Studies in the Theory of International Trade

Jacob Viner
Viner, Jacob
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New York: Harper and Brothers Publishers
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Chapter II


He shewed me a very excellent argument to prove, that our importing lesse [gold?] than we export, do not impoverish the kingdom, according to the received opinion: which, though it be a paradox, and that I do not remember the argument, yet methought there was a great deal in what he said.
—Samuel Pepys, Memoirs, February 29, 1663/4.




The mercantilist writers were often critics of the prevailing legislation, and they cannot be understood unless this is constantly borne in mind. The actual body of statutes and proclamations in force at any one time was always an uncoordinated accumulation of measures adopted at various periods and for various reasons, and was far from conforming to any self-coherent set of ideas or principles with respect to trade policy. Of these laws and proclamations there were always a number which were non-enforced or were only spasmodically enforced, either because their legal status was questionable or because change of circumstances or of official or public opinion made their strict enforcement inconvenient or impossible. There were others which were flagrantly violated, sometimes in spite of efforts to enforce them, sometimes with the connivance of corrupt or unsympathetic officials.


The laws and proclamations were not all, as some modern admirers of the virtues of mercantilism would have us believe, the outcome of a noble zeal for a strong and glorious nation, directed against the selfishness of the profit-seeking merchant, but were the product of conflicting interests of varying degrees of respectability. Each group, economic, social, or religious, pressed constantly for legislation in conformity with its special interest. The fiscal needs of the crown were always an important and generally a determining influence on the course of trade legislation. Diplomatic considerations also played their part in influencing legislation, as did the desire of the crown to award special privileges, con amore, to its favorites, or to sell them, or to be bribed into giving them, to the highest bidders. After the Revolution the crown's authority in matters of trade regulation was largely shorn away, and factional jealousies and party rivalries replaced the vagaries of monarchical whim as a controlling factor in trade policy.


The mercantilist literature, on the other hand, consisted in the main of writings by or on behalf of "merchants" or businessmen, who had the usual capacity for identifying their own with the national welfare. Disinterested exposition of trade doctrine was by no means totally absent from the mercantilist literature, and in the eighteenth century many of the tracts were written to serve party rather than self. But the great bulk of the mercantilist literature consisted of tracts which were partly or wholly, frankly or disguisedly, special pleas for special economic interests. Freedom for themselves, restrictions for others, such was the essence of the usual program of legislation of the mercantilist tracts of merchant authorship.


There follows a survey of the specific legislative proposals of the mercantilist writers with respect to the regulation of foreign trade proper. A complete survey would require consideration also of their recommendations for dealing with the fisheries, the colonial trade, the interest rate, and poor relief, as well as with the monopolies and the internal regulation of manufacture, for all of these subjects were approached more or less in terms of their bearing on the balance of trade. Space limitations, however, prevent such extension of this essay as would be necessary to deal with these even sketchily, and in any case the mercantilist doctrines with respect to most of these topics have been ably and comprehensively dealt with in their special literatures and in Heckscher's masterly treatise. Sufficient has already been said to make clear the relationship to mercantilist trade doctrine of proposals for restricting hoarding or the conversion of bullion into plate, for prohibiting or subjecting to heavy taxation use of the precious metals for making thread or cloth or for gilding, and for increasing the monetary circulation through the introduction of paper money, to make unnecessary further discussion of such proposals.

Bullionist Proposals.


Following the common usage, the term"bullionist" will be applied to the measures intended to promote the mercantilist objectives through direct regulation of transactions in the exchanges and in the precious metals. Even prior to 1600 opinion in support of the policy of controlling specie movements indirectly through control of trade, instead of directly by regulation of exchange and specie transactions, seems already to have been fairly common. As early as 1381, Aylesbury said that the way to prevent a drain of specie was to prevent more merchandise from coming into England than was exported from it.*1 An anonymous writer in 1549 stated that regulation of trade so as to bring about a surplus of exports over imports was the only means of securing an influx of bullion.*2 An official memorandum of 1559, justifying the restoration of the currency to its former metallic content, denied the efficacy of raising the nominal value of the standard coin as a means of preventing its export.*3 In the sixteenth-century manuscripts discovered by Pauli there are to be found both bullionist and non-bullionist proposals. Revival of the staples and enforcement of the Statutes of Employment are recommended. The acceptance by English sellers of wool of exchange in lieu of specie in payment for their wool should be prohibited. English coin should be overvalued in exchange for foreign coin, so as to attract foreign gold and silver. But imports of unnecessary foreign goods are to be restrained.*4 Hales had made one of the participants in his dialogue urge that some English commodity be made salable to foreigners only in exchange for specie in whole or in part, but in the course of the discussion heavy export duties on wool, the prohibition of the export of unwrought goods, and either prohibition of import of competitive foreign goods or duties high enough to make them more costly than similar domestic goods, are recommended.*5


Bullionist proposals, on the other hand, are still to be encountered in the seventeenth century. Malynes advocated the revival of the Royal Exchanger, with a monopoly over exchange transactions, the maintenance of the mint par by royal proclamation as the actual rate of exchange, and prohibition of the export of bullion.*6 Revival of the official regulation of exchange rates was urged also by Milles,*7 Maddison,*8 and Robinson;*9 and Rowe, following Malynes, suggested that exchange rates be fixed by treaty with foreign governments.*10 Mun in his first book*11 (though not in his second),*12 Rowe,*13 and Violet*14 wanted enforcement of the old Statutes of Employment. Many writers until late in the seventeenth century urged the enforcement of the prohibitions of the export of coin and bullion or after 1663, when the export of bullion and of foreign coin was legalized, their revival.*15 But with the exception of a minor lapse by Steuart,*16 there does not appear to have been any support of any of the bullionist devices among the prominent eighteenth-century writers.

Prohibitions vs. Duties.


The principal non-bullionist measures proposed by the mercantilists as means to secure a favorable balance of trade consisted of: restraints on the importation of foreign goods, especially manufactured goods and luxuries; encouragements to the export of English manufactured products; restraints on the export of raw materials; encouragements to the reexport trade; and restrictions on English industries which interfered with other industries or with trades which, on mercantilist or other grounds, were regarded as of greater importance.


Imports could be restricted either by the imposition of duties or by absolute prohibitions. Both methods were used and advocated, and many writers revealed no clear preference as between them. But they were more different in appearance than in fact. When writers asked for duties rather than prohibitions, they often wanted duties high enough to be prohibitive of import, or nearly so. When the government imposed prohibitions rather than duties, it often granted to particular trading companies or individuals special licenses to import. Many of the prohibitions were undoubtedly established primarily to obtain revenue by the sale of licenses to import rather than to promote a favorable balance of trade.*17 Some writers expressed a preference for import duties rather than prohibitions without stating their reasons, but probably because duties seemed less severe.*18 Other writers recommended moderate duties rather than high duties or prohibitions, because the latter were too severe and would lead to fraud, whereas duties could be enforced and would at least produce revenue.*19 But other writers objected to the sacrifice of trade interests to fiscal considerations,*20 while Steuart suggested that prohibitions could be more effectively enforced than duties if the latter would have to be high.*21


Some writers advised that restrictions on imports should not be carried too far, lest they excite foreign retaliation against English exports.*22 Other writers replied, however, that there was little or no danger of foreign retaliation. England exported necessaries and imported "toys," and therefore had nothing to fear.*23 Other countries already restricted the imports of things they could produce themselves; other things must be got somewhere, and they would hurt themselves if they refused to buy them where they could best be got. Most-favored-nation clauses in commercial treaties, moreover, prevented them from discriminating against England in their trade regulations.*24 "No wise nation takes from another what they can be without; and what they cannot be without, they must take, prohibit what you please.*25


One argument made repeatedly by the opponents of the French treaty of 1713 in support of treating Portuguese wines more favorably than French wines was that the balance of trade was more favorable with Portugal than with France, and that lighter duties should be imposed on the imports of the former, either because retaliation would therefore be more injurious to England in the case of Portugal,*26 or because Portugal's capacity to buy English goods would be reduced if England did not take her wine.*27


Those who urged restraints on the exportation of raw materials—especially wool—almost invariably advocated prohibitions, probably because on mercantilist grounds a stronger case could be made for shutting-off access of foreigners to English raw materials than for completely shutting-out foreign imports, with the resultant danger of foreign retaliation, loss of shipping traffic, and so forth. It was always assumed by advocates of export prohibitions on raw materials that if foreigners could not take them unmanufactured they would be forced to buy them in manufactured form, so that trade would gain instead of lose thereby.*28 Tucker, consistently with his balance-of-labor doctrine, recommended that taxes on exports should vary inversely with their completeness of manufacture, even to the extent of absolute prohibitions of export for raw materials, while the taxes on imports should vary directly with their completeness of manufacture.*29


There were few criticisms of the absolute prohibition of export of raw materials, and especially wool, and these came chiefly from spokesmen for the agricultural interest.*30 But the objection was sometimes made that the Continental weavers were not as dependent on English wool as the advocates of the prohibition claimed, and that the prohibition would not be effective, therefore, in preventing the development of a continental wool industry. Sheridan also recommended "vast" duties on the export of raw material, especially wool, with additional duties when attempt was made to export without paying the tax, in preference to the absolute prohibition then in force, infraction of which was a felony punishable by death. If the penalty for violation were a fine, instead of death, many would turn informers "who now out of tenderness of men's lives forbear the discovering this injurious practice."*31 Petty asked whether when English clothiers could not sell all the woolens that were already produced, it would not be better to lessen sheep-raising and transfer the labor to tillage. If additional corn was not needed, and there were no idle hands and more wool than could be worked up, it would be proper to permit the export of wool. But if the advantages of the Dutch in making woolens exceeded those of the English by only a little, so that it would be easy to turn the scale in favor of English woolens, he favored the prohibition of export of wool.*32 Brewster opposed the prohibition of the export of wool on the ground that England had an oversupply of it.*33 Henry Home urged that the export of wool should be made subject to a moderate duty instead of to an outright prohibition. The French had alternative sources of supply, and absolute prohibitions stimulated smuggling. Freedom to export would result in an increased output of wool, and therefore in lower prices to English woolen manufacturers. The export could be prohibited at times of high prices, and thus difficulties created for the foreign rivals of English woolen manufacturers at critical times when the raw material was scarce. The revenue from export taxes on wool could be used to pay an export bounty on wool cloth.*34 In general, Home favored the restriction of the export of raw materials only when free export would not lead to increased output and therefore to a lower price for English manufacturers.*35

Discriminatory Treatment of Domestic Industries.


The argument for international specialization in industries is, of course, the central point in free-trade doctrine. There were some instances, however, of writers who were so anxious that England specialize in some particular industry or industries that they proceeded to the length of a sort of inverted protectionism, and proposed that other domestic industries which competed with the ones they regarded as of special importance to England should be suppressed or limited. As early as 1564 Cecil suggested that it would be good for England to make and export less cloth, so that corn should not have to be imported, because clothmakers were harder to govern than farmers, and because so many were employed in making cloth that labor had become scarce for other occupations.*36 One writer would have suppressed stagecoaches, because they led to less drinking in inns, fewer privately-owned horses, and other similarly objectionable consequences.*37 An anonymous writer in 1691 opposed any attempt to set up a linen industry in England, because it would interfere with the woolen industry by causing an increase in spinning wages.*38 Another writer argued that:

...the woolen and silk manufacturers of this kingdom being the staple of our trade, and the most considerable and essential part of our wealth, is therefore the common interest of the whole kingdom to discourage every other manufacture, whether foreign or assumed [i.e., domestic?] so far as those manufactures are ruinous to and inconsistent with the prosperity of the said British manufactures of wool and silk.*39

Defoe approved of encouraging all manufactures that could be set up in England, but "with this one exception only, namely, that they do not interfere with, and tend to the prejudice of the woolen manufacture, which is the main and essential manufacture of England."*40 Arthur Young argued that because agriculture was more valuable to England than manufactures, no encouragement should be given to the increase of manufactures until England was completely cultivated, "it being proved that, until such cultivation is complete, the generality of them [i.e., manufactures] are a prejudice to the state, in that circumstance of not being employed about the most important concern of it."*41


Those who presented such arguments were usually, of course, special advocates of some particular industry rather than disinterested students of the general welfare, but it is of interest that they should have thought it possible to appeal to the public by such reasoning. There was, in fact, some actual legislation based on the principle of discouraging industries which interfered with other industries regarded as of superior importance. Defoe cited the prohibition of the cultivation of tobacco on the ground that it would use land useful for raising wool,*42 and alleged (apparently without basis in fact) that the mining of inland coal was not permitted in certain localities because it would injure the shipping trade, as examples of actual measures based on this principle. From 1699 to 1720 a series of acts was passed prohibiting covering buttons with wool, or with silk or mohair imported from other countries than Turkey, in order to promote the English silk industry and the trade with Turkey, with which country the balance of trade was favorable. Further examination of the trade legislation would no doubt reveal additional measures involving the deliberate discouragement of one English industry in order to benefit another.

The Reexport Trade.


To foster the reexport or entrepôt trade, and to win the carrying trade away from the Dutch without opening the domestic market to foreign goods, free ports, drawbacks, and bonded warehouses were generally approved by even the extreme mercantilists,*43 but some writers approved of the prevailing restriction of drawbacks of import duties to commodities which could not be conveniently manufactured at home.*44


A more important and radical proposal, however, was that all import and export duties be abolished, and that there be substituted, both for fiscal and for trade regulatory purposes, internal excises on the consumption of foreign manufactured products. This would free the merchants engaged in reexport trade from the inconveniences and expense of the drawback system, and thus enable them to compete more effectively with their foreign rivals.*45 It would at the same time get rid of the customs duties imposed on English goods for fiscal reasons and inconsistently with mercantilist doctrine.*46 Walpole was sympathetic to such a policy, and under his administration the customs system was overhauled in the direction of freeing imports of raw materials from duty and abolishing export taxes except on commodities such as lead, tin, and leather, with respect to which it was supposed that the dependence on English supplies would force the foreigner to bear the tax. On several foreign commodities, also, import duties were replaced by excises on domestic consumption. In 1733, Walpole proposed to move farther in the same direction by substituting internal excises for the import duties on tobacco and wine. In support of his proposal, he pointed out that it would leave the reexport trade in those commodities wholly free from taxation and from the inconveniences and expense of the drawback system.*47 The proposal has not appeared objectionable to later commentators, but Walpole's political opponents, appealing to the traditional connection of excises with the exercise of arbitrary power by the government against the people, and stressing the inconveniences which would result if, as alleged, acceptance of this limited excise would quickly lead to its wide extension, succeeded in arousing violent opposition to the measure, and in forcing its abandonment.

Export Bounties.*48


In 1673, an export bounty was granted on corn. It remained in effect, however, only for some five years, but a new bounty was established by the famous corn law of 1689, and continued in effect, except for temporary suspensions, until 1814. Later, other export bounties were granted on linen and silk manufactures, sailcloth, beef, salt pork, and other commodities, and these were not repealed until the nineteenth century.


Until the second half of the eighteenth century the export bounties do not appear to have aroused much comment, favorable or unfavorable, in the contemporary literature, perhaps because the circumstances were then such that they had little practical importance. After 1750, however, there was considerable opposition to the corn bounties, especially in periods of short harvests, and the poorer classes repeatedly engaged in violent rioting in protest.


