I mentioned above that in the United Netherlands, which attracted such universal admiration about the middle of the seventeenth century, - the towns and provinces retained a great deal of their old independence; and the local and provincial spirit, there so strong, had even certain favourable consequences; but it could lead to greatness, power, and wealth, only so long as it was overridden by the opposite movement towards centralisation. Even the Burgundian princes had done much for the economic unity of the land by their enlightened administration; in later times Holland and Amsterdam preponderated so greatly in power and resources, that their voice was frequently decisive and alone considered. More, however, was done for consolidation by the Eighty years' War of independence, and by the House of Orange in the various complicated official relations in which it stood towards the decisive economic questions of the time. The Admiralty Board (Oberadmiralitatscollegium) remained in existence only for a few years (1589-1593); but after this the House of Orange remained at the head of the Admiralty in the separate states; and upon the Admiralty depended not only the fleet, but also the whole tariff system, and indeed all maritime trade. Colonial policy, navigation policy, the regulation of the Levant trade, of the herring and whale fisheries, and the like, were all centralised. A glance into the rich contents of the "Resolution Book of the High and Mighty Lords the States-General of the United Netherlands" (Placaet-Boeck der hochmogenden Herren Staaten- Generael der vereinigte Nederlande) shews us to how large an extent the economic and commercial policy of the flourishing time of the republic was the outcome of a common Netherlandish egoism. Its rapid declension begins with the period during which there was no governor (Stadtholder); and the most signal cause of this decline was the preponderance in one field after another, after about 1650-1700, of bourgeois localism and provincialism.
It is a consideration of the economic history of France that most clearly brings out the fact that the mercantilism that was everywhere making its way was at least as much a matter of transformation and union at home as of barriers against the world outside. Louis XI (1461-1483) castdown the great houses of Burgundy and Anjou, of Orleans and Bourbon, resisted the narrow selfishness of the corporations, sought to bring about uniform weights and measures in France, and forbade the importation of foreign manufactures. The edict of 1539, which introduced freedom of trade in corn in the interior of France, particularly between the several provinces, sets out with the assertion that in a united political body the several districts should, at all times, help and support one another. The declaration in 1577 that trade, and in 1581 that industry, belonged to the droit domanial had not so much a fiscal as a centralising significance; as was the case generally with the ordinances dating from the time of the great de l'Hopital (Chancellor 1560-1568). Richelieu's razing of the fortresses of the nobility has often been extolled as one of the most important steps towards internal freedom of intercourse within France; his active measures for the creation of a French marine were among the most important contributions towards the development of an independent commercial policy in relation to other countries. Colbert's administration (1662-1683) was, primarily, a struggle against the municipal and provincial authorities; of whom Cheruel says that it was they really who hindered economic progress and the improvement of trade and manufactures. The submission of the towns to a uniform ordinance, the partial abolition of the provincial Estates, the diminution of the power of the provincial governor, and his replacement by the intendent; these were measures which, like his great road and canal works, his interest in posts and insurance, in technical and artistic education, in exhibitions and model buildings created by the state, in private and public model industrial establishments, his reform of river tolls, his union of the inner provinces in a uniform customs system, - all aimed at the one thing, to make of the French people under its brilliant monarchy a noble and united body, united in civilisation as well as in government, and worthy of the name of nation. The great laws of Colbert, the ordonnance civile of 1667, the edit general sur les eaux et les forets of 1669, the ordonnance criminelle of 1670, the ordonnance de commerce of 1673, founded the legal as well as the economic unity of France; even economically they are more important than the tariffs of 1664 and 1667, for these did not succeed even in removing the differences between the pays d' etats and the pays d' election.
