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THE¡¡MERCANTILE¡¡SYSTEM
HOW¡¡THE¡¡NEWLY¡¡FOUNDED¡¡NATIONAL¡¡OR
DYNASTIC¡¡STATES¡¡OF¡¡EUROPE¡¡TRIED¡¡TO
MAKE¡¡THEMSELVES¡¡RICH¡¡AND¡¡WHAT¡¡WAS
MEANT¡¡BY¡¡THE¡¡MERCANTILE¡¡SYSTEM
WE¡¡have¡¡seen¡¡how£»¡¡during¡¡the¡¡sixteenth¡¡and¡¡the¡¡seventeenth
centuries£»¡¡the¡¡states¡¡of¡¡our¡¡modern¡¡world¡¡began¡¡to¡¡take¡¡shape¡£
Their¡¡origins¡¡were¡¡different¡¡in¡¡almost¡¡every¡¡case¡£¡¡Some¡¡had
been¡¡the¡¡result¡¡of¡¡the¡¡deliberate¡¡effort¡¡of¡¡a¡¡single¡¡king¡£¡¡Others
had¡¡happened¡¡by¡¡chance¡£¡¡Still¡¡others¡¡had¡¡been¡¡the¡¡result¡¡of
favourable¡¡natural¡¡geographic¡¡boundaries¡£¡¡But¡¡once¡¡they¡¡had
been¡¡founded£»¡¡they¡¡had¡¡all¡¡of¡¡them¡¡tried¡¡to¡¡strengthen¡¡their
internal¡¡administration¡¡and¡¡to¡¡exert¡¡the¡¡greatest¡¡possible¡¡influence
upon¡¡foreign¡¡affairs¡£¡¡All¡¡this¡¡of¡¡course¡¡had¡¡cost¡¡a¡¡great
deal¡¡of¡¡money¡£¡¡The¡¡mediaeval¡¡state¡¡with¡¡its¡¡lack¡¡of¡¡centralised
power¡¡did¡¡not¡¡depend¡¡upon¡¡a¡¡rich¡¡treasury¡£¡¡The¡¡king¡¡got¡¡his
revenues¡¡from¡¡the¡¡crown¡¡domains¡¡and¡¡his¡¡civil¡¡service¡¡paid¡¡for
itself¡£¡¡The¡¡modern¡¡centralised¡¡state¡¡was¡¡a¡¡more¡¡complicated
affair¡£¡¡The¡¡old¡¡knights¡¡disappeared¡¡and¡¡hired¡¡government
officials¡¡or¡¡bureaucrats¡¡took¡¡their¡¡place¡£¡¡Army£»¡¡navy£»¡¡and
internal¡¡administration¡¡demanded¡¡millions¡£¡¡The¡¡question¡¡then
became¡¡where¡¡was¡¡this¡¡money¡¡to¡¡be¡¡found£¿
Gold¡¡and¡¡silver¡¡had¡¡been¡¡a¡¡rare¡¡commodity¡¡in¡¡the¡¡middle
ages¡£¡¡The¡¡average¡¡man£»¡¡as¡¡I¡¡have¡¡told¡¡you£»¡¡never¡¡saw¡¡a¡¡gold
piece¡¡as¡¡long¡¡as¡¡he¡¡lived¡£¡¡Only¡¡the¡¡inhabitants¡¡of¡¡the¡¡large
cities¡¡were¡¡familiar¡¡with¡¡silver¡¡coin¡£¡¡The¡¡discovery¡¡of¡¡America
and¡¡the¡¡exploitation¡¡of¡¡the¡¡Peruvian¡¡mines¡¡changed¡¡all¡¡this¡£
The¡¡centre¡¡of¡¡trade¡¡was¡¡transferred¡¡from¡¡the¡¡Mediterranean¡¡to
the¡¡Atlantic¡¡seaboard¡£¡¡The¡¡old¡¡¡®¡®commercial¡¡cities''¡¡of¡¡Italy¡¡lost
