4. The era of mercantilism Flashcards
1
Q
Overview of mercantilism
A
- Mercantilism is a set of policies that accompanied the rise of the modern state in Europe
- State building spanned a few hundreds years from the 16th century and consisted in the evolution of fragmented political units into larger, centralised political entities
- The process involved the formation of bureaucratic structures entrusted with public functions
- tax collection, justice, public finances, defence, infrastructure, etc.
- The form of the modern state varied considerably, ranging from absolutist monarchies to decentralised republics
- mercantilism expresses the nexus between POWER and PLENTY
- PLENTY was needed to build military power
- military POWER was often regarded as the most effective way to accumulate wealth
2
Q
Mercantilism was not…
A
- a coherent body of theory ⟶ lack of economic rationale of most legisla0on
- a coherent set of ideas/practices ⟶ there was a lot of variation from country to country
3
Q
Mercantilism and class
A
- Knowledge of and familiarity with economic principles and technical matters were scant among rulers and their ministers
- Mercantilist policies were tailored to the interests of the ruling classes and depended on the nature and composition of national elites
4
Q
Mercantilist policies elements
A
- bullionism ⟶ increase in the stock of gold and silver, obtained by securing colonies OR maintaining a trade surplus
- trade surplus
⟶ imposing taxes on selected imported goods
⟶ stimulating domestic production of manufactures, export bounties, monopolies, etc.
- Running large merchant fleets was an effective means to
- develop national trade
- earn revenues from foreign shippers
- flexibly enlarge the navy
- grow domestic marine expertise
- develop shipbuilding, etc.
- Navigation laws -reserving national trade for national ships or otherwise discriminating against foreigners
- Colonies, yet another means of acquiring bullion or trade supremacy
5
Q
Overview of Spain mercantilist era
A
- At mid-16th century Spain had large possessions in both Europe and Latin America
- Potentially, this large empire was also economically powerful as it had
- plenty of natural resources: bullion and other tropical commodities in Latin America +mineral ores in Europe
- areas featuring a most advanced agriculture: the Netherlands, part of the Po Valley
- areas where advanced manufacturing activities had developed: the Netherlands
- Bad economic policies since mid-16 century, though, caused Spain to experience decline ⟶ lower living standards, famine and plague, depopula0on
6
Q
Causes of Spain’s downfall
A
- The primary goal of Spanish rulers was to consolidate Christian Europe ⟶ hence many religious and commercial wars involving huge physical and financial losses
- Land property was highly concentrated in the hands of the nobility and the Church: up to 97% of the land held by 2-3% of the population
- The tax rate was very high but many of the richest landowners were exempt and the burden was borne by the lower classes
- From mid-16th century, the huge inflow of silver from the Americas became a major source of state revenue
- but the crown was unable to gain full control of it
- and was forced to borrow to cover its enormous expenditures
- In these circumstances, Spain experienced frequent fiscal crises through the 16th and 17th centuries
- Unreasonable privileges granted to special interest groups proved detrimental to the larger economy
- Mesta, the guild of sheep owners ⟶ harm to agriculture
- Consulado, guild of wool merchants (Burgos) ⟶ harm to domestic producers
7
Q
Effects of Spain’s downfall
A
negative effects of economic policies can best be seen in
- cereal produc.on: price increases in the 16th century ⟶ price caps set by the crown ⟶ exploitation unprofitable, land use shifted to other crops ⟶ more serious shortages ⟶ free entry for foreign grain
- cloth manufacturing: demand growth in Spain and the Americas was met by rigid supply ⟶ abolition of tariffs on foreign cloths and export prohibition ⟶ industry is ruined
- As to the Spanish stance towards the American empire
- discrimination against foreigners regarding trade and settlement
- intra-colonial trade discouraged
- local manufactures prohibited
8
Q
Overview of Dutch mercantilist area (politics)
A
The Dutch Republic differed substantially from other national experiences in two ways
- it did NOT have an absolutist regime but rather a decentralised political system
- •it relied on international trade to a far greater extent than most countries in continental Europe
As for the constitutional system, not only did the provinces enjoyed a lot of autonomy, but political elites were dominated by merchant interests
9
Q
Dutch economic mercantilist era in relation to shipping services
A
In the economic sphere, the strength of the Dutch rested esp. on shipping services:
- In the first half of the 17th century, up to 75% of shipping in the Baltic and North seas, the Bay of Biscay, and the Mediterranean was accounted for by the Dutch fleet
- Among Dutch exports, herrings were the most important item, followed by agricultural products such as butter, cheese, and industrial crops
- The shipbuilding and related industries also contributed to exports, as well as woollen cloths
10
Q
Commerce and industry in Dutch m. era
A
- Manufacturing capabilities were greatly enhanced by the inflow of migrants seeking refuge from religious persecution ⟶ protestants fleeing the southern Netherlands and France in late 16th and 17th centuries
- In commerce and industry, the Dutch had a relatively liberal attiude
- the only industry subject to detailed regulation was herring fishery
- all in all, guilds’ political power and control over production was far smaller than in many other European countries
- just colonial trade was controlled by two private chartered companies under a monopoly regime
11
Q
What were the 2 constiutional developments that distinguished England from continental countries?
A
- absolutism was defeated in the 17th century and a constitutional monarchy emerged (⟶ Glorious Revolution, 1688-89)
- control over taxation and public finance, one of the most contentious issues, was eventually secured by the Parliament
12
Q
What were the institutional developments that helped England distinguish itself?
A
Institutional developments in the financial system also greatly contributed to making England a different story from the continent
- Bank of England, 1694
- emergence of a market for government debt (and private securities), enabling the government to raise money at a far lower cost than its European counterparts
13
Q
Most important English economic policies during m.era
A
- Navigation Acts (1651, 1660)
- British imports and trade with British colonies were reserved for British ships
- imported goods were to be shipped directly from the country of origin
- British colonial goods needed to be shipped to Britain and re-exported rather than shipped directly to foreign countries
- Calico acts (1701, 1721)
- banned imports of cotton cloths from India; lobbied for by woollen producers ⟶ fostered development of the cotton industry
- a form of economic protectionism, largely in response to India (particularly Bengal), which dominated world cotton textile markets at the time
=> Overall, England adopted:
- mercantilist policies vis-à-vis its foreign partners
- rather liberal policies in the domestic market
⟶ guilds increasingly lost power
⟶ entrepreneurial activity was relatively unhampered by regulation
14
Q
Why was France the paradigm of economic nationalism during the m.era?
A
To a great extent this is due to Jean-Baptiste Colbert (1661-1683), finance minister under Louis XIV (Colbert’s stated goal was to make France self-sufficient )
- Colbert attempted to rationalise the administrative structure of the state, esp. with regard to controls over the economy but fell short of reforming the tax system
- state fiscal needs were met with a mix of taxation, borrowing, and the sale of public offices (administrative, fiscal, and judicial)
- The share of office sale in state revenue ranged between 10 and 15%
15
Q
Drawbacks of economic nationalism
A
- it diverted capital from productive use in commerce and manufacturing to public expenditure
- it favoured wealth over merit and competence in the selection of civil servants
- it generated corruption and low efficiency
- it created enclaves of vested interests resisting reform aiming at greater homogeneity
- France ability to raise taxes compared poorly w/ NL, GB