In so far as the export bounties stimulated the production and export of the bounty-fed commodities, the mercantilist would of course be predisposed to favor them, and on these simple grounds John Houghton defended the first corn bounty,*49 and later writers,*50 not all of whom were frank partisans of the agricultural interest, defended the later bounties. Henry Home supported the export bounty on corn both on these grounds and on the grounds that it had hurt French agriculture and therefore weakened France in case of war. In the same spirit he recommended a bounty on exports of manufactures to the colonies, "which by underselling them in their own markets, would quash every attempt to rivalship."*51


The corn bounties were attacked on the grounds that by making corn dearer in England they resulted in a raising of wages and in the general cost of living, and thus impaired the capacity of the English to compete with other countries in non-subsidized commodities, and especially manufactures.*52 But some of the supporters of the corn bounties denied that they had in fact made the price of corn higher in England or lower abroad than it would otherwise have been.*53

Infant Industry Protection.


Modern writers usually credit Alexander Hamilton or Friedrich List, or even John Stuart Mill, with the first presentation of the "infant industry" argument for protection to young industries. It is of much earlier origin, however, and is closely related both in principle and in its history to the monopoly privileges granted to trading companies opening up new and hazardous trades and to inventions (the "patents of monopoly"). A complaint of 1645, that the circumstances which originally justified the grant of trading monopolies were no longer present, reveals the probable origin of the infant industry argument for bounties or import duties:

Those immunities which were granted in the infancy of trade, to incite people to the increase and improvement of it, are not so proper for these times, when the trade is come to that height of perfection, and that the mystery of it is so well known....*54


Some early presentations of the argument for temporary protection or bounties to "infant industries" follow:

And that the linen and iron manufactures may be so encouraged here by a public law, as that we may draw these trades solely to us, which now foreign nations receive the benefit of, there ought in the first place to be a tax or custom at least of four shillings in the pound put on all linen yarn, threads, tapes, and twines for cordage that shall be imported into England, and three shillings in the pound upon all linen cloths under four shillings the ell; and this law to continue and be for seven years. And by virtue of this tax or imposition, there will be such advantage given to the linen manufacture in its infancy, that thereby it will take deep rooting and get a good foundation on a sudden....*55

[I am] fully convinced...that all wise nations are so fond of encouraging manufactures in their infancy, that they not only burden foreign manufactures of the like kind with high impositions, but often totally condemn and prohibit the consumption of them....*56

Upon the whole, premiums are only to be given to encourage manufactures or other improvements in their infancy, to usher them into the world, and to give an encouragement to begin a commerce abroad; and if after their improvement they can't push their own way, by being wrought so cheap as to sell at par with others of the same kind, it is in vain to force it.*57

I have now, I think, shewn, Sir, that the linen but in its infancy in Britain and Ireland; that therefore it is impossible for our people to sell so cheap, or to meet with such a ready sale even here at home, as those who have had this manufacture long established among them, and that for this reason, we cannot propose to make any great or quick progress in this manufacture, without some public encouragement.*58 must be ridiculous to say to an infant manufacture, or while it is in its progress toward maturity, you have no occasion for any public encouragement, because as soon as you can make the quantities and qualities wanted, and sell them as cheap as those who have been long in possession of the manufacture, you will certainly find a vent for all you can make.*59

All manufactures in their infancy require not only care, but considerable expense, to nurse them up to a state of strength and vigor. The original undertakers and proprietors are seldom able to lay down at once the necessary sums; but are obliged to take time, struggle with difficulties, and enlarge their bottoms by degrees.*60

Mercantilism and Protectionism.


It is not easy to make a sharp distinction between mercantilism as commercial policy and the modern doctrine of protection, for they differ more in their distribution of emphasis than in their actual content. The modern protectionist urges the importance of restricting the imports of foreign goods of a kind which can be produced at home in order that domestic production and employment may be fostered. He does not stress as much as did the mercantilist, and he may refrain from discussing, and may even reject, the balance-of-trade doctrine. Except in its more popular manifestations, modern protectionism does not lay special stress on the desirability of increasing or maintaining the national stock of bullion. But most of the arguments commonly used by modern protectionists were already current in the mercantilist period. Even during the seventeenth century, and frequently during the eighteenth century, tracts were written which made no reference to the balance of trade or to monetary considerations, and dealt only with the desirability of protecting domestic industries in order to increase employment and production.*61 Usually, however, the balance-of-trade argument was invoked to reinforce the employment-production argument for import restrictions. Few writers, apparently, saw any possibility of conflict between these arguments. But the "balance-of-employment" argument, when it asserts that the "balance of work" is a better test than the balance of trade of whether trade is beneficial or not, can be interpreted as a plea for the greater importance of the protectionist than the monetary phases of mercantilist doctrine, and one author condemned the East India Company because it brought in silks to be consumed in England in place of English silks and woolens even if its activities did result in more gold coming into England than it took out.*62 There are no important differences, also, between the legislative devices of the mercantilist and those of modern protectionism. The chief differences appear to be that: absolute prohibitions of import are less common, and commercial treaties and tariff bargaining relatively more important, now than then; export prohibitions have almost completely disappeared; rates of duty are generally much higher now than then (although a contrary impression is prevalent); and there has been a substitution for some of the old arguments of new or partially new ones of comparable intellectual quality.


The Self-regulating Mechanism of Specie Distribution.*63


After Hume and Smith had written, mercantilism was definitely on the defensive and was wholly or largely rejected by the leading English economists. That their victory was as great as it was, was due largely, of course, to the force of their reasoning and the brilliance of their exposition, but it was due also in large part to the fact that, even before they wrote, mercantilism as a body of economic doctrine had already been disintegrating because of dissension within the ranks of its adherents and attacks by earlier critics. An important element in its collapse, especially in its monetary phases, was the development of the theory of the self-regulating mechanism of international specie distribution. The most influential formulation of this theory in England*64 prior to the nineteenth century was by Hume. But its most important constituent elements had been stated long before Hume, and several earlier writers had brought them together much as he did.


Stated briefly, the theory is that a country with a metallic currency will automatically get the amount of bullion it needs to maintain its prices at such a level relative to the prices prevailing abroad as to maintain an even balance between its exports and imports. Should more money than this happen to come into that country, its prices would rise relatively to those of other countries; its exports, consequently, would fall, and its imports increase; the resultant adverse balance of payments would have to be met in specie; and the excess of money would thus be drained off. If, on the other hand, a country's monetary supply should happen to fall below the amount necessary to maintain equilibrium, its prices would fall relative to those abroad, exports would rise and imports fall, and the resultant favorable balance of payments would bring in an amount of specie from abroad sufficient to restore equilibrium. For its formulation and its use as a basis for repudiation of certain of the monetary phases of mercantilist doctrine, five stages had to be achieved:

Recognition that net international balances of payments must be paid in specie.
Recognition that the quantity of money is a determinant of the level of prices.
Recognition that the volume of exports and the volume of imports depend on the relative levels of prices at home and abroad.
Integration of the three preceding propositions into a coherent theory of a self-regulating international distribution of the money metal.
Realization that this theory destroyed the basis for the traditional concern about the adequacy of the amount of money in circulation in a country, at least as a long-run matter.


The first proposition was an important element in the mercantilist doctrine, and was universally accepted. A quantity theory of the value of money, as has already been shown, was held by many of the mercantilists, and there were few who rejected it once they became aware of it. There remains to be examined only the progress made toward attainment of the last three stages. Vague statements suggestive of the existence of a self-regulating mechanism of specie distribution but not specific as to its character will be disregarded.*65


Recognition that low prices were conducive to large exports and high prices to large imports was fairly common even, in the early mercantilist literature, but I have not been able to find any generalized statement setting forth the dependence of the trade balance on the comparative level of prices until the end of the seventeenth century. Malynes at one point approached surprisingly close to a grasp of the self-regulating mechanism, especially if one considers his general obtuseness and obscurantism. He argues that if the manipulations of exchange dealers forced English currency below its mint par, coin would be exported, home prices would consequently fall, and foreign commodities would rise in price because of the increase of money abroad.*66 Had he proceeded to consider the effect of these price changes on the balance of trade and on the flow of specie, he would have presented a complete formulation of a full cycle of the self-regulating mechanism. He proceeded, instead, to denunciation of the exchangers. Except for the development of the quantity theory of money, I can find no real traces of further progress in this connection until the last decade of the seventeenth century.*67


Locke is sometimes credited, wrongly I believe, with having come close to a satisfactory statement of the self-regulating mechanism, although he did make some advance in that direction. He states that a country in commercial relations with, and using the same metal for currency as, the rest of the world requires under given circumstances a certain (presumably minimum) amount of money if a certain volume of trade is to be carried on at all, or is to be carried on without loss:

That in a country, that hath open commerce with the rest of the world, and uses money, made of the same materials with their neighbors, any quantity of that money will not serve to drive any quantity of trade; but there must be a certain proportion between their money and trade. The reason whereof is this, because to keep your trade going without loss, your commodities amongst you must keep an equal, or at least near the price of the same species of commodities in the neighboring countries; which they cannot do, if your money be far less than in other countries; for then either your commodities must be sold very cheap, or a great part of your trade must stand still, there not being money enough in the country to pay for them (in their shifting of hands) at that high price, which the plenty, and consequently low value of money, makes them at in another country....*68


He proceeds to illustrate by imagining that England loses half its money, other things there and elsewhere remaining unaltered. Either half the trade, employment, etc., would cease, or prices, wages, rents would be cut in half. If the latter should result, domestic commodities would be sold abroad cheap and foreign commodities would be bought dear, to the loss of the country,*69 and labor might emigrate to where wages were high. Eventually, because of the relatively high foreign prices, foreign goods would become scarce (i.e., imports would fall?). He says nothing as to the necessary as distinguished from the possible and the desirable relations between prices at home and abroad, and he gives not even a hint that the departure from the initial and desirable situation will breed its own correctives, through its influence on price levels, commodity balances, and specie flows.*70 All that Locke had of the elements of the self-regulating mechanism was the quantity theory of money, with even here the defect that at the critical point he failed to make use of it and implied instead that a serious maladjustment between prices and the quantity of money was as likely to be corrected, presumably permanently, by a consequent change in the volume of trade as by a change in prices.


In dealing with the factors determining the exchange rates, Locke was much more penetrating. He explains the exchange rate between two countries as due to: (1) "the overbalance of the trade," which, the context shows, means the balance of payments resulting from past transactions; and (2) the relative plenty of money (identified with liquid capital) which affects inversely the opportunities for profitable investment of surplus funds, and therefore determines to what country they will flow. He states fairly clearly the limits beyond which exchange rates cannot move without leading to specie flows.*71


North, in 1691, presented a concise formulation of an automatic and self-regulating mechanism, which provides a country with the "determinate sum of specific money" required for carrying on the trade of the nation.*72 It is not, however, the mechanism described in the modern theory, and is not, explicitly at least, an explanation of the international distribution of money.*73 The mechanism which he presents consists of an automatic ebb and flow of money into and out of circulation according to the unexplained specific requirements of trade. When because of troubled conditions money is hoarded, the mints coin more bullion, whose source is not explained. When peace returns, money comes out of the hoards, the mints cease to coin bullion, and the excess of money is melted down "either to supply the home trades or for transportation abroad. Thus the buckets work alternately; when money is scarce, bullion is coined; when bullion is scarce, money is melted." He fails to relate this process either to price movements or to movements in the balance of trade.


Samuel Pratt, in 1696, urged that funds be voted to the king to meet the expenses of his Continental armies and denied that the consequent remittances to the Continent would drain England of its silver by an argument which not only corrects the "sinews-of-war" emphasis on money but, in spite of its compactness, is a satisfactory statement of the self-regulating mechanism if, as seems to me reasonable, "cheapness of silver" may be interpreted as meaning high commodity prices:*74

Which uncoined silver will for the most part find its way back again, because the carrying over so much every year will glut that place to which 'tis carried so that silver will become cheap there, and they must disgorge at the best market; which England, in all probability, will be. And the effect of that overbalance which foreigners must, as cases now stand, get by us, cannot be carried out of the nation but in other commodities besides silver.*75


William Wood supposes that by accident forty-odd millions of public money were to be found in specie under the ruins of Whitehall, and were paid out to the public creditors, and proceeds to trace the consequences. Interest would fall; either the added bullion would be hoarded or converted into plate, or else prices and wages would rise and exports consequently fall. If the free export of money were not permitted, England, since it now had smaller exports and high prices, would therefore now be worse off instead of better, with the implication that if it were permitted money would be exported in consequence of an unfavorable balance of payments. From which he concludes that a favorable balance of trade is the only way to keep bullion at home.*76


In 1720, there appeared a remarkable essay of some thirty-odd pages by one Isaac Gervaise, apparently his only publication, in which there is presented an elaborate and closely-reasoned exposition of the nature of international equilibrium and of the self-regulating mechanism whereby specie obtained its "natural" or proper international distribution.*77 In spite of the peculiarities of terminology and the occasional obscurities of exposition by which it is marred, the essay marks a great advance over earlier doctrine in this field. The brilliance of its contents, and its complete oversight by other scholars, due presumably to its rarity, warrant its being dealt with in some detail.


Gervaise starts out with the proposition that gold and silver, which he calls "the grand real measure or denominator of the real value of all things," tend to be distributed internationally in proportion to population, on the ground that only labor (i.e., the product of labor) can attract specie. He proceeds immediately to qualify this proposition in a manner which indicates that he believes that it is in proportion to national value productivity or real income, and to population only as that is an index of real income, that specie tends to be distributed:

Whenever I mention the quantity of inhabitants, I always suppose that regard which ought to be had to the situation and disposition of the different countries of the world; the same quantity of inhabitants not producing the same effect in all countries, according as their dispositions differ....*78


If a country should for a time have more than its proportion of specie, this would break the balance between consumption and production. Consumption would exceed production, the excess being met by increased imports or decreased exports. An unfavorable balance of payments would result, which would continue until the proper proportion was restored:

When a nation has attracted a greater proportion of the grand denominator of the world than its proper share, and the cause of that attraction ceases, that nation cannot retain the overplus of its proper proportion of the grand denominator, because in that case the proportion of poor and rich of that nation [i.e., of producers and consumers] is broken; that is to say, the number of rich is too great, in proportion to the poor, so as that nation cannot furnish unto the world that share of labor which is proportioned to that part of the grand denominator it possesses: in which case all the labor of the poor will not balance the expense of the rich. So that there enters in that nation more labor than goes out of it, to balance its want of poor: and as the end of trade is the attracting gold and silver, all that difference of labor is paid in gold and silver, until the denominator be lessened, in proportion to other nations; which also, and at the same time, proportions the number of poor to that of rich.*79


Gervaise then proceeds to consider the effects of "credit," or "that time which is allowed in trade." "As all men one with the other are equally subject to the same passions," the "denominators," or currencies, of all the countries are increased in amount by credit in equal proportions: "Credit increases the denominator, and adds unto all things an increase of denomination of value proportioned to the increase of the denominator by credit," i.e., prices rise in proportion to the increase in currency through credit.*80 If a country should, however, add to its currency by credit in more than due proportion, that increase of credit will act on that nation as if it had drawn an equal sum from a gold or silver mine. It will retain only its proportion of the increase; "so that the rest thereof will in time be drawn off by the labor of other nations, in gold or silver." The mechanism whereby this will be brought about is explained as follows: the increase in the holdings of currency will lead the holders to increase their consumption of goods; less goods will therefore be available for export; the adverse trade balance will be met by an export of specie. The reverse happens when a country decreases the amount of credit below its due proportion; by a corresponding process gold and silver will be drawn from abroad until its "denominator," including "credit," has recovered its proper proportion to that of other countries.*81 Gervaise concedes, however, another temporary possibility: an even balance may be maintained in the foreign trade even though there is increased consumption at home through the surrender (whether for domestic consumption or for export is not indicated) of the nation's "store or capital of exportable labor," by which Gervaise apparently means that the normal stocks of materials and finished goods may be allowed to run down. But once the available specie and stores of goods had been exhausted, credit would have to be contracted until the "denominator" was again in due proportion.*82


A relative excess of the "denominator," or of currency, on the part of a particular country results, through its effect on the trade balance, in a decline in the foreign exchange value of its currency. If its excess of currency is great, so that coin becomes scarce and the exchange value of its currency is low, foreigners having claims for payment against that country in terms of its currency try to reduce their losses by accepting payment in goods and disposing of them abroad for specie. But this results in a rise in the wages of its labor and therefore also (by implication) in the prices of its commodities in terms of that country's currency, and the foreign creditors find that wages and prices abroad are relatively lower, and must therefore dispose of these commodities at a loss. They therefore "cease to credit this nation, by importing into it no more labor than they are sure to export out of it." In the meanwhile, foreign manufacturers find that because of the reduced value on the foreign exchanges of the currency of the country which has expanded its currency they can afford to pay a high price in its own currency for that country's materials, until the prices of those materials rise more than sufficiently to offset the discount on the exchanges. At this point, where he seems to be well embarked upon an explanation of the manner in which equilibrium is established between a country with a depreciated "credit" currency and a metallic standard outside world, Gervaise unfortunately stops short.*83


This summary of Gervaise's analysis, which does not do full justice to it, should nevertheless be sufficient to indicate how striking an advance he had made toward a satisfactory exposition of international equilibrium. Although Hume's exposition was superior in its freedom from obsolete terminology and much clearer in its exposition, not until the nineteenth century was there to be a match for the comprehensiveness of Gervaise's account, with its specific provision for the necessity, under equilibrium, of balance between a country's exports and its imports and between its production and its consumption, and with its description of the role of wage rates and exchange rates in the mechanism whereby a disturbed equilibrium is restored.*84 Gervaise, in fact, in approaching the problem from the income rather than from the price angle, proceeded in a manner which many recent writers have found more to their liking than that adopted by Hume and predominantly followed by the classical school, and in this sense was more "modern" than his successors of a century or so later.


