If you were asked, could you describe Mercantilism? I dare say you could have a good go at Capitalism and Feudalism. But Mercantilism? And is it worth finding out? I think it is, because it tells us a lot about the system we live under now, by explaining more about how we got here. Apologies to academic economic historians for my previous ignorance – I can’t really accuse you of not telling us, because I’m reading an Economic History by J. K. Galbraith, and he’s certainly telling us – it’s just that only a tiny minority of us have read it or would be likely to read it.
I’d heard of Mercantilism, and thought it was an ill-defined and particularly egotistical and greedy part of early Capitalism – and in fact it is often called Merchant Capitalism. But it wasn’t – it was I believe a distinct pre-Capitalist period. In fact it’s an interim period between feudalism and capitalism, and it lasted around 300 years. From this perspective, economic history splits easily into:
- Slavery, under which the rich own the poor outright
- Feudalism, under which the rich hold the poor in bondage
- Mercantilism, under which the rich are the government
- Capitalism, under which the rich own the government
Actually, to address academic economists again – it’s this last point that you’re not telling us about. Your profession appears to exist to justify the concentration of wealth, and therefore power – and to ensure that it continues to concentrate.
The boundary between Feudalism and Mercantilism appears first with the Black Death, and the resulting population drop and labour shortage in Europe. Serfs moved to the cities and into paid employment. Power under Feudalism was an alliance of monarchy, church and landed gentry, which stumbled due to the removal of so many serfs – the only people who actually produced anything in the Feudal system. This power stumbled even more with the Reformation, which damaged the power of the church; with merchant guilds that damaged the power of the landed gentry; and with the English Civil War, then the Glorious Revolution of 1688, which damaged, then removed entirely, the power of the monarchy and gave it to merchants.
Banks and corporations were formed and the men at the top of these insitutions were the same men at the top of government. The landed gentry, church and monarchy were still tolerated, but they didn’t have power. The big idea behind Mercantilism was there wasn’t really a big idea – which is why you’ve never heard the term ‘Mercantilist philosopher’. It was all about naked self-interest. Get together with some buddies, form a corporation, build loads of ships, get slaves, tobacco, sugar, tea, coffee, timber, fur, silk, ivory, gold, silver, start a bank, make loads and loads of money, sit in government, award yourselves state-sponsored monopolies, build big armies.
Mercantilism was nationalist – corporations were national and used protectionism (tariffs and import controls) and war to compete – it wasn’t international and it wasn’t about free trade. The main aim was to accumulate as much gold and silver (being brought into Europe by Spain from Latin America) in the home country by exporting more than was imported into it.
The boundary between Mercantilism and Capitalism is more blurred, but the most important events were the publication by Adam Smith of the Wealth of Nations in 1776, and the Industrial Revolution. France was a special case, where agriculture and landed interests retained their status, although merchants were still rich and powerful – but the French Revolution put an end to that, and launched France into Capitalism. But really, after Adam Smith, Mercantilism was used as more of an insult than anything else.
Mercantilism was about getting a bigger slice of the global pie for your country and yourself. Capitalism was about making the pie bigger – growth – and opening up markets. Capitalism was the impetus for an enormous expansion of economic activity, and, it has to be said, happiness for a lot of people. However, it was also the basis of the ecological damage which is going to cause us so many problems in the near future.
One further important distinction between Mercantilism and Capitalism. The dominant figure in Mercantilism was that of the merchant, who bought and sold goods that were produced in the workers’ own cottages. Early Capitalism was dominated by industrialists who made things, in their factories.
Capitalism was an attempt to share power amongst more people, through the legislative, governmental and electoral processes – and especially through anti-trust laws (the control of monopolies). But it hasn’t worked. The system has been manipulated to concentrate wealth and power much more than it ever has been.
However, each step – from Slavery to Feudalism, from Feudalism to Mercantilism and from Mercantilism to Capitalism – has given us more freedom and democracy. But that process hasn’t finished yet, Francis Fukuyama notwithstanding. I don’t think humanity will settle for second-best – why should we?