Austria, as late as 1748, had not got beyond a very loose association of provinces. It was then determined, in imitation of the Prussian administration, that things should be different. The Prussian government had been able, since the days of the Great Elector (1640-1688), and still more during the reign of Frederick William I (17I3-1740), to create a financial, economic, and military whole, such as there was no other on the continent, and this out of the most refractory materials, out of territories lying far apart and almost hostile one to another. What is more, this was successfully carried through at the very period when the administration had set before itself the purpose of retrieving lost time within the territories themselves, and securing what many other districts of Germany had already obtained by 1600, that is, their unity and self sufficiency. At the very time that it was engaged in Brandenburg, Pomerania, Magdeburg, East Prussia, and the Rhine provinces (Cleves and Mark), in subjecting the towns and the nobles to the authority of the state, and in creating a united provincial administration, it took in hand the task of giving the whole group of poor little territories a real political and economic unity, of taking part in European politics, and of securing, by an independent policy in trade and industry, for these northern lands, bare as they were of men, devoid as they were of maritime commerce or mines or considerable manufactures, a place by the side of the old and wealthy Great Powers. The whole character of the Prussian administration from 1680 to 1786 was determined by the way in which this state, with its small and broken geographical basis, set about combining a national policy in pursuit of German-Protestant and mercantilist objects, with the tasks of territorial rule handed down to it by the past; and by the way in which it carried out, in war and peace, in administration and economy, a national state policy in the "great style" with scarcely more than territorial means. Our present task has only been to shew how close was the connection, in Prussia as elsewhere, between, on the one side, reform and centralisation at home, the transformation of territorial economies into a national economy ("Volks" wirthschaft), and the mercantile system on the other; how, here as elsewhere, domestic policy and foreign policy supplemented one another as indispensable elements in one system.
If we pause for a while to consider this foreign and external economic policy of the European states of the seventeenth and eighteenth centuries, - which it has hitherto been the custom to regard as the essential feature of the mercantile system, - it is not, of course, our purpose to describe the details of its several forms. The general features of its regulations are well enough known. Difficulties were put in the way of the importation of manufactured goods; and their production and exportation were favoured by the prohibition of the export of raw materials, by bounties on export, and by commercial treaties. encouragement was given to domestic shipping, to the fisheries, and to the coasting trade by restricting or forbidding foreign competition. Commerce with the colonies, and the supplying of them with european wares, was reserved for the mother country. The importation of colonial produce had to take place directly from the colony itself, and not by way of other european ports; and everywhere an attempt was made to establish direct trading relations by great privileged trading companies, and by state aid in manifold ways. England promoted the export of corn and the prosperity of agriculture at the same time by the payment of bounties; France hindered the export of corn for the benefit of industry; Holland, in its later days, sought to create very large stores of corn and a very free trade in corn, so as both to ensure a due domestic supply and to encourage trade. But, as we have already said, an account of these several measures would go beyond the purpose of this essay. The general features are known; the details have even yet not been subjected to due scientific investigation. Our only purpose here is to grasp the fundamental ideas of the system; which, naturally, found varying expression, here in high duties, there in low, here in the prevention, there in the encouragement of the corn trade. The thought pursued everywhere was this: as competition with other countries fluctuated up and down, to cast the weight of the power of the state into the scales of the balance in the way demanded in each case by national interests.
In proportion as the economic interests of whole states, after much agitation of public opinion, found a rallying-point in certain generally accepted postulates, there could not fail to arise the thought of a national policy, of protection by the state against the outside world, and of the support by the state of great national interests in their struggle with foreign countries. The conception of a national agriculture, of a national industry, of national shipping and fisheries, of national currency and banking systems, of a national division of labour, and of a national trade must have arisen before the need was felt of transforming old municipal and territorial institutions into national and state ones. But, as soon as that had taken place, it must have seemed a matter of course that the whole power of the state, in relation to other countries as well as at home, should be placed at the service of these collective interests; just as the political power of the towns and territories had served their municipal and district interests. The struggle for existence, in economic life in particular, as in social life in general, is necessarily carried on at all times by smaller or larger groups and communities. That will also be the case in all time to come. And the practice and theory of those times, answering, as they did, to this universal tendency, were nearer reality than the theory of Adam Smith; and so also were the main ideas of Frederick List.
