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:
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: