1902 Encyclopedia > Political Economy (Economics) > Political Economy - The Second Modern Phase: Merchantile System

Political Economy
(Part 5)


Throughout the first modern phase the rise of the new social forces had been essentially spontaneous; in the second they became the object of systematic encouragement on the part of Government, which, now that the financial methods of the Middle Ages no longer sufficed, could not further their military and political ends by any other means than increased taxation, implying augmented wealth of the community. Industry thus became a permanent interest of European Governments, and even tended to become the principal object of their policy. In natural harmony with this state of facts, the mercantile system arose and grew, attaining its highest development about the middle of the 17th century.

The mercantile doctrine, states in its most extreme form, makes wealth and money identical, and regards it therefore as the great object of a community so to conduct its dealings with other nations as to attract to itself the largest possible share of the previous metals. Each country must seek to export the utmost possible quantity of its own manufactures, and to import as little as possible of those of other countries, receiving the difference of the two values in gold and silver. This difference is called the balance of trade and the balance is favourable when more money is received than is paid. Governments must resort to all available expedients—prohibition of, or high duties on, the importation of foreign wares, bounties on the export of home manufactures, restrictions on the export of the precious metals—for the purpose of securing such a balance.

But this statement of the doctrine, though current is the text books, does not represent correctly the views of all who must be classed as belonging to the mercantile school. Many of the members of that school were much too clear-sighted to entertain the belief, which the modern student feels difficulty in supposing any class of thinkers to have professed, that wealth consists exclusively of gold and silver. The mercantilists may be best described, as Roscher has remarked, not by any definite economic theorem which they held in common, but by a set of theoretic tendencies, commonly found in combination, though severally prevailing in different degrees in different minds. These tendencies may be enumerated as follows:—(1) towards overestimating the importance of possessing a large amount of the precious metals; (2) towards an undue exaltation (a) of foreign trade over domestic, and (b) of the industry which works up materials over that which provides them; (3) towards attaching too high a value to a dense population as an element of national strength; and (4) towards invoking the action of the state in furthering artificially the attainment of the several ends thus proposed as desirable.

If we consider the contemporary position of affairs in western Europe, we shall have no difficulty in understanding how those tendencies would inevitably arise. The discoveries in the New World had led to a large development of the European currencies. The old feudal economy, founded principally on dealings in kind, had given way before the new "money economy," and the dimensions of the latter were everywhere expanding. Circulation was becoming more rapid, distant communications more frequent, city life and movable property more important. The mercantilists were impressed by the fact that money is wealth sui generic, that it is at all times in universal demand, and that it puts into the hands of its possessor the power of acquiring all other commodities. The period, again, was marked by the formation of great states, with powerful Governments at their head. These Governments required men and money for the maintenance of permanent armies, which, especially for the religions and Italian wars, were kept up on a great scale. Court expenses, too, were more lavish than ever before, and a larger number of civil officials was employed. The royal domains and dues were insufficient to meet these requirements, and taxation grew with the demands of the monarchies. Statesmen saw that for their own political ends industry must flourish. But manufacturers male possible a denser population and a higher total value of exports than agriculture; they open a less limited and more promptly extensible field to enterprise. Hence they became the object of special Governmental favour and patronage, whilst agriculture fell comparatively into the background. The growth of manufactures reacted on commerce, to which a new and mighty arena had been opened by the establishment of colonies. These were viewed simply as estates to be worked for the advantage of the mother countries, and the aim of statesmen was to make the colonial trade a new source of public revenue. Each nation, as a whole, working for its own power, and the greater onces for predominance, they entered into a competitive struggle in the economic no less than in the political field, success in the former being indeed, by the rulers, regarded as instrumental to pre-eminence in the latter. A national economic interest came to exist, of which the Government made itself the representative head. States became a sort of artificial hothouses for the rearing of urban industries. Production was subjected to systematic regulation with the object of securing the goodness and cheapness of the exported articles, and so maintaining the place of the nation in foreign markets. The industrial control was exercised, in part directly by the state, but largely also through privileged corporations and trading companies. High duties on imports were resorted to, at first perhaps mainly for revenue, but afterwards in the interest of national production. Commercial treaties were a principal object of diplomacy, the end in view being to exclude the competition of other nations is foreign markets, whilst in the home market as little room as possible was given for the introduction of anything but now materials from abroad. The colonies were prohibited form trading with other European nations than the parent country, to which they supplied either the precious metals or raw produce purchased with home manufactures. It is evident that what is known as the mercantile doctrine was essentially the theoretic counterpart of the practical activities of the time, and that nations and Governments were led to it, not by any form of scientific thought, but by the force of outward circumstance, and the observation of facts which lay on the surface.