We are not, however, concerned just now with this universal tendency; what we want is to understand the particular form in which it then expressed itself, and the reason for it; and why it could, in later times, give way so far before other tendencies.
The great states of an earlier time display no commercial policy in the style of the mercantile system, not because the Utopia of a purely individualistic economic life possessed more reality then than later, but because they were not united economic bodies; as soon as they became such, the inheritance of such economic bodies as had previously existed, and, above all, of the town policy, passed over to them. It was not because money and money payments or industry or trade suddenly played an altogether new rile in the days of Cromwell and Colbert, that it occurred to people to guide the course of exportation and importation and colonial trade, and to subject them to governmental control. On the contrary, it was because just then, out of the earlier smaller communities, great national communities had grown up, whose power and significance rested on their psychological and social concert, that they began to imitate, not what Charles V had done in Spain, but what all towns and territories of earlier times had done, from Tyre and Sidon, from Athens and Carthage onward; to carry over what Pisa and Genoa, Florence and Venice, and the German Hanse towns had done in their time to the broad basis of whole states and nations. The whole idea and doctrine of the Balance of Trade, as it then arose, was only the secondary consequence of a conception of economic processes which grouped them according to states. Just as up to this time attention had been fixed on the exportation from and importation to particular towns and territories, so now people tried to grasp in their minds the trade of the state as a whole, and to sum it up in such a way as to arrive at a better understanding of it and at some practical conclusion. Such a grouping and combination were very evidently suggested in a country like England, where, on account of its insular position and the moderate size of the land, the national economy had early displayed its exports and imports, its supply of money and of the precious metals, as a connected whole to the eye of the observer.(33*)
All economic and political life rests upon psychical mass-movements, mass-sentiments, and mass-conceptions, gravitating around certain centres. That age could begin to think and act in the spirit of free trade, which had left so far behind it the toilsome work of national development that it regarded its best results as matters of course, and forgot the struggle they had cost; an age which, with cosmopolitan sentiments, with great institutions and interests of international traffic, with a humanised international law, and an individualist literature everywhere diffused, was already beginning to live in the ideas and tendencies of a world economy (Weltwirthschaft). The seventeenth century had just managed to fight its way up from local sentiment to national sentiment; international law as yet scarcely existed. The old bonds which had held together Catholic states had been broken; all the intellectual movement of the time centred in the new national life; and the stronger and sounder beat the pulse of that life, the more it felt its individuality, the more inevitable was it that it should bar itself against the world outside with a harsh egoism. Each new political community that forms itself must be carried along by a strong and exclusive feeling of community; these are the roots of its strength. The struggle for self-sufficiency and independence is as natural to it as the spirit of violent rivalry which hesitates at nothing in order to come up with, to surpass, and to crush the rivals in whom it always sees enemies. It was the law of autarchy by which the commercial policy of those times was exclusively guided. The endeavour after autarchy naturally shews itself in an especially violent and one-sided form in the youth of nations.
The doctrine of the natural harmony of the economic interests of all states is just as false as the opinion then entertained that an advantage to one state is always a disadvantage to another. The latter was an opinion which not only had its roots in the earlier stubborn struggles between towns and territories, but was strengthened just at this time by the circumstance that the possession of colonies, of the Indian Spice Islands, and of the silver mines of America had fallen to the several nations only as the result of war and bloodshed. It seemed unavoidable that one nation should have to recede when another pressed in. In reality, all social bodies, and therefore economic bodies among them, - at first towns and districts, and afterwards nations and states, - stand to one another in a double relation; a relation of action and reaction by which they mutually supplement one another, and a relation of dependence, exploitation, and struggle for supremacy. The latter is the original one; and only slowly, in the course of centuries and millenniums, is the antagonism softened. Even to-day the great economic Powers seek to utilise their economic superiority in all their international relations, and to retain weaker nations in dependence; even to-day any half-civilised nation or tribe, among whom the English or French establish themselves, is in danger, first, of a sort of slavery for debt and an unfavourable balance of trade, and, following closely in the wake, of political annexation and economic exploitation, - though this, indeed, may turn into an economic education for it.
