POLI 441 Lecture Notes - Lecture 1: Samuel Von Pufendorf, Hugo Grotius, Mercantilism
Course CodePOLI 441
A Brief Intellectual History
Mercantilism in Britain
The French Physiocrats
Henry Martyn and Adam Smith
Adam Smith and the Invisible Hand
Smoot Hawley and the Depression
Strategic Trade Policy: US and Japan
“The result [of such a division], then, is that more things are produced, and
better and more easily when one man performs one task according to his
nature, at the right moment, and at leisure from other occupations.”
Two decades later, Xenefon links division of labour to size of the market.
Natural Law Thinkers
“natural right” justified free trade.
Later, turns into natural right of all nations to regulate their own trade (Pufendorf)
Throughout: devoid of analysis
Early 17th century
Two key features of the period:
Overseas exploration, expansion of known world
Rise of nation-states as political entities
Trade becomes “an affair of state” (Hume)
Conflation of Mercantilism with Autarky/Isolationism
While in fact:
“If [we exchange] amongst ourselves, the commonwealth cannot be enriched
thereby. And if we exchange with strangers, then our profit is the gain of the
commonwealth.” (Mun, 1621)
“[trade is] the only mean to enrich this kingdom.” (Coke 1670)
Trade brings greater diversity, shared risk
Associated Social Changes
The perceived role of merchants, and popular views on their subject, evolved
Merchants and tradesmen are considered for the first time as beneficial to social
welfare, rather than a rising class threatening established order.
Natural Law Echoes
Some elements of the natural law approach remain, and are twisted to suit mercantilist
what Providence gave to England, should remain there,
yet what Providence put on foreign shores was meant to foster exchange.
Zero Sum or Fixed Gains?
It is a simplification to see the mercantilist position as a zero-sum view.
Trade was seen as mutually beneficial, but its gains could be captured by either
Hence: not all trade transactions are equally beneficial. And therein lay the role of the
Perceived need for central decision-maker (Steuart, 1767)
Central Mercantilist Tenets
Benefits of trade flow from exports, or a favourable balance of trade:
“Exportation is gain, but all commodities imported is loss” (Battie, 1644).
An underlying concern over gold and foreign specie.
Yet Restricting Imports was Problematic
“here it is worth remembering that a great part of foreign commodities brought for
England are taken in barter of ours” (Robinson, 1648). “
...how should our neighbors be able to pay for our manufactures, for which we have
those commodities in exchange” (Paxton 1704).
What remained: recommending frugality.
Moral argument against imports as luxuries and trifles.
By late 17th century, ideas on trade turn to what is being imported and exported. •
Manufacturing is linked to employment.*
Exported manufactured goods were said to lead to “foreign paid wages”.
Exporting raw materials was seen as squandering this benefit.
Commodity Composition II
Here, the policy implications are less problematic:
You tax imports of manufactured products,
And you tax exports of raw materials.
Asgill (1719): use policy for “protection and encouragement” of domestic industry.
Echoes import substitution schemes of the post-colonial era.
Even here, the recognition of trade as barter restricted use of import barriers
Vanderlint in 1734 spoke against them on account of fear of retaliation.
Appearance of notion of reciprocity
Mercantilism Remains a Step Forward
Respect of property rights
Recognition of importance of political stability*
Mercantilists tended to advocate freedom of religion, of expression, of immigration
They held an anti-monopoly position (especially within domestic realm)
Doubts within Mercantilism
“The Dutch we see import all, yet thrive upon trade, and the Irish export eight
times more than they import, yet grow poorer” (Coke, 1670)
Hume establishes the price-specie flow mechanism, observing that Spain cannot
hold onto all of its gold.
Conclusion: it is produced goods and labour that matters, rather than precious