Prior, in 1730, expounds one-half of the self-regulating mechanism unobjectionably. After pointing out that the East India trade draws silver from Europe, and thereby creates a scarcity of it in Europe, apparently in relation to both gold and commodities, he says:

And if so much treasure shall flow for any considerable time in the same channel, it may put an end to that trade: for such large remittances in silver must in time make this metal plenty in those parts, and as its quantity increases, its value will lessen; so that by degrees silver may come to bear the same proportion to gold in the East Indies as it does in Europe, and their commodities will rise in proportion.*85


Jacob Vanderlint, in 1734, states the mechanism well, although his exposition of it is so scattered through his book that it is not possible to quote a compact statement of it. In the following passage, he comes closest to a unified exposition of the mechanism:

But no inconvenience can arise by an unrestrained trade, but very great advantage; since if the cash of the nation be decreased by it, which prohibitions are designed to prevent, those nations that get the cash will certainly find every thing advance in price, as the cash increases among them. And if we, who part with the money, make our plenty great enough to make labor sufficiently cheap, which is always constituted of the price of victuals and drink, our manufactures, and everything else, will soon become so moderate as to turn the balance of trade in our favor, and thereby fetch the money back again.*86


Vanderlint does not approve of this automatic mechanism when it operates to raise prices, and advocates the encouragement of the use of gold and silver in the arts as a means of preventing a rise of prices when the balance of trade is favorable.*87


When Hume published his Political Discourses, in 1752, therefore, all the essential elements of the theory of the self-regulating mechanism were already available in previous literature, and several fairly satisfactory attempts to bring them together into a coherent theory had been made. Hume, however, stated the theory with a degree of clarity, ability of exposition, emphasis on its importance, and consistent incorporation with the remainder of his economic views, which most of these earlier writers did not even distantly approach.*88 Since his account of the mechanism is reexamined in a later chapter, attention need be called here only to some particular phases of his analysis. He includes in the general mechanism as an additional equilibrating factor the influence of variations in the exchange rates on commodity trade,*89 a point which apparently no one had hitherto brought directly into an exposition of the larger mechanism of adjustment. He remarks that the mechanism is not peculiar to international trade, but also operates internally between the districts of a single country.*90 He does not quite follow out the consequences of his analysis to what later exponents of it regard as its logical significance for long-run policy, namely, lack of concern about the quantity of money in a country; for without stating the qualifications which would possibly justify his position, he disapproves of paper money which is not merely a certificate of deposit of an equivalent amount of metallic money, because it drives hard money out of the country;*91 he concedes that for wars conducted on foreign soil, and in negotiations with foreign nations, a country derives benefit from an abundance of metallic money at home;*92 and he concedes that an increasing amount of money acts as a stimulus to industry.*93


After Hume, the self-regulating mechanism was much more frequently and more clearly stated than before. Patrick Murray (Lord Elibank) disapproves of paper money because, on quantity-theory grounds, it results in a rise of prices, a check to exports, and consequent depression, but:

These inconveniences, when arising from a plenty of real money, are fully compensated by the riches which occasioned them, and the above stagnation of trade will last no longer than other states continue to undersell us, which cannot be very long; for the trade of any state will be an inlet to riches, and money will flow in upon it till that state be likewise full, and its entrance be stopped by the same repletion; from that state it will go to another, and so on, till it becomes on a perfect level and equality throughout the whole.*94


Harris presents an excellent statement of the self-regulating mechanism.*95 Like Vanderlint, however, Harris is too much of a mercantilist to accept with equanimity the consequences of the mechanism when it results in an outward drain of money, and recommends hoarding and conversion of bullion into plate as means of withdrawing bullion from circulation when otherwise an outward drain would ensue.*96 A good statement of the mechanism, in this case free from any mercantilist qualification, is to be found also in Whatley.*97


Vanderlint, Wood, and Harris, as has been shown, accepted the automatic regulation of the amount of money in circulation, but still retained the mercantilist preoccupation with the amount of bullion in the country, as did Hume also to some extent. A few mercantilists after Hume tried to find a basis for rejecting the automatic mechanism, but with meager results. Wallace replies to Hume that if the amount of paper money increases, trade will increase. Making an unconscious substitution of "export trade" for "trade," he concludes: "And, as they don't take paper in payment from foreign nations, if they are gainers by trade, they must receive the balance in silver and gold."*98 Steuart rejects the quantity theory of money, on the ground that prices depend on the demand for, and supply of, commodities, and not on the quantity of specie. He tries half-heartedly to meet Hume's exposition of the self-regulating mechanism by stressing the transitory effects, with reference to hoarding and the volume of production, of the sudden change posited by Hume in the quantity of money. The removal of four-fifths of the money in circulation would annihilate both industry and the industrious. If as a result of the lower prices (all of ?) the stock of English goods were to be exported, it would mean the starvation of the English people.*99 If the quantity of money increases, on the other hand, hoarding will prevent this increase from acting on prices. In any case "reason and experience" refute the quantity theory.*100 At one point he suggests a self-regulating mechanism, whereby money goes into hoards when in excess and comes out when there is scarcity, essentially like North's except that Steuart explains the movement of specie into and out of hoards as governed by the possibility of lending it at interest:

While there is found a sufficient quantity of money for carrying on reciprocal alienations, those money gatherers will not be able to employ their stagnated wealth within the nation; but so soon as this gathering has had the effect of diminishing the specie below the proportion found necessary to carry on the circulation, it will begin to be lent out, and so it will return to circulate for a time, until by the operation of the same causes it will fall back again into its former repositories.*101


Tucker, in the course of an attempt to refute Hume's argument, follows Hume's ambiguous terminology too closely, and in consequence shifts unconsciously from a discussion of the effects on trade of more money to the effects of more wealth, and proceeds to a discussion of whether a rich country can compete successfully with a poor one,*102 and Hume, in an unsatisfactory reply, himself follows this shift in issues.*103


One of the mysteries of the history of economic thought is that Adam Smith, although he was intimately acquainted with Hume and with his writings, should have made no reference in the Wealth of Nations to the self-regulating mechanism in terms of price levels and trade balances, and should have been content with an exposition of the international distribution of specie in the already obsolete terms of the requirement by each country, without specific reference to its relative price level, of a definite amount of money to circulate trade. When a country has more money than it needs to circulate its trade, the "channels of circulation" will overflow, and the surplus money will be sent abroad "to seek that profitable employment which it cannot find at home."*104 What adds to the mystery is that Smith had in his earlier Lectures presented approvingly a good summary of Hume's analysis.*105

Scarcity of Money.


It was the constant complaint of the mercantilists that England was suffering from "scarcity of money," and the main objective of the mercantilist proposals, at least during the earlier period, was to relieve this scarcity. Many modern writers accept these complaints at their face value, and cite dubious historical facts as the cause of this scarcity, without either investigating what those who complained meant by "scarcity of money" or analyzing the notion for themselves. The mercantilists who voiced such complaints rarely made clear precisely what they had in mind. But where the context reveals what they were thinking of, they meant by scarcity of money some one or some combination of the following things: men not having enough "money" to buy the things they wanted—i.e., general poverty; merchants not being able to sell their goods in adequate volume—i.e., "slack trade"; merchants not having, or not being able to borrow at moderate rates of interest, enough "money" adequately to finance their operations—i.e., shortage of capital; high interest rates—i.e., scarcity of capital; money of some denominations scarce relative to other denominations—i.e., either a mismanaged currency, or the ordinary condition of a bimetallic currency whenever the market ratios of gold and silver diverge from the mint ratios; low prices; prices too high for the existing supply of money—an impossibility as a continuing phenomenon.


Even contemporary writers saw that these complaints rested on confused or inadequate economic analysis and heaped ridicule upon them. More criticized the notion of scarcity of money as early as 1523;*106 Starkey makes one of the participants in his dialogue deal disrespectfully with it; and Mun and Child, among others, refused to take it seriously:

Lupset: "For, as touching wool and lead, tin, iron, silver and gold, yea, and all things necessary for the life of man, in the abundance whereof standeth very true riches, I think our country may be compared with any other."

Pole: "...All with one voice cry they lack money,...and it is nothing like that all should complain without a cause."

Lupset: "...Men so esteem riches and money, that if they had thereof never so great abundance and plenty, yet they would complain...."*107

And first concerning the evil or want of silver, I think it hath been, and is a general disease of all nations, and so will continue until the end of the world; for poor and rich complain they never have enough; but it seemeth the malady is grown mortal here with us, and therefore it cries out for remedy. Well, I hope it is but imagination maketh us sick, when all our parts be sound and strong...*108 seems to vulgar observers most plentiful when there is least occasion for it; and on the contrary, more scarce, as the occasions for the employment thereof are more numerous and advantageous;...from the same reason it is, that a high rate of usury makes money seem scarce....*109

I can say in truth, upon my own memory, that men did complain as much of the scarcity of money ever since I knew the world as they do now; nay, the very same persons that now complain of this, and commend that time.*110


The common confusion between money and what could be bought with money or was valued in terms of money, which was usually the explanation of complaints of scarcity of money, was pointed out by North*111 and by the author of Considerations on the East-India Trade.*112 At least two writers before Hume explained the process of saving, to show that it need not consist merely of the piling-up of a stock of actual money.*113 As has already been shown, arguments for the need of more money for the building-up of a state treasure had become wholly academic after Henry VIII squandered his inheritance, and played little part in later mercantilist discussion. The advocates of paper money and of credit banking helped to undermine the prestige of the precious metals, especially when they claimed that credit and paper money could perform all the functions of metallic money. These considerations, combined with the development of the doctrine of an automatic regulation of monetary supplies, left the monetary doctrines of the mercantilists in a sad state of disrepair, and prepared the way for their definitive exposure by Hume and Smith.



The prevailing glorification of thrift and the acceptance of the accumulation of wealth as the end of production operated in a twofold way to strengthen the hold of the mercantilist doctrines on public opinion. On the one hand, identification of the saving process with the accumulation of the precious metals made acquisition of a greater supply of them the positive side of thrift. The stress on frugality, on the other hand, helped to create a prejudice against imports, which then consisted largely of luxuries. But the force of these considerations was weakened by counter-arguments justifying consumption of luxuries, either for their own sake, on the ground that the end of economic activity was neither production, nor the accumulation of wealth, but consumption, or enjoyment of the good things of life;*115 or as a stimulus to productive activity, whether because free spending quickens trade and circulation,*116 or because the prospect of enjoyment is an incentive to labor and to risk-taking.*117

Laissez-Faire and Free Trade.


The antecedents of Smith's laissez-faire and free-trade views are probably rightly to be sought mainly in the philosophic literature, and perhaps also in the writings of the physiocrats, rather than in the earlier English economic literature. Hume, no doubt, was an important influence on Adam Smith. But Hume was primarily a philosopher, rather than an economist, and although he must have helped Smith to develop his free-trade views, he remained a moderate protectionist himself. But if Adam Smith had carefully surveyed the earlier English economic literature, including, however, tracts apparently always obscure and already scarce by his time, he would have been able to find very nearly all the materials which he actually used in his attack on the protectionist aspects of the mercantilist doctrine. He would, however, have found them scattered, often imbedded in crudely mercantilist analysis, and often consisting only of stray and vague anticipations of later doctrine of whose full significance their authors showed little or no awareness. Caution is necessary lest more be read into such passages than was really intended by their authors, and there has been great exaggeration of the extent to which free-trade views already prevailed in the English literature before Adam Smith. North, Paterson, the author of Considerations on the East-India trade (1701), Isaac Gervaise, and Whatley are the only writers prior to Adam Smith whom I have found who seem really to have been free traders.*118 But certain elements of doctrine tending to lead to free-trade views were fairly widely prevalent before the publication of the Wealth of Nations. Some of these have already been discussed, for the mercantilist doctrines with respect to the importance of money and of a favorable balance of trade were inconsistent with the principles upon which a free-trade argument could be based, and their refutation was a necessary preliminary to successful formulation of a free-trade doctrine. The formulation of the quantity theory of money and the criticisms and qualifications of the balance-of-trade doctrine prepared the way, therefore, for the emergence of a comprehensive free-trade doctrine. There were other ideas, more immediately related to Adam Smith's argument for free trade, which had attained some degree of currency before he wrote.