In the seventeenth and eighteenth centuries the relations, and especially the economic relations, between states were particularly hostile and harsh, because the new economico-political creations were for the first time trying their strength, and because it was the first time that such considerable political forces were available for the pursuit of commercial, agricultural, and industrial ends,forces which might seem, if only properly employed, to promise untold wealth to every state. In all ages history has been wont to treat national power and national wealth as sisters; perhaps they were never so closely associated as then. The temptation to the greater states of that time to use their political power for conflict with their economic competitors, and when they could, for their destruction, was too great for them not to succumb time after time, and either to set international law at naught or twist it to their purposes. Commercial competition, even in times nominally of peace, degenerated into a state of undeclared hostility: it plunged nations into one war after another, and gave all wars a turn in the direction of trade, industry, and colonial gain, such as they never had before or after.
It has been often enough remarked that the period of the wars of religion was followed by one in which economic and commercial interests governed the whole foreign policy of European states. It is true that even the expedition of Gustavus Adolphus to Germany was a move in the game which was being played for the trade of the Baltic. In like manner, the later wars of Sweden, aiming at the conquest of Poland, and the aggressive movements of Russia towards the Swedish and German provinces on the Baltic, were all directed towards the acquisition and domination of the Baltic trade.
As in the East Indies, the ancient source of supply for Oriental wares, for pearls and spices, the Portuguese violently pushed their way in first, annihilated Arabian trade with unheard-of brutality, and imposed upon all the Asiatic tribes and states the rule that they should carry on trade with Portuguese alone; so in later times the Dutch were able to drive the Portuguese out, to get for themselves a like monopoly of the spice trade, to keep other Europeans away by craft and by mercantile talent, - if need were, by insolent violence and bloodshed, and to hold the people of the East in commercial subjection. The heroic struggle of the Dutch for religious liberty and for freedom from the Spanish yoke displays itself, when looked at in a "dry light," as a century-long war for the conquest of East Indian colonies, and an equally long privateering assault on the silver fleets of Spain and the Spanish-American colonial trade. These Dutch, so lauded by the naif free-trader of our day on account of the low customs-duties of their early days, were from the first the sternest and most warlike of monopolists after the mercantilist fashion that the world has ever seen. As they suffered no trading ship, whether European or Asiatic, in East Indian waters, without a Dutch pass to be bought only with gold; as by force of arms and by treaty they kept the Belgian port, Antwerp, shut up against commerce; as they crushed the Prussian colony in Africa, and countless other settlements of other nations; so at home they forbade all herring-fishers to take their wares to any but the Dutch market, and prohibited their passing into foreign service, or taking to foreign countries the implements of their craft. Although at the beginning they had low duties on imports and exports, they resorted constantly to arbitrary prohibitions whenever they thought they could thereby further Dutch interests; in 1671 they imposed the heaviest duties on French goods; and, in the eighteenth century, when they had become too pusillanimous to wage war for their commercial ends, they resorted to the extremest protectionism. In the time of their prosperity they were carrying on war well-nigh all the time, and war for commercial ends; and they shewed more skill than any other state, in the seventeenth century, in getting out of their wars fresh commercial advantages. Their obstinate pursuit of monopoly gave rise to England's navigation law and Colbert's tariff; and attracted England and France themselves towards a like policy of pursuing narrowly mercantilist objects by force of arms. The bloody and costly wars of England with the Dutch were, Noorden tells us, at bottom nothing but a duel over the maintenance of the Navigation Acts. The French invasion of Holland (1672) was an answer to their foolish and extravagant reprisals against Colbert's tariff.
