple towns' such as Bruges, Antwerp and Calais in particular. They were bound by law to bring back in cash from these places, which as staple towns enjoyed a monopoly of the export trade in manufactured goods, a fixed proportion of the prices paid them by aliens. Furthermore, there were the' statutes of employment' which required alien traders selling goods in England to invest the money in English produce. To guarantee the exact observance of these minute prescriptions, traders were subjected to a special supervision by officers of finance, called Customers, upon whom devolved the collection of tariff dues in staple towns. This collection involved intervention on the part of still another public officer, called the Royal Exchanger, who exchanged foreign coins intrusted to the Customers for coin of the English realm."

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Third Phase of Mercantilism: The Balance of Trade. The practical application of the principles held by the earlier Mercantilists proved a hindrance to trade. Modifications were advocated especially by English writers, who asserted that it was not the individual but the aggregate or national balance which was the important thing. "Only one thing really enriches the state and that is such a shaping of complex commercial transactions as shall secure that the value of all imports shall be less than that of all exports." In this case there would be a balance payable in money. Such a balance became known as a "favorable balance of trade," while, on the other hand, if the total value of a country's imports exceeded the total value of its exports, so that a nation must pay a money balance, such a condition was designated an "unfavorable balance of trade." The task of the lawmaking power was to create a favorable balance of trade" and in

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