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began¡¡to¡¡regain¡¡self¡­confidence¡£¡¡And¡¡this¡¡was¡¡the¡¡work¡¡of

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with¡¡snuff£»¡¡who¡¡said¡¡very¡¡funny¡¡but¡¡very¡¡unpleasant¡¡things

about¡¡his¡¡neighbours£»¡¡and¡¡who¡¡played¡¡the¡¡scandalous¡¡game¡¡of

eighteenth¡¡century¡¡diplomacy¡¡without¡¡any¡¡regard¡¡for¡¡the¡¡truth£»

provided¡¡he¡¡could¡¡gain¡¡something¡¡by¡¡his¡¡lies¡£¡¡This¡¡in¡¡spite¡¡of

his¡¡book£»¡¡¡®¡®Anti¡­Macchiavelli¡£''¡¡In¡¡the¡¡year¡¡1786¡¡the¡¡end

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said£»¡¡they¡¡were¡¡never¡¡ungrateful¡¡and¡¡remained¡¡true¡¡to¡¡their

friends¡£







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

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