The War of the Spanish Succession, like the War of the Grand Alliance in 1689-1697, was, primarily, the struggle of England and Holland, in concert, against the growing industrial and commercial preponderance of France, and against the danger of the union of French trade with the colonial power of Spain.(34*) It was a struggle for the lucrative Spanish-American trade which mainly occasioned the antagonism of England and France till after the middle of the eighteenth century. The supply of the Spanish-American colonies with European manufactures could only take place by means of the great West Indian smuggling trade, or through Spain, i.e. the Spanish port-towns. As Spanish industry supplied only a part of the need, the question was, whom Spain. would allow to share in the trade, - whether it would wink at smuggling, and, if so, to what extent and by whom; whether France could circumvent England, or England France, in Spain and the West Indies. The war, also, of England with Spain from 1739 to 1748, - which, in 1744, turned itself into a war with Spain and France, - had, in the main, no other object than this, to obtain a free course for the English smuggling trade with Spanish America; it was generally nicknamed by public opinion "the Smuggler's War."
The Seven Years' War had its origin, as everyone knows, in the colonial rivalry of England and France in North America. Whether the Ohio and Mississippi should furnish the Romance race or the Teutonic with a field for colonisation and trade, whether maritime and commercial supremacy for the next hundred or two hundred years should belong to England or France, - that was the far-reaching economic quarrel into which the great king of Prussia was drawn because he would not suffer his old ally France to attack his old enemy England in Hanover, i.e. in Germany. In defending Germany's neutrality in this commercial and colonial war, he was drawn into it himself; and when his brave troops defeated the French at Rossbach (1757) and elsewhere, they decided at the same time the great questions of the world's trade and of future colonial development. Without the victories of the Prussian grenadiers and the English fleet, England would not today have its world-wide trade, and the United States of America would not exist. It is probable that French would now be spoken alike on the Ohio and the Mississippi, at Calcutta and Bombay.
English commercial greatness and supremacy date from the successes of the war of 1756-1763. But the climax in its career of colonial conquest by force of arms, and of intentional destruction, dictated by trade jealousy, of the competing mercantile navies of France, Holland, Germany, and Denmark, was reached by Great Britain during the Napoleonic war. The commercial struggle between England and France, the shameless brutalities of the English fleet on the one side and the continental blockade on the other, form the terrible concluding drama in the age of commercial wars. Henceforward another spirit begins to make its way in commercial policy and in international morality; although the old traditions have not yet been entirely overcome, and, indeed, can never be entirely overcome, so long as there is such a thing as independent politico-economic life with separate national interests.
The long wars, each lasting several years, or even decades, which fill the whole period from 1600 to 1800 and have economic objects as their main aim; the open declaration by the Grand Alliance in 1689 that their object was the destruction of French commerce; the prohibition by the Allies of all trade, even by neutrals, with France, without the slightest regard to international law; all this shews the spirit of the time in its true light. The national passion of economic rivalry had been raised to such a height that it was only in wars like these that it could find its full expression and satisfaction. To be content, in the intermediate years of peace, to carry on the conflict with prohibition, tariffs, and navigation laws instead of with sea fights; to give, as they did, in these years of peace, somewhat more attention to the infant voice of international law than in time of war - this was in itself a moderating of international passion.
The very idea of international law is a protest against the excesses of national rivalry. All international law rests on the idea that the several states and nations form, from the moral point of view, one community. Since the men of Europe had lost the feeling of community that had been created by the Papacy and Empire, they had been seeking for some other theory which might serve to support it; and this they found in the re-awakening "law of nature." But the particular ideas for which in the first instance men strove, and for which they sought arguments pro et contra in the law of nature, were mainly products of the economic and commercial struggle then proceeding.
Inasmuch as the states that were the first to obtain colonies on a large scale, Spain and Portugal, had secured from the Pope a partition of the whole oceanic world, and its designation by him as their exclusive property, the law of nature, when it made its appearance, put forward the doctrine of Mare liberum. But while in this way Hugo Grotius in 1609 created a legal justification for his Dutch fellow-countrymen in pushing their way into the old possessions of the Portuguese and Spaniards, the English maintained the opposite theory of Mare clausum, and of the exclusive lordship of England over the British seas, in order to free their necks from the competition of the Dutch in navigation and the fisheries. Denmark appealed to its sovereignty of the sea as a justification for its oppressive tolls at the Sound; and the other Baltic powers sought, on the same ground, to forbid the Great Elector to build a fleet. The great principle of the freedom of the sea did, indeed, slowly gain general currency; but at first each nation only recognised the particular theory that promised it some advantage.