their¡¡financial¡¡importance¡£¡¡New¡¡¡®¡®commercial¡¡nations''¡¡took
their¡¡place¡¡and¡¡gold¡¡and¡¡silver¡¡were¡¡no¡¡longer¡¡a¡¡curiosity¡£
Through¡¡Spain¡¡and¡¡Portugal¡¡and¡¡Holland¡¡and¡¡England£»
precious¡¡metals¡¡began¡¡to¡¡find¡¡their¡¡way¡¡to¡¡Europe¡¡The¡¡sixteenth
century¡¡had¡¡its¡¡own¡¡writers¡¡on¡¡the¡¡subject¡¡of¡¡political
economy¡¡and¡¡they¡¡evolved¡¡a¡¡theory¡¡of¡¡national¡¡wealth¡¡which
seemed¡¡to¡¡them¡¡entirely¡¡sound¡¡and¡¡of¡¡the¡¡greatest¡¡possible
benefit¡¡to¡¡their¡¡respective¡¡countries¡£¡¡They¡¡reasoned¡¡that¡¡both
gold¡¡and¡¡silver¡¡were¡¡actual¡¡wealth¡£¡¡Therefore¡¡they¡¡believed
that¡¡the¡¡country¡¡with¡¡the¡¡largest¡¡supply¡¡of¡¡actual¡¡cash¡¡in¡¡the
vaults¡¡of¡¡its¡¡treasury¡¡and¡¡its¡¡banks¡¡was¡¡at¡¡the¡¡same¡¡time¡¡the
richest¡¡country¡£¡¡And¡¡since¡¡money¡¡meant¡¡armies£»¡¡it¡¡followed
that¡¡the¡¡richest¡¡country¡¡was¡¡also¡¡the¡¡most¡¡powerful¡¡and¡¡could
rule¡¡the¡¡rest¡¡of¡¡the¡¡world¡£
We¡¡call¡¡this¡¡system¡¡the¡¡¡®¡®mercantile¡¡system£»''¡¡and¡¡it¡¡was
accepted¡¡with¡¡the¡¡same¡¡unquestioning¡¡faith¡¡with¡¡which¡¡the
early¡¡Christians¡¡believed¡¡in¡¡Miracles¡¡and¡¡many¡¡of¡¡the¡¡present¡
day¡¡American¡¡business¡¡men¡¡believe¡¡in¡¡the¡¡Tariff¡£¡¡In¡¡practice£»
the¡¡Mercantile¡¡system¡¡worked¡¡out¡¡as¡¡follows£º¡¡To¡¡get¡¡the
largest¡¡surplus¡¡of¡¡precious¡¡metals¡¡a¡¡country¡¡must¡¡have¡¡a
favourable¡¡balance¡¡of¡¡export¡¡trade¡£¡¡If¡¡you¡¡can¡¡export¡¡more¡¡to
your¡¡neighbour¡¡than¡¡he¡¡exports¡¡to¡¡your¡¡own¡¡country£»¡¡he¡¡will
owe¡¡you¡¡money¡¡and¡¡will¡¡be¡¡obliged¡¡to¡¡send¡¡you¡¡some¡¡of¡¡his
gold¡£¡¡Hence¡¡you¡¡gain¡¡and¡¡he¡¡loses¡£¡¡As¡¡a¡¡result¡¡of¡¡this¡¡creed£»
the¡¡economic¡¡program¡¡of¡¡almost¡¡every¡¡seventeenth¡¡century
state¡¡was¡¡as¡¡follows£º
1¡£¡¡Try¡¡to¡¡get¡¡possession¡¡of¡¡as¡¡many¡¡precious¡¡metals
as¡¡you¡¡can¡£
2¡£¡¡Encourage¡¡foreign¡¡trade¡¡in¡¡preference¡¡to¡¡domestic
trade¡£
3¡£¡¡Encourage¡¡those¡¡industries¡¡w