And yet, if we regard the question from the highest point of view of philosophic history, we must pronounce the universal enthusiasm of this second modern phase for manufactures and commerce to have been essentially just, as leading the nations into the main avenues of general social government. If the thought of the period, instead of being impelled by contemporary circumstances, could have been guided by sociology prevision, it must have entered with zeal upon the same path which it empirically selected. The organization of agricultural industry could not at that period make any marked progress, for the direction of its operations was still in the hands of the feudal class, which could not in general really learn the habits of industrial life, or place itself in sufficient harmony with the workers on its domains. The industry of the towns had to precede that of the country, and the latter had to be developed mainly through the indirect action of the former. And it is plain that it was in the life of the manufacturing proletariat, whose labours are necessarily the most continuous and the most social, that a systematic discipline could at a alter period be first applied, to be afterwards extended to the rural populations.

That the efforts of Governments for the furtherance of manufactures and commence were really effective toward that end is admitted by Adam Smith, and cannot reasonably be doubted, though free trade doctrinaires have often denied it. Technical skill must have been promoted by their encouragements; whilst new forms of national production were fostered by attracting workmen from other countries, and by lightening the burden of taxation on struggling industries. Communication and transport by land and sea were more rapidly improved with a view to facilitate traffic; and, not the least important effect, the social dignity of the industrial professions was enhanced relatively to that of the classes before exclusively dominant.

It has often been asked to whom the foundation of the mercantile system, in the region whether of thought or of practice, is to be attributed. But the question admits of no absolute answer. That mode of conceiving economic facts arises spontaneously in unscientific minds, and ideas suggested by it are to be found in the Greek and Latin writers. The policy which it dictates was, as we have shown, inspired by the situation of the European nations at the opening of the modern period. Such a policy had been already in some degree practised in the 14th and 15th centuries, thus preceding any formal exposition or defence of its speculative basis. At the commencement of the 16th century it began to exercise a widely extended influence. Charles V. adopted it, and his example contributed much to its predominance. Henry VIII. and Elizabeth, conformed their measures to it. The leading states soon entered on a universal competition, in which each power brought into play all its political and financial resources for the purpose of securing to itself manufacturing and commercial preponderance. Through almost the whole of the 17th century the prize, so far as commerce was concerned, remained in the possession of Holland, Italy having lost her former ascendancy by the opening of the new maritime routes, and Spain and Germany being depressed by protracted wars and internal dissensions. The admiring envy of Holland felt by English politicians and economists appears in such writers as Raleigh, Mun, Child, and Temple; and how strongly the same spectacle acted on French policy is shown by a well-known letter of Colbert to M. de Pompenne, ambassador to the Dutch States. Cromwell, by his Navigation Act, which destroyed the carrying trade of Holland and founded the English empire of the sea, and Colbert, by his whole economic policy, domestic and international, were the chief practical representatives of the mercantile system. From the latter great statesman the Italian publicist Mengotti gave to that system the name of Colbertismo; but it would be an error to consider the French minister as having absolutely accepted its dogmas. He regarded his measures as temporary only, and spoke of protective duties as crutches by the help of which manufacturers might learn to walk and then thrown them away. The policy of exclusions had been previously pursued by Sully, partly with a view to the accumulation of a royal treasure, but chiefly from his special enthusiasm for agriculture, and his dislike of the introduction of foreign luxuries as detrimental to the national character. Colbert’s tariff of 1664 not merely simplified but considerably reduced the existing duties; the tariff of 1667 indeed increased them, but that was really a political measure directed against the Dutch. It seems certain that France owed in a large measure to his policy the vast development of trade and manufactures which so much impressed the imagination of contemporary Europe, and of which we hear so much from English writers of the time of Petty. But this policy had also undeniably its dark side. Industry was forced by such systematic regulation to follow invariable courses, instead of adapting itself to changing tastes and popular demand. Nor was it free to simplify the processes of production, or to introduce increased division of labour and improved appliances. Spontaneity, initiation, and invention were repressed of discouraged, and thus ulterior sacrificed in a great measure to immediate results. The more enlightened statesmen, and Colbert in particular, endeavoured, it is true, to minimize these disadvantages by procuring often at great expense, and communicating to the trades through inspectors nominated by the Government, information respecting improved processes employed elsewhere in the several arts; but this, though in some degree a real, was certainly on the whole, and in the long run, an insufficient compensation.