Almost all the wars of the time were waged in the name of the European "Balance." And who will deny that this idea had its justification, and that it laid the foundation for the peaceful future of a great community of states? But, at first, it was a mere phrase taken from international law; and used to justify every caprice on the part of the Great Powers, every intervention in the relations, and every interference with the fate of the smaller states: it was the cloak which hid the silent conspiracy of the western Powers to prevent the rise of a new Power, like the Prussian, and to keep its trade and its whole economic life in the bonds of dependence.
The gradual growth of the milder principle, more favourable to the small states, which is summed up in the phrase "free ships, free goods," out of the mediaval principle found in the Consolato del Mare, which allowed the confiscation of the enemy's property even on friendly neutral ships, is one of the great gains in international law in the eighteenth century. But England has never accommodated herself to it, and has, with unheard-of assurance, and with decisions of the Court of Admiralty about prizes which can have been determined by nothing but national egoism, succeeded in injuring the trade of neutrals everywhere, in time of war, even when it could not destroy it. Busch shewed, in 1797, that of the last one hundred and forty-four years England had spent sixty-six in the most sanguinary naval wars. They had all been more or less concerned, on the one side, with the conquest of colonies by force of arms, on the other, with the destruction of the neutral trade, i.e. the trade of the smaller states.
The blows of the English are nearest to us in time; they have also vitally affected Germany; and, accordingly, we are inclined, - measuring with the standard of today, - to condemn them most. On the whole, however, they were naught else than what all the more powerful commercial powers allowed themselves in their treatment of the weaker. And although we condemn the whole period for excesses in the politico-commercial struggle, and see everywhere much injustice and error mingled with it, yet we must allow that passions and blunders such as these were the necessary concomitants of the new state policy, of the developing national economies; we must feel that those states and governments are not to be praised which did not pursue such a policy, but those who knew how to apply it in a more skilful, energetic, and systematic way than others. For it was precisely those governments which understood how to put the might of their fleets and admiralties, the apparatus of customs laws and navigation laws, with rapidity, boldness, and clear purpose, at the service of the economic interests of the nation and state, which obtained thereby the lead in the struggle and in riches and industrial prosperity. Even if they frequently went too far, and were led by theories that were only half true, and gathered riches by violence and exploitation, yet, at the same time, they gave the economic life of their people its necessary basis of power, and a corresponding impulse to its economic movement; they furnished the national striving with great aims; they created and liberated forces which were absent or slumbered in the states they outstripped. And it was natural that what in these struggles was brutal and unjust should be lost to sight in each nation in the glow of national and economic success. We can understand that the several peoples asked only whether a Cromwell or a Colbert on the whole furthered national prosperity, and not whether he did injustice to foreigners in some one point. And historical justice does not demand more: it gives its approbation to systems of government which help a people to reach the great goal of national greatness and moral unity at a given time and with the means of that time, at home and abroad; systems, moreover, which have redeemed the harshness of national and state egoism as regards neighbouring peoples, by a model administration at home.