There was general agreement that the profit motive was the controlling factor in economic behavior, especially of merchants: "No man in England never seeketh for no common weal, but all and every for his single weal";*119 "For merchants travail for gain and when gain ceaseth they travail no more";*120 "Every man will sell his wares at the highest price he may";*121"And where it is said that he is a merchant, and that he ought to have the sea open and free for him, and that trades of merchants and merchandise are necessary to export the surplus of our commodities, and then to import other necessaries, and so is favorably to be respected, as to that it is well known that the end of every private merchant is not the common good, but his particular profit, which is only the means which induceth him to trade and traffic";*122 "Every man almost is taken with the attention to profit. Love doth much, but money doth all";*123 "Men in trade, more especially than the rest of mankind, are bound by their interest; gain is the end of commerce";*124 "I am afraid there are but few men in any country who will prefer the public good to their private interest, when they happen to be inconsistent with one another."*125


The concept of the "economic man," instead of being, as is often alleged, an invention of the nineteenth-century classical school, was an important element in the mercantilist doctrine. Between the attitudes of the two schools toward the "economic man," if the extreme positions of both may be taken for purposes of contrast, there was this important difference, however, that the classical economists argued that men in pursuing their selfish interests were at the same time, by a providential harmony of interests, either rendering the best service of which they were capable to the common good or at least rendering better service than if their activities were closely regulated by government, whereas the mercantilists deplored the selfishness of the merchant and insisted that to prevent it from ruining the nation it was necessary to subject it to rigorous control. When Malynes made the title of one of his tracts read The center of the circle of commerce, or, a refutation of a treatise, intituled the circle of commerce, he did so in order to emphasize his thesis that "gain" was the "center" or objective of those engaged in economic activities, and that the only way to prevent merchants from bringing ruin to the commonwealth by their selfish pursuit of gain was to eliminate by restrictions or penalties the profitability to individuals of certain types of transactions which were opposed to the common interest.*126 In extreme cases this attitude tended to lead to wholesale denunciation of the merchant,*127 and the belief that merchants were governed only by self-interest underlay the fundamental mercantilist doctrine of the need for state regulation of commerce. As Fortrey put it, "the public profits should be in a single power to direct, whose interest is only the benefit of the whole," i.e., the statesman.*128


There was nobody to deny that merchants were governed only or predominantly by self-interest, but some spokesmen for the merchants replied that so were the other classes, and asked the old question: quis custodiet custodes? or warned that those who counseled interference by government with the operations of merchants, especially if they were merchants themselves, probably had some private ax to grind. There follow a few citations illustrating these points of view:

And in general all those who are lazy, and do not, or are not active enough, and cannot look out, to vent the product of their estates, or to trade with it themselves, would have all traders forced by laws, to bring home to them sufficient prices, whether they gain or lose by it.*129

There is hardly a commerce, but the dealers in it will affirm, we lose by all the rest; and yet it is evident that in time of peace the kingdom gets by trade in general.*130

...most of the laws that have been made relating to trade, since the Act of Navigation, may be presumed were calculated rather for particular interests than public good; more to advance some tradesmen than the trade of the nation.*131

...only to manage a little conceit or selfish intrigue, to encourage and procure a monopoly, exclusion, pre-emption, and restraints or prohibitions;... to restrain, prohibit, and disjoin, not [only] the industry of His Majesty's subjects with other nations, but even with and respect to one another. They will find that all these and many more pretended encouragements are so far from the things they are called, that they are not only intrigues to make private advantage from the ruin of the public, and arise from the mistaken notions and conceits of unthinking men, who neither have temper nor allow themselves time or opportunity to consider things as they are,—but only take them as they seem to be,—a sort of presumptuous meddlers, who are continually apt to confound effects with causes, and causes with effects,—and not to measure the trade, or improvement of house, family, or country, and even that of the universe, by the nature and extent of the thing, but only by their own narrow and mistaken and meán conceptions thereof....*132

Most of the statutes...for regulating, directing, or restraining of trade have, we think, been either political blunders, or jobs obtained by artful men, for private advantage, under pretense of public good.*133


Conflicting counsel was offered as to how to solve this familiar dilemma of public administration, namely, how to regulate in the public interest the selfish activities of individuals while averting the danger lest the regulations themselves be the product of advice or pressure from interested groups. The problem was made to appear even more serious by the general agreement among merchants of all shades of opinion that politicians and landed gentlemen were not competent to regulate trade on the basis of their own judgment. To the solution offered by some that the statesman should take the advice of the merchant,*134 others replied that the merchant was a bad councilor because he always had private interests to serve. Child advised that neither merchants, shopkeepers, nor manufacturers should be accepted as guides until they had become rich, retired from trade, and "by the purchase of lands, become of the same common interest with most of their countrymen."*135 But this was an argument to suit the occasion of the moment, and intended to discredit particular types of proposals by merchants which did not fit in with his own commercial ambitions. Child had no high opinion of the sort of regulation of trade which would result from the unaided wisdom of the landowner. To a subordinate in the East India Company, who had objected against certain instructions that they seemed to be in violation of the law, Child is reported to have replied:

that he expected his orders were to be his rules, and not the laws of England, which were a heap of nonsense, compiled by a few ignorant country gentlemen, who hardly knew how to make laws for the good government of their own private families, much less for the regulating of companies and foreign commerce.*136

The general effect of this common discrediting of all advice except such as emanated from one's self must have been to weaken confidence in the possibility of obtaining sound and disinterested advice as to the regulation of trade from any source.


Tending further to weaken confidence in the possibility of the beneficial regulation of trade by government was the frequently repeated argument that such regulation went counter to human nature, and could not succeed as against the power of the profit motive.*137 Some representative instances follow:

...the trade of the world will not be forced, but will find or make its own way free to all appearance of profit....*138

...if the matter in England, is so prepared for an abatement of interest, that it can not be long obstructed, as he [i.e., "I.C.," the author of an unnamed contemporary tract—probably Josiah Child] saith it is, we need no law for stating it, for nature will have its course with us, as well as in other countries, and he cannot instance, in any country, where by a law, interest is set under 6 per cent and nature is best let alone unforced.*139

To pretend after this, that parties shall govern mankind against their gain, is to philosophize wisely upon what may be, and what would be politic to bring to pass; but what no man can say was ever put in practice to any perfection; or can be so by the common principles that govern mankind in the world.... That tradesmen should cease to seek gain and usurers to love large interests; that men that have gain'd money should leave off desiring to get more; and that zeal to a party should prevail over zeal to their families; that men should forfeit their interest for their humor, and serve their politics at the price of their interest.... No, no, it is not to be done; the stream of desire after gain runs too strong in mankind, to bring any thing of that kind to perfection in this age. The thing is so impracticable in its nature, that it seems a token of great ignorance in the humor of the age to suggest it; and a man would be tempted to think those people that do suggest it, do not themselves believe what they say about it.*140

There is nothing weaker, than pretending to offer particular rules how a country may thrive by foreign traffic. Trade must be suffered to take its own course, and will find its own channel.*141

...unless our own manufactures are as good of their kinds, and as low in their prices as the same goods of other nations are, they will not sell either abroad or at home. Trade cannot be forced, but manufacture may be improved.*142


The objections so far considered against government regulation, in the public interest, of the selfish activities of the merchant rested on the incompetence of the regulators, or the unavailability of unbiased advisers, or the inability of government to cope with the strength of the profit motive.*143 A few writers, however, anticipated Adam Smith more or less clearly in formulating his fundamental principle that man in pursuing his own ends was at the same time usually serving the general good, and that unregulated trade was therefore desirable, not merely because it was the lesser of two evils, but because it was positively the servant of the public welfare.*144 The idea of the natural harmony of interests appears already to be present in the following passage from Misselden:

And is it not lawful for merchants to seek their Privatum Commodum in the exercise of their calling? Is not gain the end of trade? Is not the public involved in the private, and the private in the public? What else makes a common wealth, but the private-wealth, if I may say so, of the members thereof in the exercise of commerce amongst themselves, and with foreign nations?*145

North states it clearly: "That there can be no trade unprofitable to the public; for if any prove so, men leave it off; and wherever the traders thrive, the public, of which they are a part, thrives also."*146 It is implied in a tract attributed to Child: "... trade is a free agent, and must not be limited or bounded; if it be so in any nation, it will never prosper."*147 Davenant subscribed to it, although not wholly unqualifiedly:

Trade is in its nature free, finds its own channel and best directeth its own course; and all laws to give it rules and directions, and to limit and circumscribe it, may serve the particular ends of private men, but are seldom advantageous to the public.*148


More important, in preparing the way for Adam Smith, was Mandeville's more elaborate reasoning in support of individualism and laissez faire, resting on his famous argument that "private vices" such as "avarice" and luxury were "public benefits."*149 In Hume's economic writings the laissez-faire doctrine is to be found only by implication if at all. Tucker, although in the field of foreign trade policy he continued to be a protectionist of a somewhat extreme type, at one point vigorously asserted the identity of private and public interests and drew laissez-faire conclusions therefrom:

For let the legislature but take care not to make bad laws, and then as to good ones, they will make themselves: that is, the self-love and self-interest of each individual will prompt him to seek such ways of gain, trades, and occupations of life, as by serving himself, will promote the public welfare at the same time. The only thing necessary to be done by positive institutions is, to enforce the observance of voluntary contracts by legal penalties speedily levied....

Indeed, it must be acknowledged with gratitude and pleasure that the legislature of late years hath enacted many excellent laws which have promoted commerce, increased industry, and extended manufactures... but then the laws in question are such, whose true excellence consists rather in the repeal of absurd and bad laws formerly made, than in any particular positions or maxims of commerce.*150


But shortly before the publication of the Wealth of Nations, Whatley, obviously under physiocratic influence, made a specific plea for laissez faire on the basis, in part, of the existence of an identity of interest between the individual traders and the state:

Now, though it is hardly to be expected, as above hinted, that princes should allow of a general free trade or intercourse, because they seldom know their own true interest....*151

Perhaps, in general, it would be better if government meddled no farther with trade, than to protect it, and let it take its course.... It were therefore to be wished, that commerce were as free between all the nations of the world, as it is between the several counties of England: so would all, by mutual communication, obtain more enjoyments.*152


In the ancient Greek and Roman classics is to be found the doctrine that differences in natural conditions in different countries made trade between these countries mutually profitable. The early Christian philosophers took over this doctrine and gave it a theological flavor. God had endowed different regions with limited but varied products in order to give mankind an incentive to trade, so that through a world economy they would become united in a world society, and as children of one God they would learn to love each other.*153 This was apparently common doctrine among the English theological writers of the sixteenth century and later.*154 This doctrine was taken over to some extent by the lay writers on commercial matters, but they managed ingeniously to adapt the intent of Providence to their own particular views. Extreme mercantilists, who in general were pleading for new or added restrictions on trade, used the doctrine either to justify the restriction of certain products to Englishmen, on the ground that Providence had assigned them to this country, or appealed to the doctrine in support of that branch or type of trade which they wished to have fostered, while conveniently forgetting the doctrine when attacking other branches or types of trades. William Cholmeley at first states the doctrine fairly, bringing out clearly its implication that a tolerant attitude toward imports and raw material exports was proper:

But when I considered how the unsearchable purpose of God hath, by the lack of necessary commodities, driven all the nations of the earth to seek one upon another, and thereby to be knit together in amity and love, I thought, that as this realm lacketh (and that naturally) things necessarily required to the perfecting of our commodities, it might also be a thing natural to the English nation, to be so imperfect of wit that we could never be able to attain to the knowledge of true and perfect workmanship, because God would drive us thereby to suffer other nations to have a commodity by making our commodities [im?]perfect?*155


Since his main concern, however, was that English wool should be exported only in the form of finished cloth, instead of as raw wool or as undyed cloth, he found a means of reconciling his theology and his patriotism. It would be ingratitude to God to attribute to him the intention of withholding from Englishmen "the aptness of wytt" to become perfect workmen in the weaving and dyeing of cloth, and their failure to do so was not because God intended England to supply foreign weavers and dyers with the necessary wool, but because the English craftsmen were selfish and indolent: "we being beastly minded, and seeking to again much by doing little, every man seeking his own private commodity, without regard of the weal public, do not diligently apply our good wits to the searching out of good knowledge, but to the inventing of subtle deceit (wherein we excel all other nations), to our private advancement, but the decay of the public weal of our country."*156


Misselden similarly expounded the benevolent attitude of God toward trade between nations, in the course of a defense of the trading activities of the Merchant Adventurers, of which he was an employed official, but did not let it trouble him in his advocacy of stringent restrictions on branches of trade in which the Merchant Adventures were not directly concerned.*157 Another writer derived from the doctrine the lesson that Providence had assigned wool-raising and the woolen industry to England, and therefore that England should concentrate her efforts on it,*158 and several later writers did call upon it for support of their more liberal views with respect to freedom of trade as against the more extreme mercantilists, much as did Adam Smith in his two famous references to the "invisible hand."

For it is not the having all things of our own growth on the one hand, and the saving of our money on the other, can make us rich; neither can our increase and plenty in some sense be said to be our wealth, if we have not a suitable vend and consumption thereof; besides, nature hath otherwise provided, and so furnished each particular part of the world with something which the rest want, whereby to preserve a friendship and commerce together.*159

The various products of different soils and countries is an indication that Providence intended they should be helpful to each other, and mutually supply the necessities of one another.*160

By the wise appointment of divine Providence, a mutual intercourse and commerce amongst men is both conducive and necessary to their well being. Every man stands in need of the aid of others; and every country may reap advantages by exchanging some of its superfluous products, natural or artificial, for those which it wants of foreign growth.*161


In a remarkable passage, Henry Home gives credit to Providence for the self-regulating mechanism of international specie flows, as the means by which it is provided that commerce shall be mutually profitable:

It appears the intention of Providence that all nations should benefit by commerce as by sunshine; and it is so ordered, that an unequal balance is prejudicial to the gainers as well as to the losers; the latter are immediate sufferers; but not less so ultimately are the former. This is one remarkable instance, among many, of providential wisdom in conducting human affairs, independent of the will of man, and frequently against his will. The commercial balance held by the hand of Providence is never permitted to preponderate much to one side; and every nation partakes, or may partake, of all the comforts of life. Engrossing is bad policy; and men are prompted, both by interest and duty, to second the plan of Providence, and to preserve, as near as possible, equality in the balance of trade.*162

International Division of Labor.


A few writers prior to Adam Smith stated or approached closely some of the specific economic arguments for unrestricted trade which were later to serve as the core of the free-trade doctrine of Adam Smith and the English classical school. John Houghton, in 1677, in a tract of free-trade flavor, argued that the same sort of reasoning should be applied to foreign as to domestic trade, since both alike consisted of a mutual exchange of goods, presumably to mutual advantage.*163 Barbon claimed that a reduction of imports as a result of prohibitions would cut off an equivalent amount of exports.*164 Davenant made explicitly a point vital to the free-trade doctrine, but which the nineteenth-century economists often assumed implicitly, namely, that labor had adequate occupational mobility. He claimed that if domestic labor is displaced as a consequence of imports of foreign commodities "these hands can shift from one work to another, without any great prejudice to themselves, or the public."*165


Several writers presented arguments in support of the international division of labor, and it requires only mildly generous interpretation to justify the conclusion that they approached more closely than did Adam Smith the high point of free-trade reasoning, the statement of the benefit of regional specialization in terms of comparative advantage. Davenant maintained that the artificially stimulated production of goods for which neither the soil nor the general bent of the people were adapted is never wise, and that the silk and linen industries were suitable only for countries where wages were low. "It is the prudence of a state to see that this industry, and stock, be not diverted from things profitable to the whole, and turned upon objects unprofitable, and perhaps dangerous to the public."*166 The unknown author of Considerations on the East-India Trade (1701), who has been rightly praised by a number of modern writers, reveals almost no trace of the mercantilist or protectionist fallacies. He meets all objections against the export of bullion or the import of foreign commodities by regarding trade as a voluntary exchange of considerations. If bullion is voluntarily exchanged for Indian manufactures, it must be because the latter are of more value. "To exchange bullion for cloth is to exchange for the less for the greater value." Cheap imports, he asserts, are the valid objective of foreign trade. He even draws an analogy between foreign trade and labor-saving devices. The fact that Indian wares can be gotten through trade with less expenditure of labor than their production at home would require means that labor is saved and made available for other purposes:

If nine cannot produce above three bushels of wheat in England, if by equal labor they might procure nine bushels from another country, to employ these in agriculture at home, is to employ nine to do no more work than might be done as well by three; the loss of six bushels of wheat; is therefore the loss of so much value.*167


Isaac Gervaise claimed that for each country, according to the "disposition" or productive capacities of its people and their geographical situation, there was a "natural" apportionment among different industries of its productive resources. If consumption demands were such that with this "natural" apportionment of production some commodities would not be produced in adequate quantities to satisfy the demand, it was best to meet such deficiencies of production by permitting free importation of such commodities from abroad:

Taxes on imports being no more than a degree of prohibition, and prohibition only forcing those manufactures to extend themselves beyond their natural proportions, to the prejudice of those which are, according to the disposition of the country, natural beyond the entire demand of the inhabitants; which lessens or hinders their exportation, in proportion to the prejudice they receive by the increase of those manufactures which are but in part natural, and whereof the importation is prohibited.

