Mercantilism and European colonial expansion

European Culture and Colonialism in the Age of Mercantilism

The modern day doctrines of capitalism and socialism are but the latest in a series of economic doctrines that have helped shape the actions of states and mold the cultures of peoples. In Early Modern Europe, economic thinking centered mainly on the concept of mercantilism, an economic system that is based essentially on the notion that there exists only a limit supply of wealth and resources. An early form of capitalism, before the full formulation of that doctrine by Adam Smith, mercantilism, encourages nations to look to the welfare of their own states and to view themselves as begin at the center of largely closed systems. The economic exploitation of mercantilism is geared toward the aggrandizement and enrichment of a single state entity, or possibly, a group of entities conceived of a single coherent system. Mercantilism was not a set theory, but rather a "tendency" that described the careful regulation of state economies that characterized the Early Modern period as opposed to the laissez-faire approach of much of the Nineteenth and even Twentieth centuries (1999, p. 157). The exploitation of natural resources, finished goods, and their ultimate exchange in the marketplace had to be strictly managed in order to prevent the loss of the state's reserves of gold and silver -- the only real "money" of the period (1999, p. 157). Indeed, the increasing of these supplies of precious metals could be seen as the ultimate goal of mercantilist policies.

Most of the major economic powers of Early Modern Europe practiced mercantilism in one form or another, even those that would appear to have flourished better under a regime of free trade. Mercantilism fit neatly with prevailing notions of society. The society of early Modern Europe was hierarchical, with status typically accorded by right of birth. Most European nations were governed by some form of absolute, or quasi-absolute, monarchy. Even in those nations that possessed some form of parliament, or even actual republican forms of administration, voting and office holding was normally restricted to a narrow class of oligarchs. The France of Louis XIV represented quintessential form of the absolutist monarchical state, a kind of pyramid with the king at the top governing, in theory, for the good of each class of individual, and exercising unchallenged control of the decision-making process. Naturally, the king should be the wealthiest person in the kingdom, as he was also the most powerful and socially highest-ranking. French Finance Minister Jean-Baptiste Colbert put in place a system of strict economic controls that included high tariffs on the import of goods not considered necessary for the French market, a policy that was expounded in England as well by economic theorists such as Samuel Fortrey (Magnusson, 1994, p. 97). According to mercantilist thinking, it was in the interest to safeguard a nation's own manufactures, importing only those goods that -- for whatever reason -- could not be produced, or could not be produced effectively enough, at home. Fortrey had railed against the destructive effects on English manufactures of the importation of French luxury goods. The idea, as best shown by Colbert's legislation, was to encourage domestic production at the expense of any imported goods. Such production would keep wealth within the kingdom by eliminating the need to send gold and silver abroad to purchase foreign manufactures. Furthermore, the emphasis on domestic production and resource exploitation stimulated employment at home and forestalled insurrection. The effect created was one of a self-contained economic world.

Still, no "world" could be entirely self-sufficient. Not every state possesses every resource, nor do all states possess persons of the requisite skill to produce all desired goods, as shown by English demand for French luxury goods. In addition, smaller states, like the Seventeenth Century United Provinces (the Netherlands) can actually be disadvantaged by mercantilist policies. Holland throve on the global trade that was carried in Dutch ships. The Low Countries had along history as centers of commerce and textile production that went back well into the Middle Ages. The Dutch earned much of their wealth by transporting and selling resources and goods that had been produced or grown all over the world. Dutch prosperity resulted, to a considerable extent, from the Dutch government's inability to suppress competition between towns at home, and from the overly-regulated economies of the English, French, and Spanish competitors (Ekelund & Tollison, 1997, p. 155). As the Dutch experience showed, the merchants and manufacturers of one country needed the consumers of other countries if they were to expand beyond the limits of their own homelands. Mercantilist policy was a frequent cause of war and conflict as nations sought to close their frontiers to foreign goods. At the same time, the drive to be as complete and self-contained an economy as possible meant that expansion was essential -- if only to control those resources in which the home country was lacking.

In consequence, colonial expansion was almost a natural result of mercantilist tendencies. The larger the territory encompassed by a single government, the larger its resource and production base. As an example, the vast Spanish Empire contained vast supplies of precious metals, and extensive lands for the establishment of agriculture based on cash crops. The English, French, Dutch, and others also see the lucrative possibilities of overseas colonies. While in the Early modern Period, most colonial empires were situated in the New World, with only the Spanish taking over formerly heavily settled areas, the Dutch even conquered areas of the East Indies in a bid to monopolize the extremely profitable spice trade. In the Eighteenth Century, Great Britain began to emerge as the world's great commercial and military power, with contemporaries accepting as natural the connection between "power and profit" (O'Brien, 1999, p. 51). A nation must be powerful in order to control markets and resources. Control of goods often also translated into control of individuals, especially if these individuals were required to produce the goods and commodities essential to national well-being.

The slave trade was a major outgrowth of mercantilist tendencies. The exploitation of the New World demanded workers who could put in long hours of backbreaking labor to grow lucrative cash crops. The British, French, Dutch, Spanish, and Portuguese, imported millions of African slaves to produce sugar and tobacco. In the Spanish and Portuguese colonies slaves were also used at the gold and silver mines (and also to mine diamonds and other natural resources). In fact, William Darity, Jr. concludes that it was Britain's almost innate understanding of mercantilist economics that enabled Britain to emerge supreme in the contest for world domination and economic and military might through its, "pursuit of the grand mercantilist scheme of commercial conquest, naval power, colonialism, slavery, and metropolitan industrialization" (Inikori & Engerman, 1992, p. 11). The Triangular Trade in rum, slaves, and molasses constituted almost the ideal paradigm of mercantilism, with all "commodities" and manufactures contained within the empire and sold and re-sold for the benefit of the mother country. British planters on British-owned islands in the West Indies produced sugar on plantations that employed slave labor. The slaves processed the sugar by turning it into molasses. The molasses was shipped in British ships to Britain's colonies in New England. Yankee entrepreneurs turned the molasses into rum. The rum was taken in British ships to Africa to be sold for more slaves that were then purchased and re-sold in either the West Indies or Great Britain's American colonies. As much as possible, foreign rum, slaves, and molasses were kept out of the British market. Great Britain's colonies were forbidden to trade with other nations. The cycle was complete. Everything was reserved for the home country. Wars with other European powers resulted either in the acquisition of new territories for exploitation and markets, or in the destruction of competitors' production and markets.