At any rate one thing is clear; a single community could not withdraw itself from the great current wherein the whole group of European nations was being swept along; and least of all, one of the smaller states which was still making its way upward. In such a time of harsh international and economic struggles, he who did not put himself on his defence would have been remorselessly crushed to pieces. As early as the sixteenth century, it became apparent what a disadvantage it was for Germany that it had neither the national and politico-commercial unity of France, nor the mercantilist regulations to which both England and France were beginning to resort. And this was still more apparent in the seventeenth century. The military and maritime Powers of the West not only drove the Germans out of the few positions they had at first obtained in the colonial world; they menaced more and more even the trade they had long possessed. The Hanseatic merchants were driven out of one position after another. One after another the mouths of the great German streams passed into foreign hands: the Rhine came under French, Dutch, and Spanish suzerainty, the Weser under Swedish, the Elbe under Danish, the Oder under Swedish, the Vistula under Polish control. The tolls imposed by these foreign masters at the mouths of the streams gave the river trade, in many cases intentionally, its last blow. While the Dutch destroyed the Hanseatic trade in their own markets by differential duties; while they and the English made the direct trade of Germans with Spain and Portugal impossible, by violence and the confiscation of ships; the Dutch misused, with increasing dexterity, their growing preponderance on the Rhine and in the Baltic to put Germany itself into a position of unworthy dependence in all matters of business. As the only or most important purchasers of German raw products and the only suppliers of Indian spices, they secured an almost intolerable monopoly, which reached its climax through the unconditional dependence of Germany on the Dutch money market during the period 1600-1750. And what Holland was with regard to Indian wares, France was with regard to manufactures and objets d'art. Those Hanseatic towns that were not ruled by Dutch business managers (Lieger) were in slavery to English creditors. Denmark sought to destroy German navigation, fisheries, and trade by its tolls on the Sound and the Elbe, and by its commercial companies. And all these conditions affected Germany most severely, not in the Thirty Years' War, but one, two, or three generations later; when the western Powers had firmly established their new politico-economic institutions. With naive pleasure in their maritime and commercial strength, with the support of a brutal international law, and a diplomacy which forced upon weaker and less experienced peoples, by every art of intrigue, unprofitable and perfidious commercial treaties, they openly adopted the half-true, half-false doctrine that the trade advantage of one state always was and always must be the disadvantage of another. In the period from 1670 to 1750 the bitterest lamentations were heard in Germany about this commercial dependence, about French manufactures, about the traders from every prince's land that overran the country: the torrent of complaint touching the pitiable condition of the imperial government, which was unable to give any assistance, increased like an avalanche. The state of commerce in Germany, cried the most distinguished economic writer of the time, depends upon the interest taken in it in the Reichstag at Ratisbon. At last all the voices, alike of scholars and of the people, came together in unison: There is but one way out of it; we must do what Holland, France, and England have done before us; we must exclude the foreign wares; we must once more become masters in our own house. Facts had taught them, with inexorable clearness, that, - at a time when the most advanced nations were carrying on the collective struggle for existence with the harshest national egoism, with all the weapons of finance, of legislation, and of force, with navigation laWS and prohibition laws, with fleets and admiralties, with companies, and with a trade under state guidance and discipline,- those who would not be hammer would assuredly be anvil.
The question in Germany in 1680-1780 was not whether a mercantilist policy was necessary and desirable; about that there was agreement, and properly so. The ideals of Mercantilism, though they may have been presented in an exaggerated form, and too sharply expressed in one-sided economic theories, meant, practically, nothing but the energetic struggle for the creation of a sound state and a sound national economy, and for the overthrow of local and provincial economic institutions; they meant the belief of Germany in its own future, the- shaking off of a commercial dependence on foreigners which was continually becoming more oppressive, and the education of the country in the direction of economic autarchy. The victories of the Prussian army served the same end as the financial and commercial policy of the state; between them they raised Prussia to a place among the Great Powers of Europe.
The difficulties in the internal economic policy of the country consisted in this: that the Prussian state, instead of being a nation, included only a limited number of provinces; and that, at the same time as it adopted a protective system against France, Holland, and England, it also excluded its German neighbours. The real explanation is that the Prussian state was still but half-way out of the period of territorial development; was still, so to speak, in the earlier century of commercial disputes with Hamburg, Leipzig, and Danzig, with Poland, Saxony, and other neighbouring territories; and it could make use of its natural superiority, as compared with neighbours like these, only by binding its provinces together in an enclosed and exclusive combination.