We must not expect from the writers of this stage any exposition of political economy as a whole; the publications which appeared were for the most part evoked by special exigencies, and related to particular questions, usually of a practical kind, which arose out of the great movements of the time. They were in fact of the nature of counsels to the Governments of states, pointing out how best they might develop the production powers at their disposal and increase the resources of their respective countries. They are conceived (as List claims for them) strictly in the spirit of national economy, and cosmopolitanism is essentially foreign to them. On these monographs the mercantile theory sometimes had little influence, the problems discussed not involving its tenets. But it must in most cases be taken to be the scheme of fundamental doctrine (so far as it was ever entitled to such a description) which in the last resort underlies the writer’s conclusions.

The rise of prices following on the discovery of the American mines was one of the subjects which first attracted the attention of theorists. This rise brought about a great and gradually increasing disturbance of existing economic relations, and so produced much perplexity and anxiety, which were all the more felt because the cause of the change was not understood. To this was added the loss and inconvenience arising from the debasement of the currency often resorted to by sovereigns as well as by republican states. Italy suffered most from this latter abuse, which was multiplied by her political divisions. It was this evil which called forth the work of Count Gasparo Scaruffi (Discorso sopra le monete e della vera proporzione fra l’oro e l’argento, 1582). In this he put forward the bold idea of a universal money, everywhere identical in size, shape, composition, and designation. The project was, of course, premature, and was not adopted even by the Italian princes to whom the author specially appealed; but the reform is one which, doubtless, the future will see realized. Gian Donato Turbolo, master of the Neapolitan mint, in his Discorsi e Relazioni, 1629, protested against any tampering with the currency. Another treatise relating to the subject of money was that of the Florentine Bernado Davanzati, otherwise known as the able translator of Tacitus, Lezioni delle Monete, 1588. It is a slight and somewhat superficial production, only remarkable as written with conciseness and elegance of style.

A French writer who dealt with the question of money, but from a different point of view, was Jean Bodin. In his Réponse aux paradoxes de M. Malestroit touchant l’enchérissement de toutes les choses et des monnaies, 1568, and in his Discours sur le rehaussement et diminution des monnaies, 1578, he showed a more rational appreciation than many of his contemporaries of the causes of the revolution in prices, and the relation of the variations in money to the market values of wares in general as well as to the wages of labour. He saw that the amount of money in circulation did not constitute the wealth of the community, and that the prohibition of the export of the precious metals was useless, because rendered inoperative by the necessities of trade. Bodin is no inconsiderable figure in the literary history of the epoch, and did not confine his attention to economic problems; in his Six livres de la République, about 1576, he studies the general conditions of the prosperity and stability of states. In harmony with the conditions of his age, he approved of absolute Governments as the most competent to ensure the security and wellbeing of their subjects. He enters into an elaborate defense of individual property against Plato and More, rather perhaps because the scheme of his work required the treatment of that theme than because the scheme of his work required the treatment of that theme than because it was practically urgent in his day, when the excesses of the Anabaptists had produced a strong feeling against communistic doctrines. He is under the general influence of the mercantilist views, and approves of energetic Governmental interference in industrial matters, of high taxes on foreign manufactures and low duties on raw materials and articles of food, and attaches great importance to a dense population. But he is not a blind follower of the system; he wishes for unlimited freedom of trade in many cases; and he is in advance of his more eminent contemporary Montaigne in perceiving that the gain of one nation is not necessarily the loss of another. To the public finances, which he calls the sinews of the state, he devotes much attention, and insists on the duties of the Government in respect to the right adjustment of taxation. In general he deserves the praise of steadily keeping in view the higher aims and interests of society in connexion with the regulation and development of its material life.

Correct views as to the cause of the general rise of prices are also put forward by the English writer, W.S. (William Stafford), in his Briefe Conceipte of English Policy, published in 1581, and dedicated to Queen Elizabeth. It is in the form of a dialogue, and is written with liveliness and spirit. The author seems to have been acquainted with the writings of Bodin. He has just ideas as to the nature of money, and fully understands the evils arising from a debased coinage. He describes in detail the way in which the several interests in the country had been affected by such debasement in previous reigns, as well as by the change in the value of the precious metals. The great popular grievance of his day, the conversion of arable land into pasture, he attributes chiefly to the restrictions on the export of corn, which he desires to see abolished. But in regard to manufactures he is at the same point of view with the later mercantilists, and proposes the exclusion of all foreign wares which might as well be provided at home, and the prohibition of the export of raw materials intended to be worked up abroad.

Out of the question of money, too, arose the first remarkable German production on political economy which had an original national character and addressed the public in the native tongue. Duke George of the Ernestine Saxon line was inclined (1530) to introduce a debasement of the currency. A pamphlet, Gemeine Stymmen von der Müntze, was published in opposition to this proceeding, under the auspices of the Albertine branch, whose policy was sounder in the economic sphere no less than in that of ecclesiastical affairs. A reply appeared justifying the Ernestine project. This was followed by a rejoinder from the Albertine side. The Ernestine pamphlet is described by Roscher as ill-written obscure, inflated, and, as might be expected from the thesis it maintained, sophistical. But it is interesting as containing a statement of the fundamental principles of the mercantile system more than one hundred years before the publication of Mun’s book, and forty-six before that of Bodin’s Six livres de la République. The Albertine tracts, according to Roscher, exhibit such sound views of the conditions and evidences of national wealth, of the nature of money and trade, and of the rights and duties of Government in relation to economic action, that he regards the unknown author as entitled to a place beside Raleigh and the other English "colonial-theorists" of the end of the 16th and beginning of the 17th century.

It connexion with the same subject of money we meet the great name of Copernicus. His treatise De monelae eudendae ratione, 1526 (first printed in 1816), was written by order of King Sigismund I., and is an exposition of the principles on which it was proposed to reform the currency of the Prussian provinces of Poland. It advocates unity of the monetary system throughout the entire state, with strict integrity in the quality of the coin, and the charge of a seigniorage sufficient to cover the expenses of mintage.

Antonio Serra is regarded by some as the creator of modern political economy. Hw was a native of Cosenza in Calabria. His Breve Trattato delle cause che possomo fare abbondare li regni d’oro e d’argento dove non sono miniere, 1613, was written during his imprisonment, which is believed to have been due to his having taken part in the conspiracy of Campella for the liberation of Naples from the Spanish yoke and the establishment of a republican government. This work, long overlooked, was brought into notice in the following century by Galiani and others. Its title alone would sufficiently indicate that the author had adopted the principles of the mercantile system, and in fact in this treatise essential doctrines of that system are expounded in a tolerably formal and consecutive manner, he strongly insists on the superiority of manufactures over agriculture as a source of national wealth, and uses in support of this view the prosperity of Genoa, Florence, and Venice, as contrasted with ten depressed condition of Naples. With larger insight than many of the mercantilists exhibit, he points out the importance, towards the acquisition of wealth, not alone of favourable external conditions, but of energetic character and industrious habits in a population, as well as of a stable government and a good administration of the laws.

The first systematic treatise on our science which proceeded from the French author was the Traité de l’Économie Politique, published by Montchrétien de Watterville in 1615. The use of the title, says Roscher , now for the first time given to the science, was in itself an important service, since even Bacon understood by "Economia" only the theory of domestic management. The general tendencies and aims of the period are seen in the fact that this treatise, notwithstanding the comprehensive name it bears, does not deal with agriculture at all, but only with the mechanical arts, navigation, commerce, and public finance. The author is filled with the then dominant enthusiasm for foreign trade and colonies. He advocates the control by princes of the industry of their subjects, and condemns the too great freedom, which, in his opinion do their own detriment, the Governments of Spain, Portugal, and Holland had given to trade. His book may be regarded as a formal exposition of the principles of the mercantile system for the use of Frenchmen.