This considered, we may conclude, that trade is never in a better condition than when it's natural and free; the forcing it either by laws or taxes being always dangerous: because though the intended benefit or advantage be perceived, it is difficult to perceive its countercoup, whichever is at least in full proportion to the intended benefit: nature not yielding at once, sharpens those countercoups, and commonly causes a greater evil than the intended benefit can balance. Moreover, trade being a tacit and natural agreement to give or furnish a proportion of certain denominations of labor, to be drawn back in like proportion in such other denominations as best suits necessity or fancy, man naturally seeks, and finds, the most easy and natural means of attaining his ends, and cannot be diverted from those means but by force and against his will.*168


Similar reasoning was presented by Patrick Lindsay. Scotland should discourage rather than encourage industries, such as woolens, which would interfere with the progress of the only "staple," linen. These other industries had no chance of success in Scotland, and it was better to buy their products from abroad than to attempt to make them at home:

We may then reasonably suppose, on the lowest computation, that we can buy...those woolen goods 10 and 15 per cent cheaper in England, than we can make them at home; and if we can make linen cloth, and sell it in England from 5 to 10 per cent profit, and purchase, in exchange for it, woolen goods 10 and 15 per cent cheaper than we can make them at home, then are we gainers by this trade from 15 to 20 per cent, and of consequence, so many hands as are employed in the woolen, who might be employed in the linen, just so much does the country lose by their labor.*169


A few writers were in the rather paradoxical position of adhering to crudely mercantilistic doctrines with respect to the balance of trade, the superiority of exports over imports, or the importance of money, while advocating complete or very nearly complete free trade. Houghton*170 and Vanderlint*171 appear to belong to this group, and also Decker, who advocated free trade as a means of procuring a more favorable balance of trade.*172 Roger Coke was an out-and-out mercantilist in his general analysis, but he nevertheless disapproved of monopolies, the Navigation acts, the restriction of import of cattle from Scotland, and the restrictions on the Irish trade, and did not give explicit support to any trade restrictions in any of his writings that were available for examination.*173 There were other writers who adhered to the mercantilist doctrines without revealing their attitude toward trade regulation.


A constant note in the writings of the merchants was the insistence upon the usefulness to the community of trade and the dignity and social value of the trader, and in the eighteenth century it appears to have become common for others than the traders themselves to accept them at their own valuation.*174 Very often "trade" is not more definitely specified, but no doubt most of the writers who argued for the value of trade meant foreign trade, or even only export trade. But in the general glorification of trade, some of the tracts made no reference to the quantity of money, the balance of trade, or other phases of the mercantilist doctrines. In some cases there was explicit inclusion of imports on a parity with exports as deserving of encouragement, and support of low customs, without explicit discrimination between export and import duties, as a means of fostering trade.*175 The general tendency of such discussion must have been to weaken faith in legislative restriction of trade, and to prepare the way for the acceptance of free-trade views on explicitly stated economic grounds, although on the other side it is to be said that the chief advocates of particular restrictions were merchants.*176


Free-trade doctrine, however, continued to be a rank heresy, and there were probably some who subscribed to it but who did not dare to expose their peculiar views in print. Violet relates with horror that some men in high positions held such views:

...some men are of an opinion, that they would have trade free, to import all commodities, and export all without any restraint, not for leather, fuller's earth, corn, wool, ammunition, gold and silver, horses, and all other things that are staff and stay of this nation. I would not write it, but I have it affirmed by men of great quality, that this is the opinion of some men that are in place and power.*177


I believe I have succeeded in showing that all the important elements in Adam Smith's free-trade doctrine had been presented prior to the Wealth of Nations. These were often, however, to be found only in isolated passages not wholly consistent with the views expounded in the surrounding text. There is little evidence that these early expositions had much influence on public opinion in the mass, or even on Hume and Smith. Hume himself discarded the monetary and balance-of-trade doctrines of his time while adhering to protectionism,*178 and Adam Smith both in his Lectures and in the Wealth of Nations relapsed at times into rather crude versions of the mercantilist monetary and balance-of-trade doctrines, as well as into protectionism.*179 In so far as Hume and Smith did not develop their foreign-trade doctrines for themselves, it seems likely that their chief indebtedness was to the philosophers, rather than to the earlier English economic literature. In the literature before Hume there is scarcely any discussion of the anticipations of free-trade doctrine examined in the foregoing, even for purposes of refutation,*180 and most of the controversy is between exponents of rival schemes of regulation, or between extreme and moderate mercantilists, rather than between mercantilists and free traders.


In many respects, indeed, as the mercantilist argument became more elaborate and involved, it became more objectionable from the point of view of modern doctrine, and, except with reference to the bullionist doctrines, a strong argument could be presented in defense of the thesis that the mass of ordinary tracts on trade of the first half of the eighteenth century showed a more extreme and confused adherence to the fallacies of mercantilism than did the writings of the sixteenth and early seventeenth centuries. The simplicity and brevity of the early analysis at least resulted in fallacies of comparable simplicity, but the later writers were able to assemble a greater variety of fallacies into an elaborate system of confused and self-contradictory argument. In so far as trade theory was concerned, such progress as occurred was due almost solely to a small group of capable writers, able to analyze economic problems more acutely and logically than their predecessors, but not able to make a marked impression upon their contemporaries or even to attract their attention. Even Hume made few converts in England, and his influence on the physiocrats was more apparent than on the English writers of his own generation. On legislation, it is not evident that the critics of mercantilism had much influence, and it could be seriously argued that, with the exception of the disappearance of the bullionist regulations, the general course of foreign-trade legislation from 1600 to after Adam Smith was, without important exception, away from, rather than toward, conformity with the doctrines of the critics of mercantilism.



There has been a marked tendency in recent years, more especially perhaps on the part of German economists and of economic historians, toward a more favorable appraisal of English mercantilist doctrine than has prevailed among the economic theorists of the English classical tradition. Much of this tendency can be explained away as due to participation in the interventionist, protectionist, or aggressively nationalistic sentiments of the mercantilist writers, to misconceptions of what the economic doctrines of the English mercantilists really were, or to absence of knowledge of, or interest in, the grounds for rejecting the mercantilist doctrines afforded by modern monetary and trade theory. To those apologists who defend the mercantilist doctrines on the ground either that they were not what their critics allege them to have been, or that the theoretical objections of the critics can be successfully refuted, the foregoing presentation of the mercantilist reasoning must suffice as an answer.


The modern apologies for mercantilism, however, are also supported by several arguments which do not clash directly with the propositions of modern trade and monetary theory, and these arguments are entitled to more respectful treatment. The economic historians, for instance, seem to derive from their valid doctrine, that if sufficient information were available the prevalence in any period of particular theories could be explained in the light of the circumstances then prevailing, the curious corollary that they can also be justified by appeal to these special circumstances. There are some obvious obstacles to acceptance of this point of view. It would lead to the conclusion that no age, except apparently the present one, is capable of serious doctrinal error. It overlooks the fact that one of the historical circumstances which has been undergoing an evolution has been the capacity for economic analysis. More specifically, to be involved successfully in defense of mercantilist doctrine it needs to be supported by demonstration that the typical behavior of merchants, the nature of the gains or losses from trade, the nature of the monetary processes, and the economic significance of territorial division of labor have changed sufficiently since 1550, or 1650, or 1750, to make what was sound reasoning for these earlier periods unsound for the present-day world.


It has been claimed also for the mercantilists that they were presenting short-run doctrines and proposals, whereas their later critics had only long-run considerations in mind. It must be conceded that some of the mercantilist doctrine would not be quite so absurd if appraised from the short-run point of view. But I have found no evidence that the mercantilists intended their analysis and proposals to be regarded as holding true for the short run only, and there is abundant evidence that they were ordinarily not aware of any distinction between what was desirable monetary or trade practice, to meet a temporary situation, on the one hand, and as permanent policy, on the other.


It has been argued also, in answer to the criticisms of mercantilist doctrine by economic theorists, that the primary objective of mercantilist policy was not economic prosperity but national unity and power. In dealing with this interpretation of mercantilism, it is important to distinguish between the official and the unofficial expositions of the doctrine, between the actual policies and the reasoning by which they were supported, and between Continental and English mercantilism. In each case, it is only the latter with which this essay is concerned. Government policy, no doubt, was never governed solely by economic considerations, but for the unofficial writers this was a subject for complaint rather than for approval. Even in the unofficial literature, however, political and religious considerations were mingled with the economic to a degree without parallel in modern economic literature. But in England a strong and centralized government and an aggressive national spirit had been established long before the appearance of an important mercantilist literature, and whatever may have been the situation on the Continent the primary emphasis of the English mercantilist writers was on the means by which England's wealth could be augmented. Many writers, it is true, urged in support of the measures which they advocated that they would not only contribute to England's prosperity but would also promote her prestige and power, injure her rivals, and protect her national faith against its enemies, internal and external. But the appeal to political and religious considerations seems often to have been intended to win the support of the less commercial-minded official and landed classes for the proposals of the "merchants" or businessmen, and seems only rarely to have expressed what was really the primary concern of their authors. Especially important as a safeguard against applying erroneously to the English mercantilist literature generalizations which may be true of the Continental writers, it should be borne in mind that English mercantilist doctrine was the product of merchants to an extent without parallel on the Continent. On economic matters even the landed classes in England found their ablest spokesmen in merchants such as Child and North. And the merchants were typically impatient of official policy when it failed to place primary emphasis on the economic aspects of the matters with which it dealt, and especially when it appeared to subordinate economic to political or religious considerations.


Even if it be granted, however, that the principal objective of the English mercantilist writers was a great and powerful England rather than a prosperous England, it does not follow that appraisal of their reasoning on strictly economic grounds is unwarranted or irrelevant. It would be difficult to find convincing evidence that any of the prominent mercantilists regarded power and prosperity as generally conflicting and inharmonious objectives of national policy. On the contrary, it was a matter of general agreement among them that for England the only certain path to national power and glory was through promotion of trade and increase of wealth. Child's formula, which was often quoted approvingly, expresses accurately the mercantilist position: "Foreign trade produces riches, riches power, power preserves our trade and religion."*181 After the Revolution, in fact, trade and wealth seem to have become almost an obsession of the mercantile classes, and the emphasis which they placed on the economic phases of national policy was, if anything, excessive. I suspect that the "trade wars" of the seventeenth and eighteenth centuries were such more in the imagination of the mercantile writers than in the intent of the governing classes who embarked upon them, and that just as the merchants appealed to non-economic considerations to make their proposals attractive to the landed classes, so the government appealed to the cupidity of the merchants to win their support for wars embarked upon for dynastic or political reasons.*182 Even the official classes in England, however, were probably more trade-minded, and probably gave greater weight to economic considerations, than the corresponding classes on the Continent. Such, at least, appears to have been the opinion of eighteenth-century Continental observers.*183


Not only is there little evidence that the mercantilist writers were prepared to sacrifice national economic to political interests, but a good deal of the mercantilist literature can be plausibly explained as special pleading for limited economic interests. The most ardent advocates in the seventeenth century of the revival or enforcement of the bullionist restrictions had a personal interest of one sort or another in these regulations. Malynes is said to have had expectations of getting a remunerative contract in connection with the currency if the office of the Royal Exchanger were revived. Milles was a customs official among whose duties would be the enforcement of any bullionist regulations. Violet had been a "searcher" and informer in connection with the regulations prohibiting the export of bullion, and his appeals for stricter enforcement were accompanied by pleas that he again be employed to discover violations of the regulations.*184 Wheeler was secretary and Misselden an important member of the Merchant Adventurers, and their tracts were written in defense of their exchange transactions against the attacks of Milles and Malynes. The East India Company, in its charter of 1600, was granted the right to export a limited amount of bullion, and in its early as in its later operations bullion constituted the bulk of its exports from England. This led to attacks on the company of which Robert Keales' The Trades Increase (1615) was typical. Digges, a member of the company, wrote his Defence of Trade (1615) as a reply to Keales, and Mun, an officer of the company, wrote his tracts and presented a "remonstrance" to the government primarily to ward off hostile measures against the company. Throughout the history of the company its officers and employees were publishing tracts in its defense which were important contributions to the literature of mercantilism. Toward the end of the seventeenth century, when attacks on the company turned mostly on its monopolistic character, its imports of East Indian silks and calicoes to the alleged injury of English industry, and its unfavorable balance of trade, Child and Papillon, officers of the company and with much of their private fortunes invested therein, wrote in its defense. Much of the mercantilist literature from 1670 on, written in opposition to the company, was the work of rival merchants who wanted to participate in the East India trade or of persons connected in some way with the domestic textile industries which were feeling the effects of East Indian competition. Tracts were written by factors in the woolen industry urging or supporting the prohibition of the export of wool and were answered by spokesmen for agricultural interests. John Houghton, Charles Smith, Arthur Young, and many others wrote in support of the bounties on the export of corn with an evident agrarian bias. The literature on taxation consisted in large part of tracts written by traders who wanted the main burden of taxation to rest on land, or by landed men who wanted it to rest on trade. There were contemporary charges that some of those who were urging the legal limitation of the rate of interest were rich merchants who had ample funds to finance their own activities and hoped that the reduction of the rate of interest by law would make it impossible for their poorer competitors to borrow the funds necessary for the conduct of their affairs. Pleas for special interests, whether open or disguised, constituted the bulk of the mercantilist literature. The disinterested patriot or philosopher played a minor part in the development of mercantilist doctrine.*185


After the Revolution, when control of commercial policy had definitely passed from the crown to Parliament, commercial affairs became the football of party politics, and factional rivalries and conflicting economic interests were likely to be involved in any important issue of commercial policy in a complex way. If I may venture to take the controversy waged around the commercial clauses of the Treaty of Utrecht (1713) as an illustrative instance, the situation seems to have been somewhat as follows:*186 From the early decades of the seventeenth century, the trade between England and France had been greatly restricted by both countries, either by discriminatory duties of prohibitive severity or by absolute embargoes. When in 1713 a Tory government concluded peace with France, it proposed also to reestablish open trade with France. The Tories represented the landed classes and the Anglicans, and also received the support of the surviving Catholics as being less hostile to them than the Whigs. The Whigs in the unreformed Parliament of the time were also predominantly members of the landed gentry, but in order to secure a popular footing they had sought the support of the nonconformist or Low Church yeomen by adopting a policy of tolerance to dissenters and extreme opposition to Catholics, of the moneyed classes by their support of the Bank of England, and of the independent merchants and the manufacturers by opposition to the monopoly companies and by support of extreme mercantilism. The Tories, on the other hand, came to terms with the East India Company, whereby in return for support of the endeavors of the company to preserve its monopoly privileges and to be allowed to import East Indian cloth, the latter gave financial support to the crown through loans, and to its defenders in Parliament through private bribes.