We have reached the end of these general considerations as to the historical significance of the mercantile system. Our argument rested on the proposition that, in spite of the fact that it is the individual and the family that labour, produce, trade, and consume, it is the larger social bodies which, by their common attitude and action, intellectual as well as practical, create all those economic arrangements of society, in relation both to those within and those without, upon which depend the economic policy of every age in general and its commercial policy in particular. We saw that the feeling and recognition of economic solidarity, in regard alike to those within and those without, necessarily created at the same time a corporate egoism. From this egoism the commercial policy of every age receives its impulse.
We have, in the next place, laid emphasis on the proposition that historical progress has consisted mainly in the establishment of ever larger and larger communities as the controllers of economic policy in place of small. The seventeenth and eighteenth centuries seemed to us the birth hour of modern states and modern national economies; and, therefore, to have been necessarily characterised by a selfish national commercial policy of a harsh and rude kind. Whether such a policy was rightly directed in details depended on the information and sagacity of the personages who guided the state; whether it was to be justified as a whole, whether as a whole it had a probability of success, that depended, then as ever, on the question whether it accompanied a great upward-moving stream of national and economic life.
The progress of the nineteenth century beyond the mercantilist policy of the eighteenth depends, - keeping to this thought of a succession of ever larger social communities, - on the creation of leagues of states, on alliances in the matter of customs and trade, on the moral and legal community of all civilised states, such as modem international law is more and more bringing into existence by means of a network of international treaties.
But, of course, by the side of this stands another and not less important chain of connected phenomena, which also helps to explain the contrast between the nineteenth century on the one side, and the seventeenth and eighteenth on the other. The struggle of social bodies with one another, which is at times military, at other times merely economic, has a tendency, witH the progress of civilisation, to assume a higher character and to abandon its coarsest and most brutal weapons. The instinct becomes stronger of a certain solidarity of interests, of a beneficent interaction, of an exchange of goods from which both rivals gain. It was in this way that the strife of towns and territories had been softened and moderated with time, until, on the foundation of still greater social bodies, the states, it had passed into a moral influence, and an obligation to educate and assist the weaker members within the larger community.
So the eighteenth century ideas of a humane cosmopolitanism began to instil into men the thought of a change of policy in the economic struggles of European states at the very time when the international rivalry had reached its highest point. After the War of Independence of the United States, after the liberation of the South American colonies from the mother countries, after it became increasingly difficult to maintain the old, harsh, colonial policy, after international law had made progress (for which no one fought more energetically than Frederick the Great), and after the promulgation of the doctrine of mutual gain in international trade, there arose the possibility of a more humane contest. Undoubtedly we must regard this movement, - which reached its first great high-water mark, though accompanied by excessive and one-sided eulogy, in the Free Trade period 1860-1875, - as one of the great advances made by mankind. One might say that tHe seventeenth and eighteentH centuries created the modern national economies, and that the nineteenth has humanised their relations to one another. This being our point of view, we are able to raise ourselves above the suspicion of desiring, without qualification, to represent the embittered commercial strife, the privateering and colony-conquering wars of England, the prohibition and navigation laws of the eighteenth century, as presenting an ideal for our own day.
Yet must we declare, with equal emphasis, that the literary-ideological movement that assailed the old mercantile system set out from Utopias, which, useful as they were as a leaven for the transformation of public opinion, were, nevertheless, very remote from real life. Does it not sound to us to-day like the irony of fate, that the same England, which in 1750-1800 reached the summit of its commercial supremacy by means of its tariffs and naval wars, frequently with extraordinary violence, and always with the most tenacious national selfishness, that that England at the very same time announced to the world the doctrine that only the egoism of the individual is justified, and never that of states and nations; the doctrine which dreamt of a stateless competition of all the individuals of every land, and of the harmony of the economic interests of all nations?
To our own time has the task been given to survey both periods from a higher standpoint; to give their due value to the theories and ideals, the real psychical motives and the practical results of both ages; and so to understand them.
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