century, however, France made great industrial and commercial strides, largely because of the energy of her great statesmen - Sully, Richelieu, Mazarin, and especially Colbert. This is the classic period of Mercantilism, and the name of Colbert has been so prominently associated with this system that many have given it the name of Colbertism. Mercantilism as a domestic policy was especially prominent in the measures enacted by this great statesman. The immigration of skilled craftsmen and the formation of new industries were encouraged. The aim was industrial self-sufficiency, and this was in a measure realized by the removal of inland tolls and the enactment of a national customs tariff. Taxation was lowered and equalized, canals and bridges built, the navy subsidized, and the transit trade encouraged. Commercial companies were organized after the plan of the English and Dutch companies, and colonies were established in all parts of the world, especially in North America and in India. At the time of the death of Colbert (1683) France was the foremost commercial and political power in Europe. Then followed several decades of expensive wars, costly courts, unjust taxation, and religious intolerance under Louis XIV., from which France never recovered. In her struggle with the English for commercial supremacy during the eighteenth century she lost most of her colonies, including Canada, which was surrendered to England at the close of the Seven Years' (French and Indian) War in 1763. England. - England's industrial condition was primitive until about the fifteenth century. She exported raw materials, especially wool and minerals, and imported manufactures. Her commerce and navigation were largely controlled by foreigners, especially Jewish, Dutch, and Hanseatic merchants. Her industrial development began to be more active in the fifteenth century. She engaged energetically in foreign trade, made important maritime discoveries and settlements in both hemispheres, and organized important trading companies, the most famous being the East India Company (1600), after which Dutch, French, and other trading companies were largely modeled. England's England's industrial and commercial progress was checked during the first half of the seventeenth century by the civil and religious wars under the Stuarts; but, during the century following, her commercial and industrial expansion was continuous. Mercantilism held full sway and found expression in laws encouraging the growth of home manufactures by means of customs duties or import prohibitions and in inducements offered skilled workmen to settle in England. The principal aim of England's foreign commercial policy was to make her merchant marine the carrying power of the world. The most important legislation which aimed to realize this is found in the Navigation Acts already referred to, passed in the middle of the seventeenth century. The international commercial rivalry culminating in the latter part of the eighteenth century resulted in England's becoming the virtual dictator on the high seas and the possessor of important colonies in all parts of the world. Her vast colonial empire, founded upon the Mercantile idea that the purpose of the colonies was to enrich the mother country with little regard to the interests of the colonies, was more or less shattered when subjected to the changed economic conditions and political ideals at the close of the eighteenth century. BIBLIOGRAPHY A. Consult bibliography of Chapter I. D. DAY, History of Commerce; Cambridge Modern History, Vol. I; BASTABLE, Commerce of Nations, Ch. 4; CUNNINGHAM, Growth of English Industry and Commerce (Modern Times), Part I; SCHMOLLER, Mercantile System; LIST, National System, Book III; ROSCHER, Political Economy, Vol. II, Appendix II; INGRAM, History of Political Economy, 36-54; HANEY, History of Economic Thought, Ch. 7; SMALL, The Cameralists; NICHOLSON, Principles of Political Economy, Vol. II, pp. 235-247; COSSA, Introduction to Study of Political Economy, 193– 210; SMITH, Wealth of Nations, Book IV, Chs. I and 3; HEWINS, English Trade and Finance; BLANQUI, History of Political Economy; SARGENT, Economic Policy of Colbert; SEELEY, Expansion of England, Ch. 4; MUN, England's Treasure; NORTH, Discourses; ARMITAGE SMITH, Free Trade Movement, Chs. 1 and 2; LOCKE, Some Observations; TAUSSIG, Selected Readings in International Trade and Tariff Problems. SUGGESTIVE TOPICS AND QUESTIONS 1. How did the invention of gunpowder, the compass, and the printing press influence commercial development? 2. Make an outline of the most characteristic Mercantilist legislation during the sixteenth, seventeenth, and eighteenth centuries in any one of the following countries: Portugal, Spain, Netherlands, France, Germany, England. DAY, History of Commerce, and industrial histories. 