A similar office was performed in England by Thomas Mun. In his two works A Discourse of Trade from England unto the East Indies, 2d ed., 1621, and especially in England’s Treasure by Foreign Trade, 1664 (posthumous), we have for the first time a clear and systematic statement of theory of the balance of trade, as well as of the means by which, according to the authors view, a favourable balance could be secured for England. The great object of the economic policy of state, according to hum, should be so to manage its export of manufactures, its direct and carrying trade, and its customs duties as to attract to itself money from abroad. He was however, opposed to the prohibition of the export of the precious metals in exchange for foreign waves, but on the ground, fully according with his general principles, that those wares might afterwards be re-exported and might then bring back more treasure than had been originally expended in their purchase; the first export of money might be, as he said, the seed-time, of which the ultimate receipt of a larger amount would be the harvest. He saw, too, that it is inexpedient to have too much money circulating in a country, as this enhances the prices of commodities, and so makes them less saleable to foreigners, but he is favourable to the formation and maintenance of a state treasure.1

One of the most remarkable of the moderate mercantilists was Sir Josiah Child (Brief Observations concerning Trade and the Interest of Koney, 1668, and A New Discourse of Trade, 1668 and 1690). He was one of those who held up Holland as a model for the imitation if his fellow-countrymen. He is strongly impressed with the importance for national wealth and well-being of a low rate of interest, which he says is to commerce and agriculture what the soul is to the body, and which he held to be the "causa causans of all the other causes of the riches of the Dutch people." Instead of regarding such low rate as dependent on determinate conditions, which should be allowed to evolve themselves spontaneously, he thinks it should be created and maintained by public authority. Child, whilst adhering to the doctrine of the balance of trade, observes that a people cannot always sell to foreigners without ever buying form them, and denies that the export of the precious metals is necessarily detrimental. He has the ordinary mercantilist partiality for a numerous population. He advocates the reservation by the mother country of the sole right of trade with her colonies, and, under certain limitations, the formation of privileged trading companies. As to the Navigation Act, he takes up a position not unlike that afterwards occupied by Adam Smith, regarding that measure much more favourably from the political than from the economic point of view. It will be seen that he is somewhat eclectic in his opinions; but he cannot properly be regarded, though some have attributed to him that character, as a precursor of the free-trade school of the 18th century.

Two other eclectics may be here mentioned, in whom just views are mingled with mercantilist prejudices—Sir William Temple and Charles Davement. The former in his Observations upon the United Provinces of the Netherlands, 1672, and his Essay on the Trade of Ireland, 1673, has many excellent remarks on fundamental economic principles, as on the functions of labour and of saving in the production of national wealth; but he is infected with the errors of the theory of the balance of trade. He follows the lad of Raleigh and Child in urging his fellow-countrymen to imitate the example of the Dutch in their economic policy—advice which in his case was founded on his observation during a lengthened residence in Holland as ambassador to the States. Davenant, in his essay on the east-India Trade, 1696-97, Essay on the Probable Ways of making the People Gainers in the Balance of Trade, 1699, &c., also takes up an eclectic positions, combining some correct views on wealth and money with mercantilist notions on trade, and recommending Government restrictions on colonial on state, and recommending Government restrictions on colonial commerce as strongly as he advocates freedom of e exchange at home.

Whilst the mercantile system represented the prevalent form of economic thought in the 17th century, and was alone dominant in the region of practical statesmanship, there was growing up, side by side with it, a body of opinion, different and indeed hostile in character, which was destined ultimately to drive it from the field. The new ideas were first developed in England, though it was in France that in the following century they took hold of the public mind, and became a power in politics. That they should first show themselves here, and afterwards be extended, applied, and propagated throughout Europe by French writers, belongs to the order of things according to which the general negative doctrine in morals and politics, undoubtedly of English origin, found its chief home in France, and was thence diffused in widening circles through the civilized world. In England this movement of economic thought took the shape mainly of individual criticism of the prevalent doctrines, founded on a truer analysis of facts and conceptions; in France it was penetrated with a powerful social sentiment, furnished the creed of a party, and inspired a protest against institutions and an urgent demand for practical reform.