On the specific issue of the resumption of trade relations with France, the Tories were favorable and the Whigs opposed. In so far as it was not a matter merely of factional rivalry, this alignment seems to have followed economic interests fairly closely, although other considerations were also important. Support for the resumption of freer trade appears to have been confined to the landed classes and to have been due mainly to three considerations: a greater trade with France would mean greater custom revenues to the crown, of which they were at the time the supporters; it would mean cheaper claret and silks; and, as a minor factor, it would be a check to the growing power of the trading classes, who were objectionable as "upstarts" and as Whigs, as enemies of the landed interest, and as exponents of a trade policy which made the cost of luxurious living higher for the country gentleman. The Whigs opposed the commercial treaty in part to embarrass the crown, in part because they were traditionally hostile to France as the leading Catholic monarchy.*187 They were supported by the independent "merchants"*188 and by the domestic manufacturers of liquors and cloth. The Whigs succeeded in stirring up violent opposition to ratification of the commercial treaty. In the controversies at the end of the seventeenth century, when the Tories supported both the continuance of monopoly control by the East India Company of the trade with East India and the limitation of the restrictions and duties on East Indian cloth to modest proportions, they had found in the ranks of the company itself and elsewhere able advocates, including such men as Child, North, Davenant, and Barbon. In the controversy about the Treaty of Utrecht, however, the level of argument on both sides was low. Daniel Defoe was allegedly hired by the Tories to defend the treaty in a periodical, Mercator, established for the purpose, and the Whigs replied in another periodical, the British Merchant, to which the principal contributors were prominent merchants with extreme mercantilist views. Defoe was too much of a believer in the mercantilist doctrines himself to be able effectively to meet criticism of the treaty on mercantilist grounds, and as far as public opinion was concerned the British Merchant had much the best of the argument. Whether or not the battle in the periodicals and tracts had much to do with the outcome, the commercial treaty failed of ratification in Parliament by a narrow margin of votes, and its defeat tended to strengthen the hold of mercantilist doctrine on the English merchant classes, and to sharpen the conflict of interest and opinion between the landed classes and the trading and industrial classes.*189


While non-economic considerations unquestionably played an important part in this controversy, no one, as far as I could discover, conceded that these considerations clashed with the economic ones. On the basis of modern theory, the Tories had the stronger economic case. But the country gentlemen who constituted that party had no effective reply to mercantilist doctrine, and at this critical stage were without competent aid from the ranks of other classes. The ignorance and inarticulateness of the English landed classes made them impotent in 1713 to prevent their victimization by a mercantilist policy which they vaguely sensed to be hostile to their interest, although they were in overwhelming control of Parliament. Over a century later, when the change in the status of English agriculture had made them the beneficiaries instead of the victims of mercantilism, their failure to produce spokesmen able to cope with the orators of the merchant class was a factor in their failure, in a Parliament in which they were still in the majority, to prevent the spectacular overthrow of mercantilism. Anyone who attempts an interpretation of the evolution of English trade theory solely in terms of objective historical circumstances faces the task of reconciling his account with the part played by the evolution of capacity for economic analysis. Objective fact played its part. But if the Tories had had the services of North and Barbon in 1713, they might have dealt a fatal blow to mercantilism then by showing that what was in their private interest was also in the national interest. And if Peel had been less public-spirited and intelligent in 1846, or if there had been among the back-bench squires men able to cope in debate with Cobden and Bright, the reign of mercantilism in England might not have had its 1846 to 1916 intermission.

Notes for this chapter

Bland, Brown, and Tawney, English economic history, select documents, 1914, p. 222.
"Polices to reduce this realme of England" [1549], T.E.D., III, 321: "The only means to cause much bullion to be brought out of other realms unto the king's mints is to provide that a great quantity of our wares may be carried yearly into beyond the seas and less quantity of their wares be brought hither again...."
"Memorandum on the reasons moving Queen Elizabeth to reform the coinage" [1559], T.E.D., II, 195. Cf. also [John Hales] A discourse of the common weal [1581], Elizabeth Lamond, ed., p. 79.
Pauli, Drei volkswirthschaftliche Denkschriften, pp. 12, 32, 56, 64, 66, 71, 76.
A discourse of the common weal, pp. 66, 87-88.
A treatise of the canker [1601], T.E.D., III, 398 ff.; The center of the circle of commerce, 1623, pp. 70 ff., 121 ff.
The customers replie, 1604, passim.
Great Britains remembrancer [1640], 1655, pp. 16 ff.
Certain proposals in order to the peoples freedome, 1652, p. 14.
Sir Thomas Rowe, The cause of the decay of coin and trade in this land [1641], Harleian miscellany, 1809 ed., IV, 457.
A discourse of trade, from England unto the East-Indies [1621], 1930 reprint, p. 54.
In England's treasure by forraign trade, chaps. VIII-XIV, Mun presents a detailed and able criticism of the whole gamut of bullionist devices, including the Statutes of Employment.
Op. cit. p. 458.
An humble declaration...touching the transportation of gold and silver, 1643, p. 27 (advocates revival of 14 Ed. III, c. 21, requiring exporters to bring into England a proportion of their receipts in gold); A true discoverie to the commons of England, how they have been cheated of almost all the gold and silver coin of this nation [1651], 1653 reprint, p. 83 (advocates revival of 3 Hy. VII, c. 8, one of the Statutes of Employment proper, applying to merchant-strangers and requiring them to employ the money they receive through the sale of foreign goods in the purchase of English merchandise). Cf. the article on Violet in Palgrave's Dictionary of political economy.
E.g., Violet, An humble declaration..., 1643, pp. 30 ff.; ibid., A true discoverie..., 1653, passim; ibid., Mysteries and secrets..., 1653, pp. 35. 39, etc.; Et & dracone, 1668, p. 4; [Petyt] Britannia Languens [1680], in McCulloch ed., Early English tracts on commerce, pp. 307 ff.; Hodges, The present state of England, as to coin and publick charges, 1697, p. 105; [Pollexfen] England and East-India inconsistent in their manufactures, 1697, p. 48.
Principles of political œconomy 1767, II, 329: "But when the balance turns against them in the regular course of business, not from a temporary cause, then he [i.e., 'the statesman'] may lay restraints upon the exportation of specie, as a concomitant restriction, together with others, in order to diminish the general mass of importations, and thereby to set the balance even." Cf. also [George Blewitt] An enquiry whether a general practice of virtue tends to the wealth or poverty of a people? 1725, p. 60.
Cf. Thomas Violet, Mysteries and secrets, 1653, pp. 8-9: "But there are governments which are for the private advantage of a few men, procuring prohibition of importation of several commodities but only by particular men, and exportation of our native commodities, but only by particular men, and only for some ports, and at some seasons of the year." Violet is not objecting here to the restrictions, but to the special exemptions therefrom.
E.g., Petty, Treatise of taxes [1662], Economic Writings, Hull ed., I, 60. Petty recommended that the duties be high enough to make foreign finished commodities dearer than competing domestic commodities, and if the imports much exceeded the exports he would support absolute prohibitions.
E.g., "Polices to reduce this realme of Englande" [1549], T.E.D., III, 332; Fortrey, Englands interest and improvement [1663], Hollander ed., p. 28; [Sheridan] A discourse on the rise and power of parliaments [1677], Bannister ed., pp. 210-11; Barbon, A discourse of trade [1690], Hollander ed., p. 37; Arthur Dobbs, An essay on the trade and improvement of Ireland, 1729, p. 30.
See infra, p. 69.
Principles of political œconomy, 1767, I, 338.
E.g., Robinson, Englands safety; in trades encrease, 1641, p. 9; Barbon, A discourse of trade [1690], Hollander ed., p. 37.
[Hales] A discourse of the common weal [1581], Elizabeth Lamond ed., p. 67; anon., The present state of Ireland consider'd, 1730, p. 29 (the reference here is to Ireland, however, and not England).
[David Bindon] A letter from a merchant who has left off trade, 1738, p. 47. Mildmay, in another connection, claimed that countries carried out their obligations under most-favored-nation treaties only when it suited their convenience. (The laws and policy of England, 1765, p. 78.)
"On the neglect of trade and manufactures," Scots magazine, II. (1740), 476. Cf. also [Simon Clement] The interest of England, as it stands with relation to the trade of Ireland, considered, 1698, pp. 13-14: "And though this caution [i.e., the danger of foreign retaliation] hath been often urged in discourses of trade, yet I never knew one instance of any nations being piqued at another to such a degree as to break off their commerce; though I have known several instances of such occasions given. Some prevailing regard, either to the benefit of the customs, the profit of the merchants, or the like, is always had; so that governments seem to be steered by this principle, that if they cannot vend in trade as much as they would, they will yet continue to sell what they can, and acquiesce with the shopkeeper's rule, that custom is no inheritance; if they lose one chapman, they get another...."
E.g., The British merchant [1713], 3d ed., 1748, II, 3.
E.g., Joseph Massie, Ways and means for raising the extraordinary supplies, 1757, p. 27 (cited from Br. Suviranta, Theory of the balance of trade in England, 1923, p. 30, note 1).
The export of wool was first prohibited in 1647. Other commodities whose export was prohibited were fuller's earth, pipe clay, hides, lead, and knitting machinery.
Instructions for travellers, 1757, pp. 38-39.
Cf., Reasons for a limited exportation of wool, 1677, p. 4; Davenant, An essay on the East-India trade, [1697], Works, I, 98 ff.; and John Smith, Chronicon rusticum-commerciale, 1747, passim.
A discourse on the rise and power of parliaments [1677], Bannister ed., pp. 198-99.
Treatise of taxes [1662], Economic Writings, Hull ed., I, 59. Cf. also similarly moderate views with respect to leather, but a much more extreme attitude with respect to the export of wool, John Cary, An essay on the state of England, in relation to its trade, 1695, pp. 21, 37-40.
New essays, 1702, p. 9.
Sketches of the history of man, 1774, I, 494 ff.
Ibid., I, 493. Home apparently failed to see that increased production for export would not, of itself, lead to lower English prices.
"Memorandum by Cecil on the export trade in cloth and wool" [1564?], T.E.D., II, 45 ff.
The ancient trades decayed, repaired again, 1678, pp. 26-27.
The linen and woollen manufactory discoursed...[1691], in John Smith, Chronicon rusticum-commerciale, I, 383-88.
A brief state of the question between the printed and painted callicoes, and the woollen and silk manufacture, 2d ed. 1719, introduction, p. 4. This pamphlet was directed against the calico industry. In answer to it, Asgill replied that neither silks nor calicoes were "staple commodities," that calicoes competed with silks rather than with woolens, and that there was therefore as strong a case for restriction of the silk as of the calico industry.—Asgill, A brief answer to a brief state of the question, 1719.
[Daniel Defoe] An humble proposal to the people of England [1729], The novels and miscellaneous works, 1841 ed., XVIII, 50.
[Arthur Young] The farmer's letters to the people of England, 2d ed., 1768, p. 42.
Cf. An act prohibiting the planting of tobacco in England, 1652: "Whereas divers great quantities of tobacco have been of late years and now are planted in divers parts of this nation, tending to the decay of husbandry and tillage, the prejudice and hindrance of the English Plantations abroad, and of the trading, commerce, navigation, and shipping of this nation.... Be it enacted and ordained that no person or persons whatsoever...plant, set, grow, make, or cure any tobacco in any field, place or places within this nation...."
Mun, England's treasure by forraign trade [1668], Ashley ed., p. 16, advocated specially favorable customs treatment of the reexport trade. The establishment of free ports was specifically recommended by B. W., Free ports, 1652 (not available for examination); Maddison, Great Britains remembrancer [1640], 1655, pp. 37 ff.; Violet, Mysteries and secrets, 1653, pp. 22 ff.; [Sheridan] A discourse on the rise and power of parliaments [1677], Bannister ed., p. 214; [Petyt] Britannia languens [1680], McCulloch ed., Early English tracts on commerce, p. 359; Gee, The trade and navigation of Great Britain considered [1729], 1767, pp. 180 ff. Petty apparently opposed free ports, because they would facilitate evasion of duties on imports for consumption—A treatise of taxes [1662], in Economic Writings, Hull ed., I, 61. Some steps toward the establishment of a drawback and bonded-warehouse system were taken in the seventeenth century (e.g., 16 Car. I, cs. 25, 29, 31; 14 Car. II, cs. II, 25, 27) and further extensions were introduced in the eighteenth century, but England has never had any free ports.
E.g. Mildmay, The laws and policy of England, 1765, p. 70.
E.g. [Petyt], Britannia languens [1680], McCulloch ed., Early English tracts on commerce, pp. 317, 497; Davenant, Reports to the commissioners [1712/13], Works, V, 379; Dobbs, An essay on the trade and improvement of Ireland, 1729, Part II, pp. 30, 31: "Since all duties inwards, besides being disadvantageous to trade, are found to lie at last upon the consumer; and the landed interest, the rich and luxurious pay the greatest part; the prudentest and best method of raising taxes, and least expensive in trading countries that have many ports to guard, and of securing the payment of the duties, and preventing the frauds in running them clandestinely, would be to take off all port duties and place the taxes upon land, moveables and inland excises.... Where the intention is to discourage the importation of foreign goods prejudicial to the public, there to put high licenses and excises upon them in the retailers' or consumers' hands; and if they are entirely prohibited, then to lay the penalty upon the consumer or wherever found." Cf. also John Collins, A plea for the bringing in of Irish cattel, 1680, p. 21, where the Dutch use of excises not levied until the goods were sold for consumption is credited with being "the prime cause of the greatness of the Dutch trade, wealth, and power at sea."
The mercantilists complained repeatedly against the duties laid on English exports for fiscal reasons, and Misselden, in 1623, cited the Dutch as a model to follow in this respect because in Holland "their own commodities [were] eased of charge, the foreign imposed."—The circle of commerce, p. 135. Cf. also Robinson, Englands safety; in trades encrease, 1641, pp. 8-9; Violet, Mysteries and secrets, 1653, p. 14; Reynel, The true English interest, 1679, pp. 10-11; "No customs, or very small, should be paid for exportation of our own manufactures. It were better to advance the king's revenue any other way than by gaining custom on our own commodities, which hinders exportation, or to encourage foreign commodities that we can make here, to advance the customs"; Mildmay, The laws and policy of England, 1765, p. 73: "It must give us the utmost concern to find several duties at our ports imposed to satisfy rather the public exigency of our government, than to regulate the interest of our foreign commerce."
[Robert Walpole] A letter from a member of parliament to his friends in the country, concerning the duties on wine and tobacco, 1733, pp. 21 ff.
On the history of the export bounties on corn, see D. G. Barnes, A history of the English corn laws, from 1660-1846, 1930. See also Jacob Viner's review of this book, Journal of political economy, XXXVIII (1930), 710-12.
A collection of letters, 1681-83, II, 182.
E.g., Gee, The trade and navigation of Great Britain considered [1729], 1767 ed., p. 245; [Charles Smith] Three tracts on the corn trade and corn laws, 2d ed., 1766, passim; [Mildmay] The laws and policy of England, 1765, pp. 56 ff.; [Arthur Young] The farmer's letters, 2d ed., 1768, pp. 44 ff., and Political arithmetic, 1774, pp. 29 ff. Cf. also The manufacturer's plea for the bounty on corn at exportation, 1754, p. 6: "It cannot, I think, be denied that the real proceeds of every quarter of corn, I mean so many at least as the exporter would be disabled from carrying to market without the aid of this bounty, add to the public at least the exceeds of this bounty." Also, ibid., p. 8.
Sketches of the history of man, 1774, I, 491 ff.
Cf. Brewster, New essays on trade, 1702, p. 54; Dobbs, An essay on the trade and improvement of Ireland, 1729, Part II, p. 64; Decker, An essay on the causes of the decline of the foreign trade [1744], 1756, pp. 65 ff.; [Josiah Tucker] The causes of the dearness of provisions assigned, 1766, p. 24, and Considerations on the policy, commerce and circumstances of the kingdom, 1771, p. 124.
Malachy Postlethwayt, The universal dictionary of trade and commerce, 4th ed., 1774, Art. "Corn," gives a good statement of the arguments used on both sides.
A discourse...for the enlargement and freedome of trade, 1645, p. 22.
Andrew Yarranton, England's improvement by sea and land [1677], as cited by Patrick Dove, "Account of Andrew Yarranton," appended to his The elements of political science, 1854, pp. 450-51.
William Wood, A survey of trade, 1718, pp. 224-25.
Arthur Dobbs, An essay on the trade and improvement of Ireland, 1729, Part II, p. 65. See also ibid., pp. 62 ff.
David Bindon, A letter from a merchant who has left off trade, 1738, p. 24.
Ibid., p. 60.
"On the neglect of trade and manufacture," Scots magazine, II (1740), 477. The infant-industry argument is to be found also in Steuart, Principles of political æconomy, 1767, I, 302 ff., 381, and in Josiah Tucker, Instructions for travellers, 1757, p. 33. Adam Smith deals with the argument somewhat overcritically (Wealth of nations, Cannan ed., I, 422 ff.).
The first use of the term "protection" in the modern sense that I have noticed is in Asgill's A brief answer to a brief state of the question, 1719, pp. 10 ff.
A. N.,England's advocate, Europe's monitor, 1699, p. 20.
On this section cf. Angell,The theory of international prices, 1926, chap. ii.
In Richard Cantillon, Essai sur la nature du commerce en général, written ca. 1730, but not published until 1755, the self-regulating mechanism is clearly and ably expounded. See especially pp. 159-99 in the 1931 reprint, edited by Henry Higgs. Although material from Cantillon's manuscript had been used by French and English writers before its publication, I have found no evidence that any part of his exposition of the self-regulating mechanism appeared in print before 1752, or that Hume was influenced, directly or indirectly, by Cantillon.
One very early instance may be quoted: "But I say confidently you need not fear this penury or scarceness of money; the intercourse of things being so established throughout the whole world, that there is a perpetual circulation of all that can be necessary to mankind. Thus your commodities will ever find out money."—Sir Thomas More in the House of Commons, 1523, cited in White Kennet, A complete history of England, 1706, II, 55. Cf. also the quotation from John Houghton (1681), p. 49, supra.
A treatise of the canker [1601], T.E.D., III, 392-93.
A passage cited by Angell (Theory of international prices, p. 14) as quoted by Malynes in 1622 from an unidentified contemporary author, does appear to state with adequate clearness the dependence of specie movements on the relative value of money at home and abroad, and the dependence of the value of money on its quantity. But the quotation is from the unenlightened Edward Misselden (Free trade, 2d ed., 1622, p. 104) who by a low value of money means a high mint price of bullion rather than low purchasing power over commodities.
Some considerations of the lowering of interest [1691], Works, 1823 ed., V, 49.
In modern terminology, the "terms of trade" would be less favorable. Ibid., pp. 49-50.
Angell (op. cit., pp. 19-20) gives a much more favorable interpretation of Locke, and credits him with "the first outline that I have discovered of a theory of international prices." But he does so only by reading in effect "what will be" where Locke outlines what is desirable but will not necessarily be realized. He appears to find Locke inconsistent, because he did not think "that money, despite its distribution in a definite proportion to trade, keeps a uniform value throughout the world" and quotes, to reveal the inconsistency, a passage which shows clearly what I here contend, namely, that Locke did not believe that money is actually distributed in a definite proportion to trade: " of most worth in that country where there is the least money in proportion to its trade."—Locke, op. cit., p. 50, italics mine.
Ibid., pp. 50-51. Locke explains both (1) the specie-import point (mint par minus insurance between Holland and England minus additional cost of shipment because of an assumed penalty on the exportation of bullion from Holland) and (2) the point at which an English merchant having funds in one country will decide to transfer them to another, which will be determined by the relative opportunities for profitable use in the two countries, the cost of transmission, and the risk connected with investment in a foreign country.