3. Are there any examples of such restrictions in early American history? FISKE, Critical Period of American History; JOHNSON, Domestic and Foreign Commerce. 4. Are you a Mercantilist? Would you be a Mercantilist were you living in Western Europe two hundred years ago? ROSCHER, Political Economy, Vol. II, Appendix II, Sec. 1. 5. Did the employment of Mercantilist policies have an important effect upon the distribution of the precious metals? HANEY, History of Economic Thought, 108; DAY, History of Commerce, 170. 6. Summarize Adam Smith's criticism of Mercantilist notions regarding money and the balance of trade. TAUSSIG, Selected Readings, 221-243; SMITH, Wealth of Nations, Book IV, Ch. 1; compare MILL, in TAUSSIG, Selected Readings, 52-62. 7. If the gain from foreign trade is not measured by the excess of value of exported merchandise over imported merchandise, how is it to be measured? TAUSSIG, Selected Readings, 76-81 (CAIRNES) and 20-28 (J. S. Mill). 8. Outline carefully the argument of the Mercantilist, Charles King, reprinted in MARSHALL, Materials for Elementary Economics, pp. 585590. Note parallels in recent and current discussions, e.g. MARSHALL, Materials, 590; HAMILTON, Current Economic Problems, 278, 284-287, 292-293; TAYLOR, Principles of Economics, 215-219. 9. Why did the American states continue to trade chiefly with Great Britain after the Revolutionary War? JOHNSON, Domestic and Foreign Commerce, Vol. I, pp. 125-127. CHAPTER III FREE TRADE Political and Economic Revolt against Mercantilism. From the foregoing chapter it is clear that Mercantilism was the economic expression of an effort to offset the decentralizing tendencies characteristic of the Middle Ages. The conditions which characterized the beginnings of the modern period demanded strenuous state activity along national lines, but in proportion as effective political and economic nationality was realized the need of governmental activity of the Mercantilistic variety lessened, and the accumulated network of antiquated regulations tended to retard commercial and industrial expansion. A political and economic reaction arose both in England and on the Continent during the eighteenth century. The political reaction received its inspiration from English philosophers, especially John Locke, was popularized by French writers, especially Rousseau and Voltaire, and received its classical expression in America and France in the former country in the Declaration of Independence, wherein it is stated "that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness; "—in the latter country under the banner of the great Revolution of 1789- liberty, equality, and fraternity." The economic reaction which was centered in France received the name of the Physiocratic System, while a similar movement, centered in England, became known as the Free Trade System. The Physiocratic System. The founder of this system was the French economist, Quesnay, while Turgot, the French statesman, was its most brilliant expositor. There were two distinct ideas of this school, both being opposed to Mercantilism. In the first place the Physiocrats believed in the superiority of agriculture over commerce and industry. They regarded agriculture as the only source of increments of wealth because it alone produced a "net product," that is, an excess over the cost of production. Farmers and land owners alone were productive; all other classes were unproductive or "sterile." In the second place the Physiocrats held to the belief in a natural order of society and thought it useless to devise laws and regulations. They proclaimed the doctrine that things should be let alone (laissez-faire, laissez-passer). The first of these principles was an exaggeration and did not long survive as an important economic doctrine. The second principle, however, became dominant in political economy for nearly a century. Although the Physiocrats had many gifted adherents they never obtained a popular hold even in France itself. The Free Trade System. In England, where commerce and industry were more important economic factors than on the Continent, the reaction against the restrictive system took a somewhat different form. This movement, as already stated, became known by the name of Free Trade. Its most important forerunner was David Hume, but its most prominent expositor was Adam Smith. His epoch-making book, Wealth of Nations, which appeared in 1776, is the gospel on which modern political economy is based. Smith's entire work is pervaded by the spirit of individualism. The Mercantile System had, he claimed, favored the producer at the expense of the consumer. Both should be cared for. He agreed in the main with the laissez-faire principle of the Physiocrats, but did not agree with them that agriculture |