Regarded from the theoretic side, the characteristic features of the new direction were the following. The view of at least the extreme mercantilists that national wealth depends on the accumulation of the precious metals is proved to be false, and the gifts of nature and the labour of man are shown to be its real sources. The exaggerated estimate of the importance of foreign commerce is reduced and attention is once more turned to agriculture and the conditions of its successful prosecution. On the side of practical policy, a so-called favourable balance of trade is seen not to be the true object of a nation’s or a statesman’s efforts, but the procuring for the whole population in the fullest measure the enjoyment of the necessaries and conveniences of life. And—what more than anything else contrasts the new system with the old—the elaborate apparatus of prohibitions, protective duties, bounties, monopolies, and privileged corporations, which the Europe Governments had created in the supposed interest of manufacturers and trade, is denounced or deprecated as more an impediment than a furtherance, and the freedom of industry is insisted on as the one thing needful. This circle of ideas, of course, emerges only gradually, and its earliest representatives in economic literature in general apprehend it imperfectly and advocate it with reserve; but it rises steadily in importance, being more and more favoured by the highest minds, and finding an increasing body of supporters amongst the intelligent public.

Some occasional traits of an economic scheme in harmony with these new tendencies are to be found in the De Cive and Leviathan of Hobbes. But the efficacy of that great thinker lay rather in the general philosophic field; and by systematizing, for the first time, the whole negative doctrine, he gave a powerful impulse towards the demolition of the existing social order, which was destined, as we shall see, to have momentous consequences in the economic no less than in the strictly political department of things.

A writer of such extended range, but of much sagacity and good sense, was Sir WILLIAM PETTY (q.v.), author of a number of pieces containing germs of a sound economic doctrine. A leading thought in his writings is that ‘labour is the father and active principle of wealth, lands are the mother." He divided a population into two classes, the productive and the unproductive, according as they are not occupied in producing useful material things. The value of any commodity depends, he says, anticipating Ricardo, on the amount of labour necessary for its production. He is desirous of obtaining a universal measure of value, and chooses as his unit the average food of the cheapest kind required for a man’s daily sustenance. He understands the nature of the rent of land as the excess or price over the cost of production. He disapproves of the attempt to fix by authority a maximum rate of interest, and is generally opposed to Governmental interference with the course of industry. He sees that a country requires for its exchanges a definite quantity of money and may have too much of it, and condemns the prohibition of its exportation. He holds that one only of the precious metals must be the foundation of the currency, the other circulating as an ordinary article of merchandise. Petty’s name is specially associated with the progress of statistics, with which he much occupied, and which he called by the name of political arithmetic. Relying on the results of such inquiries, he set himself strongly against the opinion which had been advanced by the author of Britannia Languens (1680), Fortrey, Roger Coke, and other writers, that the prosperity of England was on the decline.

The most thorough-going and emphatic assertion of the free-trade doctrine against the system of prohibitions which had gained strength by the Revolution was contained in Sir Dudley North’s Discourses upon Trade, 1691. he shows that wealth may exist independently of gold or silver, its source being human industry, applied either to the cultivation of the soil or to manufactures. The precious metals, however, are one element of national wealth, and perform highly important offices. Money may exist in excess, as well as in defect, in a country; and the quantity of it required for the purposes of trade will vary with circumstances; its ebb and flow will regulate themselves spontaneously. It is a mistake to suppose that stagnation of trade arises from want of money; it must arise either form a glut of the home market, or from a disturbance of foreign commerce, or from diminished consumption caused by poverty. The export of money in the course of traffic, instead of diminishing, increases the national wealth, trade being only an exchange of superfluities. Nations are related to the world just in the same way as cities to the state or as families to the city. North emphasizes more than his predecessors the value of the home trade. With respect to the interest of capital, he maintains that it depends, like the price of any commodity, on the proportion of demand and supply, and that a low rate is a result of the relative increase of capital, and cannot be brought about by arbitrary regulations, as had been proposed by Child and others. In arguing the question of free trade, he urges that individuals often take their private interest as the measure of good and evil, and would for its sake debar others form their equal right of buying and selling, but that every advantage given to one interest or branch of trade over another is injurious to the public. No trade is unprofitable to the public; if it were, it would be given up; when trades thrive, so does the public, of which they form a part. Prices must determine themselves and cannot be fixed by law; No people can become rich by state regulations,—only by peace, seen how closely North’s view of things approaches to that embodied some eighty years later in Adam Smith’s great work.