Angell (op. cit., p. 21) finds the first clear statement of the specie-point mechanism in Clement (1696). The specie points must be clear to merchants as soon as they actually engage in bullion and exchange transactions, and Gresham gives an adequate statement of the specie-import point in 1558. Cf. J. W. Burgon, The life and times of Sir Thomas Gresham, 1839, I, 485. Cf. also Petty, Treatise of taxes [1662], Economic writings, Hull ed., I, 48: "As for the natural measures of exchange, I say, that in times of peace, the greatest exchange can be but the labor of carrying the money in specie, but where are hazards [and] emergent uses for money more in one place than another, etc., or opinions of these true or false, the exchange will be governed by them." Cf. also, ibid., The political anatomy of Ireland [1691], in Economic writings, Hull ed., I, 185-86: "Exchange can never be naturally more than the land and water-carriage of money between the two kingdoms, and the insurance of the same upon the way, if the money be alike in both places."

Discourses upon trade [1691], Hollander ed., pp. 35-36.
Cf. Angell (op. cit., p. 17) for a slightly more favorable interpretation.
Heckscher regards this as too favorable an interpretation, on the ground that Pratt was referring to the cheapness of silver solely in terms of other coins, not of commodities in general. (Mercantilism, 1935, II, 251, note.)
[Samuel Pratt] The regulating silver coin, made practicable and easie. 1696, p. 103. See also ibid., p. 104. Cf. also Hugh Chamberlain, A collection of some papers, 1696, p. 13: "when more can be got by our English commodities than by money, none will export money."
A survey of trade, 1718, pp. 335 ff.
Isaac Gervaise, The system or theory of the trade of the world, 1720. Gervaise was of French Huguenot birth, and was taken by his parents to Ireland as a child, upon the revocation of the Edict of Nantes. He became an Anglican clergyman and a friend of Bishop Berkeley. Cf. A. C. Fraser, Life and letters of George Berkeley, D.D., 1871, 259, note.
Op. cit., pp. 3-4. Cf. also pp. 24-25, where it is made clear that this is a correct interpretation of his reasoning.
Ibid., p. 5.
Ibid., pp. 7-8.
Pp. 8-9, 12.
Ibid., p. 13.
Ibid., pp. 15-17.
He also later (pp. 32-34) qualifies his conclusions with respect to the proportions in which specie can be distributed in the case where there is international lending or tribute.
[Thomas Prior] Observations on coin in general, 1730, p. 13.
Money answers all things [1734], Hollander ed., pp. 48-49.
Ibid., pp. 93-95. See supra, p. 50.
Political discourses [1752], in Essays, moral, political, and literary,1875 ed., I, 330 ff.
Ibid., p. 333, note.
Ibid., I, 334-35.
Ibid., I, 337 ff.; I, 311 ff. Cf., however, ibid., I, 339 ff.
Ibid., I, 337. Adam Smith found fault with Hume for having "gone a little into the notion that public opulence consists in money," presumably with these passages in mind.—Lectures on justice, police, revenue, and arms (given about 1763), Cannan ed., 1896, p. 197. To Hume's objection to paper money that it drove out bullion, Henry Lloyd replied that "money cannot go out of a kingdom without receiving an equivalent, which is either consumed at home, or resold with advantage." An essay on the theory of money, 1771, p. 16.
In this, as in some of his other economic essays, Hume was apparently replying to arguments in Montesquieu's L'esprit des lois which he could not accept. Hume had already stated the doctrine of the self-regulating mechanism in much the same terms in a letter to Montesquieu, April 10, 1749, cited in J. Y. T. Greig,The letters of David Hume, 1932, I, 136-37. In a letter of Nov. 1, 1750, to James Oswald, who had apparently already seen a manuscript of the essay and had raised objections against its thesis, Hume made a concession along the Potter-John Law lines: "I agree with you, that the increase of money, if not too sudden, naturally increases people and industry, and by that means may retain itself; but if it do not produce such an increase, nothing will retain it except hoarding." (Ibid., I, 143.)
Essays, I. on the public debt; II. on paper-money, banking, &c., 1755, p. 21.
An essay upon money and coins, Part I (1757), 90-93. Harris does not mention Hume, but in his preface he states that the main part of his essay had been written many years before.
Ibid., Part I, pp. 99, 100.
[George Whatley] Principles of Trade, 2d ed., 1774, note, pp. 15-16. Benjamin Franklin helped in the preparation of this book, and the notes, which are generally superior to the text, have especially been attributed to him. See Jared Sparks, The works of Benjamin Franklin, 1840, X, 148.

An interesting and able discussion of the effect on exchange rates and specie flows of the credit operations of banks is to be found in "Considerations relating to the late order of the two banks," Scots magazine, XXIV (1762), 39-41, 89-94. Its general argument is that the existing adverse exchange on London was due to temporary circumstances and should be corrected by borrowing in London rather than by contraction of bank credit in Scotland.

[Robert Wallace] Characteristics of the present political state of Great Britain, 1758, pp. 31-32.
Principles of political æconomy, 1767, I, 405 ff., 515-16.
Ibid., I. 422.
Ibid., II, 115.
Four tracts on political and commercial subjects, 2d ed., 1774, pp. 34 ff.
In a letter of March 4, 1758, to Lord Kames:The letters of David Hume, J. Y. T. Greig ed., 1932, I, 143 ff.
Wealth of nations [1776], Cannan ed., II, 277.
Lectures on justice, police, revenue and arms [given about 1763], Cannan ed., 1896, p. 197.
See supra, p. 75.
Thomas Starkey, England in the reign of King Henry the Eighth [ca. 1538], 1871, pp. 88-90.
T[homas] M[un], A discourse of trade, from England unto the East-Indies [1621], 1930 reprint, p. 46.
Josiah Child, Discourse about trade, 1690, p. 152.
Ibid., preface. See also North, Discourses upon trade [1691], Hollander ed., p. 36; Harris, An essay upon money and coins, Part I (1757), 93-94. Another writer, in 1710, said that explanation of the decline in trade as due to scarcity of money was "a vulgar error," and that the real cause was not a decrease in its quantity but a decrease in its circulation owing to unfavorable prospects. (A vindication of the faults on both sides [1710] in Somers' tracts, 2d ed., XIII (1815), 6-7.)
North, op. cit., pp. 24 ff.
Early English tracts on commerce [1701], McCulloch ed., p. 558.
Barbon, A discourse of trade [1690], Hollander ed., p. 20; Joseph Massie, An essay on the governing causes of the natural rate of interest [1750], Hollander ed., 1912, passim; Hume, Political discourses [1752], in Essays moral, political, and literary, 1875, I, 320 ff. Cf. also Davenant, Discourses on publick revenues [1698], Works, II, 106.

The following quotation illustrates an intermediate stage in the evolution of the theory of the formation of capital, where recognition of the possibility of accumulation through productive investment has come but without leading to the complete abandonment of the notion of saving as consisting of the piling-up of the precious metals:

The primary design, and proper end of silver and gold, is treasure, and 'tis from thence that they acquire their universal value and esteem, so that men will part with all other commodities in exchange for them, with this view, that besides that they will enable them to purchase whatsoever they stand in need of, what they can save to lay up will always be ready to serve their future occasions. 'Tis true that men soon found out ways of improving and increasing their treasure by purchasing lands, lending at interest, and employing it in trade, but how oft soever these ways of cultivation are iterated, still the acquiring of treasure is proposed as the ultimate end. (A vindication of the faults on both sides.....[1710] in Somers' Tracts, 2d ed., 1815, XIII, 5-6.)

Locke had argued that it was only the existence of money which created any incentive for the accumulation of physical capital, since without the possibility of exchanging physical goods for something not perishable and which could be hoarded men would have no motive to acquire possession of land, cattle, etc., in greater amount than they could themselves consume its product. (Two treatises of civil government [1690], in Works, 1823 ed., V, 365-66.)

Cf., on this section, E. A. J. Johnson, "Unemployment and consumption: the mercantilist view," Quarterly journal of economics, XLVI (1932), 708-19.
E.g. [Starkey], England in the reign of King Henry the Eighth [ca. 1538], 1878, p. 81; Potter, Key of wealth, 1650, p. 17: "To have a plentiful share of outward comforts, though dear, is an advantage above that of enjoying a less proportion thereof, though never so cheap, as much every whit as the end is more excellent than that means, which without such end serveth to no purpose at all"; Barbon, A discourse of trade [1690], Hollander ed., p. 22; Jocelyn, An essay on money & bullion, 1718, pp. 17-18: the East India Company, in return for bullion, brings in commodities "both to adorn and entertain our ladies. Are not these riches?...The produce of the East-Indies enriches Europe...more than all the bullion, which comes from the West"; Some considerations on the nature and importance of the East-India trade, 1728, p. 71: "Providence in its infinite goodness designed to make life as easy and as pleasurable to mankind as possible, and gave us reason to find out arts, and to make them subservient to our delight and happiness"; Lindsay, The interest of Scotland considered, 1733, p. 63; Vanderlint, Money answers all things [1734], Hollander ed., p. 134: "For trade terminates ultimately in the consumption of things, to which end alone trade is carried on." Cf.Thomas Fuller, The holy state, and the profane state [1642], Nicholas ed., 1841, p. 109: "God is not so hard a Master, but that He alloweth His servants sauce (besides hunger) to eat with their meat." Cf., however, Steuart, Principles of political œconomy,, 1767, I, 25: "The duty and business of man is not to feed; he is fed in order to do his duty, and to become useful."
E.g., Houghton, Collection of letters, 1681-83, I, 52; Barbon, A discourse of trade [1690], Hollander ed., p. 32; Child, A discourse about trade, 1690, pp. 72 ff.; Taxes no charge, 1690, pp. 11 ff.; Vanderlint, Money answers all things [1734], Hollander ed., p. 29. Sir William Temple claimed that the argument that extravagance was advantageous was erroneous, even when the spending was confined to domestic goods, because it reduced the amount of goods available for export, and cited the frugality of the Dutch as a model for the English to follow.—Observations upon the United Provinces of the Netherlands [1668], Works, 1754, I, 132. But Davenant, Discourses on publick revenues [1698], Works, I, 390-91, and Mandeville, Fable of the bees [1714], Kaye ed., I, 186, later claimed that the Dutch were frugal through necessity rather than choice.
North, Discourses upon trade [1691], Hollander ed., p. 27; Davenant, loc. cit.; Mandeville, loc. Cit.; Vanderlint, loc. cit.; "Impartial essay concerning the nature and use of specie and paper-credit in any country," Scots magazine, XXIV (1762), 134; Harris, An essay upon money and coins, Part I (1757), 30: "The word luxury hath usually annexed to it a kind of opprobrious idea; but so far as it encourages the arts, whets the inventions of men, and finds employments for more of our own people, its influence is benign, and beneficial to the whole society." Cf. also B-I-, M.D. [William Temple of Trowbridge], A vindication of commerce and the arts [1758], in McCulloch ed., Scarce and valuable tracts on commerce, 1859, pp. 551 ff. Arthur Young, Political arithmetic, 1774, pp. 46 ff., defends luxury, because it creates a market for agricultural goods.
Perhaps also Jocelyn, who would lay "as few taxes and prohibitions as possibly can be upon any export or import in trade." (An essay on money & bullion,1718, p. 30.)
[Clement Armstrong] A treatise concerning the staple [ca. 1530], in Pauli, op. cit., p. 42.
John Hales, "On the unwisdom of a new imposition on cloth" [1559], T.E.D., II, 224.
"Polices to reduce this realme..." [1549], T.E.D., III, 317.
Fleming, J., "The case of impositions" [1606], in Howell ed., A complete collection of state trials, II (1809), 390.
Robert Keale, The trade's increase [1615], in Harleian miscellany, III (1809), 307.
[Defoe?] An essay upon loans, 1710, p. 14.
David Bindon, A letter from a merchant who has left off trade, 1738, p. 12.
See pp. 51, 139, of this tract.
Cf. the scathing indictment of the merchant by James I, in the course of an exposition of the duties of a monarch:

The merchants think the whole commonweal ordained for making them up; and accounting it their lawful gain and trade, to enrich themselves upon the loss of all the rest of the people, they transport from us things necessary, bringing back sometimes unnecessary things, and at other times nothing at all. They buy for us the worst wares, and sell them at the dearest prices; and albeit the victuals fall or rise of their prices according to the abundance or scantiness thereof, yet the prices of their wares ever rise, but never fall, being as constant in that their evil custom as if it were a settled law for them. They are also the special cause of the corruption of the coin, transporting all our own, and bringing in foreign, upon what price they please to set on it....(Basilikon doron, in The workes of...James, 1616, p. 163.)
Englands interest and improvement [1663], Hollander ed., p. 13.
North, Discourses upon trade [1691], Hollander ed., p. 12.
Davenant, Discourses on publick revenues [1698], Works, I, 146.
Pollexfen, A discourse of trade, coyn, and paper credit, 1697, p. 149.
William Paterson, "A proposal to plant a colony in Darien" [ms. 1701], in Bannister ed., The writings of William Paterson, I, 133-34.
[George Whatley] Principles of trade, 2d ed., 1774, p. 33, note.
E.g., Lewes Roberts, Treasure of traffike [1641], McCulloch ed., Early English tracts on commerce, p. 58: "So when a country is properly seated for traffic, and the sovereign willing by foreign commerce to enrich his kingdom, the merchant's advice is questionless best able to propagate the same."
Cited by John Smith, Chronicon rusticum-commerciale, 1747, preface, I, v.
Cited by McCulloch, A dictionary...of commerce, American ed., 1845,I, 620, on the authority of Hamilton's New account of the East Indies, I, 232.
As early as 1550, Sir John Mason had objected to an ordinance limiting the price of cheese and butter, on the ground that it was attempting the impossible: "Nature will have her course, etiam si furca expellatur; and never shall you drive her to consent that a penny-worth of new shall be sold for a farthing."—T.E.D., II, 188.
"Advice of His Majesty's Council of Trade, concerning the exportation of gold and silver..." [1660], in McCulloch ed., Tracts on money, pp. 148-49. The argument is made here to support a recommendation that the exportation of bullion and foreign coin be permitted without restriction.
Interest of money mistaken,1668, p. 10.
[Defoe] An essay upon loans, 1710, pp. 15-17. This is in answer to a threat that if the government did not revise its policy the moneyed interests would, on party grounds, refuse to lend to it.
Davenant, Report to the commissioners for stating the publick accounts [1712], Works, V, 452.
Lindsay, The interest of Scotland considered, 1733, preface, p. iii.
Cf. Vanderlint, Money answers all things [1734], Hollander ed., p. 58:

"...I am entirely for preventing the importation of all foreign commodities, as much as possible; but not by acts of parliament, which never can do any good to trade; but by raising such goods ourselves, so cheap as to make it impossible for other nations to find their account in bringing them to us...."