Locke is represented by Roscher as, along with Petty and North, making up the "triumvirate" of eminent British economists of this period who laid the foundations of a new and more rational doctrine than that of the mercantilist. But this view of his claims seems capable of being accepted only with considerable deductions. His specially economic writings are Considerations of the lowering of Interest and raising the value of Money, 1691, and Further Considerations, 1698. Though Leibnitz declared with respect to these treatises that nothing more solid or intelligent could be said on their subject, it is difficult absolutely to adopt that verdict. Locke’s spirit of sober observation and patient analysis led him indeed to some just conclusions; and he is entitled to the credit of having energetically resisted the debasement of the currency, which was then recommended by some who were held to be eminent practical authorities. But he falls into errors which show that he had not by any means completely emancipated himself form the ideas of the mercantile system. He attaches far too much importance to money as such. He says expressly that riches consists in a plenty of gold and silver, that is, as he explains, in having more in proportion of those metals than the rest of the world or than our neighbours. "In a country not furnished with mines, there are by two ways of growing rich, either conquest or commerce." Hence he accepts the doctrine of the balance of trade. He shows that the rate of interest can no more be fixed by law than the rent of houses or the hire of ships, and opposes Child’s demand for legislative interference with it. But he erroneously attributed the fall of the rate which had taken place generally in Europe to the increase of the quantity of gold and silver by the discovery of the American mines. He sets too absolute a value on a numerous population, in this point agreeing with Petty. On wages he observes that the rate must be such as to cover the indispensable wants of the labourer; when the price of subsistence rises, wages must rise in a like ratio, or the working population must come on the poor rates. The fall of the rent of land he regards as a sure sign of the decline of national wealth. "Taxes, however contrived, and out of whose hands soever immediately taken, do, in a country where their great fund is in land, for the most part terminate upon land." In this land proposition we see a foreshadowing of the impôt unique of the physiocrats. Whatever may have been Locke’s direct economic services, his principal importance, like that of Hobbes, lies in his general philosophic and political principles, which powerfully affected French and indeed European thought , exciting a spirit of opposition to arbitrary power, and laying the foundation of the doctrine developed in the Contrat Social.1


FOOTNOTE (page 357)

(1) Writers of less importance who followed the same direction were Sir Thomas Culpeper (A Tract against the High rate of Usury, 1623, and Useful Remark on High Interest, 1641); Sir Dudley Digges (Defence of Trade, 1615); G. Malynes (Consuetudo vel Lex Mercatoria, 1622); E. Misselden (Circle of Commerce, 1623); Samuel Fortrey (England’s Interest and Improvement, 1663 and 1673); and John Pollexien (England and India inconsistent in their Manufactures, 1697).

FOOTNOTES (page 358)

(1) Minor English writers who followed the new economic direction were Lewis Roberts, Treasure of Traffick, 1641; Rice Vaughan, Discourse of Coin and Coinage, 1675; Nicholas Barbon, Discourse concerning Coining the new money lighter, 1696, in which some of Locke’s errors were pointed out; and the author of an anonymous book entitled Considerations on the East India Trade, 1701. Practical questions much debated at this period were those connected with banking, on which a lengthened controversy took place, S. lamb, W. Potter. F. Cradocke, M. Lewis, M. Geoffrey, R. Murray, H. Chamberlen, and W. Paterson, founder of the Bank of England (1694); producing many pamphlets on the subject; and the management of the poor, which was treated by Locke, Sir Matthew Hale, R. Haines. T. Firmin, and others.

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