Few traces are to be found in the literature of the period of the intermediate doctrine, which concedes that self-interest is a powerful force for good, and should not be reviled or crushed, but maintains that it is also capable of doing harm to the commonwealth, and therefore needs to be watched and regulated. It is perhaps implied in the arguments of some of the moderate mercantilists, and may be what Petty had in mind in the following passage: "We must consider in general, that as wiser physicians tamper not excessively with their patients, rather observing and complying with the motions of nature than contradicting it with vehement administrations of their own, so in politics and economics the same must be used, for Naturam expellas furcd licet usque recurrit." (Treatise of taxes [1662], Economic writings, I, 60.) Tucker gives expression to it at one point, although elsewhere he expounds contradictory doctrine. In his Elements of commerce, 1755, he asserts that self-love is an important stimulus. "Consequently, the main point to be aimed at, is neither to extinguish nor enfeeble self-love, but to give it such a direction, that it may promote the public interest by pursuing its own" (p. 7). But the only clear and elaborate exposition of this intermediate position I have found is in [Nathaniel Forster] An enquiry into the causes of the present high price of provisions, 1767, pp. 17-22. The relevant passages are too long for quotation, but they deserve the attention of those interested in the history of the laissez-faire idea.
The circle of commerce, 1623, p. 17.
Discourses upon trade [1691], Hollander ed., p. 13. Cf. also ibid., p. 37:

" people ever yet grew rich by policies; but it is peace, industry, and freedom that brings trade and wealth, and nothing else."

The humble answer of the Governor...of the East-India Company [1692] in Somers' tracts, 2d ed., X, 622. Child is here objecting to a proposal, directed against himself, to limit the amount of stock in the company which could be held by any one person.
An essay on the East-India trade [1697], Works, I, 98. Cf. also ibid., p. 104: "Wisdom is most commonly in the wrong, when it pretends to direct nature."
Fable of the bees, passim. Mandeville deliberately stated his conclusions in such manner as to make them offensive to moralists, but Smith accepted them in substance while finding a more palatable form for their expression.
Instructions for travellers, 1757, pp. 31-32.
Principles of trade, 2d ed., 1774, p. 10.
Ibid., note, pp. 33-34. This note may have been a contribution by Benjamin Franklin. It mentions with approval the demand reputed to have been made of Colbert by the French merchants, "Laissez nons faire (Let us alone)"—perhaps the first appearance of the term in the English literature.
Cf. Heinrich Dietzel, Weltwirtschaft and Volkswirthschaft, 1900, p. 6.
[Cf. Clement Armstrong] A treatise concerning the staple [ca. 1530], in Pauli, op. cit., p. 25: "So as all special gift of rich commodities that God first gave unto the earth in every realm to one realm, that another hath not, to the intent, that every realm should be able to live of God's gift, one to be help to another to be an occasion one to live by another." Cf. also R. H. Tawney, "Religious thought on social and economic questions in the sixteenth and seventeenth centuries," Journal of political economy, XXXI (1923), 478.
William Cholmeley, The request and suite of a true-hearted Englishman [ms. 1553], W. J. Thomas, editor, Camden miscellany, II (1853), 1.
Ibid., p. 2.
Edward Misselden, Free trade, 2d ed., 1622, pp. 25-26. Misselden cites from Aristotle and Seneca in this connection.
The linen and woollen manufactory discoursed... [1691], in John Smith, Chronicon rusticum-commerciale, I, 384:

Divine Providence, that appoints to every nation and country a particular portion, seems to allot that to England, which was the first acceptable sacrifice to his Omnipotency, that of the flock.... Now to decline this, and set up another manufacture, looks like an extravagant mechanic, who by his improvidence hath lost his own art, and thinks to retrieve his misfortune by taking up that of another man's. This is condemned in particular persons, and to be feared in a community.
A treatise of wool and cattel, 1677, p. 3.
Davenant, An essay on the East-India trade [1697], in Works, I. 104.
Harris, An essay upon money and coins, Part I (1757), 14. Cf. also Charles Molloy,A treatise of affairs maritime, and of commerce [1676], 9th ed., 1769, I, preface, p. iv.
Sketches of the history of man, 1774, I, 81-82.
John Houghton, England's great happiness [1677], in McCulloch ed., Early English tracts on commerce, p. 261. In his A collection of letters, 1681-83, I, 60, Houghton claims its authorship, quotes from it, adds to it, and argues along identical lines on a number of points. Houghton adheres to the monetary phases of the mercantilist doctrine, however, and elsewhere expounds doctrine inconsistent with free-trade reasoning.
A discourse of trade, 1690, p. 35. Barbon proceeds, however, to argue that the production of the exports would not necessarily be displaced by the production of domestic goods, since the latter might not satisfy the buyers, who would consequently not spend their money. Barbon in any case was far from being a free trader. Mandeville, Fable of the bees [1714], Kaye ed., I, iii, also claimed that reducing imports involved a reduction of exports as well.
Essay on the East-India trade [1697],works, I, 95.
Ibid., I, 105-10. Cf. also, Gardner, Some reflections on a pamphlet, intituled, England and East India inconsistent in their manufactures, 1696, pp. 9 ff., for ideas closely resembling those of Davenant, and in part also those of the author of Considerations on the East-India trade.
In McCulloch ed., Early English tracts on commerce, pp. 556-59, 578-85. (Citation from p. 583.) The original tract is extremely rare, and does not appear to have exerted any influence on contemporary writers. Halkett and Laing attribute its authorship to Dudley North, and they have been followed by a number of economists. This seems, however, clearly to be a mistake. North died in 1691, whereas this tract was not published until 1701. Chapter iii of the tract discusses the effects of the competition of the two companies then privileged to trade with India, which definitely locates its time of writing as not earlier than 1698.
The system or theory of the trade of the world, 1720, pp. 22-23.
The interest of Scotland considered, 1733, pp. 111-12. Cf. also for similar reasoning, Vanderlint, Money answers all things [1734], Hollander ed., pp. 96-98; anon., Reflections and considerations occasioned by the petition...for taking off the drawback on foreign linens, &c., 1738, p. 26; Nicholas Magens, Farther explanations of some particular subjects, 1756, p.6.
England's great happiness, 1677; Collection of letters, 1681-83.
See supra, pp. 83-84, 98.
But Decker, after advocating the removal of all restrictions on trade except the Navigation acts, in somewhat of an anticlimax, concedes that if duties were taken off some sort of regulation would be necessary for some goods, lest they interfere with home manufactures.—Serious considerations on the several high duties, 3d ed., 1744, p. 31. Massie pointed out the inconsistency between Decker's general argument for free trade and this concession to protection.—Joseph Massie, The proposal, commonly called Sir Matthew Decker's scheme, for one general tax upon houses, laid open, 1757, p. 3.
A discourse of trade, 1670; A treatise wherein is demonstrated, that the Church and State of England, are in equal danger with the trade of it, 1671; Reflections upon the East-Indy and Royal African companies, 1695; A treatise concerning the regulation of the coyn of England, 1696.
See, e.g., the eulogy of the merchant in Lillo's play, The London merchant, 2d ed., 1731, Act I, scene i, and Act III, scene i.
Cf., e.g., John Smith, Advertisements for the inexperienced planters of New England [1631], in Works, Edward Arber ed., 1884, pp. 961-62; anon., A discourse concerning the East-India trade [ca. 1692], in Somers' tracts, 2d ed., X, 642: "The more goods are exported and imported,...the nation in general will have the advantage, though the traders may not..."; William Wood, A letter...shewing the justice of a more equal and impartial assessment on land, 1717, p. 19; anon., Considerations occasioned by the bill for enabling the South-Sea Company to increase their capital stock, 1720, p. 14: "Whether upon the whole, if more of our own product and manufactures are exported, and of foreign commodities imported, more of our ships and seamen, our manufactures and people of all trades will not be employed; consequently, if the customs and excises will not be greatly advanced?"
A spokesman for the agricultural interests objected that in this general glorification of trade the interests of the farmer were being overlooked, and that even petty domestic traders were including their own trades as entitled to the special consideration which was being claimed for "trade": "The notion of encouraging trade has of late years prevailed very much, and very rightly where we speak of foreign trade; and the first promoters of the notion meant no others, but from thence we are descended to all trade, domestic as well as foreign, and the cry of it is so common, even amongst the vulgar, that I have heard my landlord, who keeps a petty ale-house in a country village, harangue it with great eloquence; and with a grave air complain, that trade was not sufficiently encouraged, when he meant the trade of ale-draping and smoking tobacco."—Some thoughts on the interest of money in general (ca. 1720), pp.65-66.
Mysteries and secrets, 1653, p. 24.
Cf. Political discourses [1752], in Essays moral, political, and literary, 1875 ed., I, 343-44: "All taxes, however, upon foreign commodities, are not to be regarded as prejudicial or useless, but those only which are founded on the jealousy above-mentioned. A tax on German linen encourages home manufactures, and thereby multiplies our people and industry. A tax on brandy increases the sale of rum, and supports our southern colonies."
Cf. e.g., Lectures, p. 209: "If I purchase a thousand pounds' worth of French wines, and drink them all when they come home, the country is two thousand pounds poorer, because both the goods and money are gone; if I spend a thousand pounds' worth of goods at home upon myself the country is only deprived of one thousand pounds, as the money still remains; but in maintaining an army in a distant war it is the same thing whether we pay them in goods or money, because the consumption is the same at any rate." For the history of a late American version of this fallacy, see F. W. Taussig, "Abraham Lincoln on the tariff; a myth," in Free trade, the tariff and reciprocity, 1920, pp. 34-47. For an earlier English version, see Richard Haines, The prevention of poverty, 1674, p. 11.
The only exceptions of any importance that I have noticed are [David Bindon] A letter from a merchant who has left off trade, 1738, pp. 31-32, where a number of presumably current arguments against restrictions on imports are stated and controverted, and Gee, The trade and navigation of Great Britain considered [1729], 1767 ed., pp. 183 ff.
Cf. also, James Whiston, A discourse of the decay of trade, 1693, p. 3:

Neither will the pursuing these proposals, augment the nation's wealth and power only, but that wealth and power will also preserve our trade and religion, they mutually working for the preservation of each other....
A striking instance is the following passage from a tract which is clearly the product of a writer not familiar with, nor really interested in, commercial matters, but who sensed the need for an appeal to economic considerations if his plea for the continuance of the war with France then under way was to have weight with its readers: "To proceed now to the second head I proposed, namely, that this war has produced great and lasting advantages to the people over and above liberty, and a security of our properties. The advantages I propound to speak to shall be confined to the article of wealth, as being that which most generally affects; for to talk to the common people of the great honor our nation will gain by a happy issue of this war, is to speak to little purpose."—The taxes not grievous and therefore not a reason for an unsafe peace, 1712, p. 15. The views of the mercantilists as to the efficacy of war as an instrument to procure economic advantages would be an interesting topic for investigation. It would be wrong to attribute to them without exception the view that trade wars, even if successfully prosecuted, promoted the national wealth, and some of them anticipated the modern argument that even a victorious war costs more than it returns in economic benefits. Others, however, looked upon trade wars as so essential to commercial prosperity that the Turkey Company tried to exclude a Quaker from its councils in 1759 as professing opinions hostile to the waging of such wars. See G. B. Hertz, The old colonial system, 1905, p. 10.
Cf. Montesquieu, De l'esprit des lois [1748], Bk. xx, chap. vii: "D'autres nations ont fait céder des intérêts du commerce à des intérêts politiques: celle-ci [i.e., England] a toujours fait céder ses intérêts politiques aux intérêts de son commerce."—Œuvres complètes, Paris, 1877, IV, 371.

Cf. also Quesnay, "Remarques sur l'opinion de l'auteur de l'esprit des lois concernant les colonies" [Journal de l'agriculture, January, 1766], in Oncken ed., Œuvres de...F. Quesnay, 1888, p. 429: "...en Angleterre...oł les lois du commerce maritime ne se prêtent point aux lois de la politique; oł les intérêts de la glèbe et de l'Êtat sont subordonnés aux intérêts des négociants; oł le commerce des productions de l'agriculture, la propriété du territoire et l'Êtat même ne sont regardés que comme des accessoires de la métropole, et la métropole comme formée de négociants."

Violet had himself been convicted of, and punished for, violation of the laws against the export of bullion, and one of his arguments in support of his reinstatement was that "an old deer-stealer is the best keeper of a park."—A true discoverie to the commons of England [1651], 1653, p. 79.
This interpretation of the literature of the period as consisting mainly of briefs for special interests is intended to apply to the writings of the moderate as well as of the extreme mercantilists. Child, infact, presents one of the most glaring instances of special pleading. See Sven Helander, "Sir Josiah Child," Weltwirtschaftliches Archiv, XIX (1923), 233-49, and for closely similar exposure of Child by contemporaries, A discourse concerning the East-India trade [ca. 1692], in Somers' tracts, 2d ed., X, 634-47; The interest of England considered: in an essay upon wooll, 1694.
Cf. the excellent account in Jehan Maintrieu, Le traité d'Utrecht et les polémiques du commerce anglois, 1909.
By the Whigs, willingness to trade with France was accepted as proof of hostility to trade. Cf. the interesting pamphlet, Torism and trade can never agree (ca. 1713), which accused the Tories of having always been hostile to trade, and attacked Mercator as being anti-trade, because it supported open trade with France.
"'Merchants' in the eighteenth century meant business men, and the term was as wide as 'trade' is even now; bankers and manufacturers were included in it." L. B. Namier, The structure of politics at the accession of George III, 1929, I, 61, note.
It is of interest that the French government, on sober second thought of the mercantilist variety, had also lost its seal for the treaty, and felt relieved when the English Parliament rejected it. See E. Levasseur, "Les traités de commerce entre la France et l'Angleterre sous l'ancien régime," Revue d'économie politique, XV (1901), 971.

Chapter III

End of Notes

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