Trade policies and war preparation in the 18th century

In the eighteenth century, in Europe the land was still the primary font for wealth and the mean through which families and firms could survive. It is claimed by George Rude’ that peasants were 75% of the population in Prussia, 80% in France and 90% in Russia and, at the end of the seventeenth century, 75% in England. Notwithstanding these data, it is in the seventeenth century that the Republic of The United Netherlands shown that the wealthy of a country could depend on trade and industry. While industries became very important after the industrial revolution, which started after the 1770, trades between states were important already at the end of the medieval age, and became fundamental for the wealth and the power of a state in the seventeenth century. In order to examine the importance that trade policies had in the pre modern State for preparing to war, firstly I will briefly examine the economies of the three most important countries of the seventeenth and eighteenth century: the Dutch Republic, Great Britain and the Kingdom of France. Secondly I will show how the trade policies of these three States sometimes led to wars. Finally I will highlight the importance of mercantilism in the seventeenth century and the consequences that this policy had on Europe.

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The wreck of a transport ship, 1810, William Turner.

Amsterdam, the most important city of the Dutch Republic, grew a lot during the seventeenth century till to become the biggest and most important commercial city of Europe. An example of this exponential growth could be the foundation in 1602 of the first stock exchange in the world, the Amsterdam Bourse. It could be argued, not in this context, that in the Dutch Republic of the seventeenth century the modern capitalistic system started to become the main economic system. The Bourse was founded in order to allow the Dutch East India Company to find funds to finance the transport of goods from the Far East. The greatness of the Dutch Republic in fact is due to the trade hegemony it had among East India in the seventeenth century.

During the second part of the XVII century, England and France started to act in order to contrast the hegemony of the Dutch Republic. The Kingdom of England never liked the position that Holland took in the sea power scenario. England claimed to be the “Lord of the seas”. In 1651, the parliament of England passed the Navigation Acts. The Navigation Acts stated that all the goods that were imported in England could be brought just by England ships or ships of the country that produced these goods. The navigation acts are an example of a mercantilist policy, which I will describe better later. At the same time England started to incentive the shipbuilding industry. Furthermore, as the Dutch created the Amsterdam Bourse in order to finance the East India Company, England in 1694 created the Company of The Bank of England. At the beginning the principal goal of the BofE was to raise funds for the government. However, after a short time, the bank started to print paper money, and began to assume the positions that the central banks have today. Mercantilist policies such as these helped a lot the Kingdom in the preparation for war. Furthermore England, after the Glorious revolution of 1688, became the alternative political model to the absolute states of Europe, this gave to England political stability.

The best example of an absolute state is the Kingdom of France. France in the seventeenth century was one of the greatest States of Europe in terms of size and in terms of population. As an absolute Monarchy, there are two figures that must be analyzed: the King and the finance minister. Louis XIV, or the Sun King, is the main expression of an absolute monarch. He reigned France from 1643 to 1715 and during his reign France spent most of his time in wars. However, Louis XIV was not just a warmonger, he enriched France with industries and public works and also was very interested in the arts and sciences. The second important figure is the Minister for the Maison du Roi: Jean Baptiste Colbert. Colbert is the main important figure in order to explain mercantilism, the main economic system of that period. It is so important that in France, also today, when referring to mercantilism, it is also used the world colbertism.

re_luigi_xiv
Louis XIV, 1701, oil on canvas, 277 x 194cm, Hyacinthe Rigaud

Mercantilism is a “system of extensive economic controls employed under a monarch with absolute power”. For mercantilist economists the wealth of a country is measured in terms of the quantity of gold or precious metals that are within a State. Therefore, it was important that gold and wealth remained in the country so that to increase his wealth. For these reasons a main economic policy of mercantilism is the application of tariffs on imports. Furthermore, mercantilism aims to create a strong and developed home market. Many cartels and monopolies where established in order to defend the growth of internal production and to promote the internal goods.

Colbert, interested in the greatness of the Kingdom of France, applied many interventions in the economic life of France. Firstly he was interested in responding to the British Navigation Acts and to the Dutch power over the control of the sea. In 1669 he became the France Navy Minister. He started by strengthening the ports of France, than he endowed France with a powerful navy and a merchant marine. Goods usually were brought between the colonies through Dutch boats. Colbert so decided to create important trade companies (like the French East India Company) in order to reconfirm the presence in America and in the East Indies. These societies were similar to the East India Dutch Company and started to connect the main France settlements (Canada, Martinique, Santo Domingo, Guadalupe, Senegal and South India) with the Kingdom. As a result, Dutch ships were no longer needed.

king-william-iii-and-his-army-at-the-siege-of-namur-1695

While Colbert was interested in the role of France on the intercontinental maritime expansion, the King was mainly interested in the territorial expansion. Due to the fact that the King expenditures on wars and public works were enormous (France spent almost 50 years on wars between 1650 and 1760), there was a huge need of funds and resources. Yet there was a big problem in the fund raising method. The French society was divided into three big classes, or “states”: the nobility, the clergy and the “Third State”. Because of ancient privileges and a venal society, the first two classes, which contended most of the wealth of the country, didn’t use to contribute at the rent seeking process for financing the Kingdom. Rent seeking is a term that is used when speaking of French monarchy looking for financing its expenditures. So there were 2 sources of revenues:

  • Taxation
  • Monopoly grants

While taxation was largely used since the beginning of the sixteenth century, monopoly grants started to take importance during the Colbert administration, till to become the mayor source of revenues. However, Colbert had many difficulties to adopt rent seeking. The tax system, as described above was corrupted and full of privileges. When Colbert took office in 1665, he wanted to reform the tax system. Thus he rose the taille, a tax imposed on the income and on properties of the third state, but this didn’t help France because of many exemptions based on traditional privileges. Secondly he operated on the incidence of taxes. He reduced the taille and drastically rose the aides (a tax on commodities and tolls). However the farmers of the aides were so corrupted that this improvements were nullified.

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Mr and Mrs Andrews, oil on canvas, 1750, Thomas Gainsborough, National Gallery London.

The Dutch war of 1672 led Colbert to a new method of acquiring funds. He started to grant monopoly rights. The France economy become in a short period of time a web of economic regulations administrated by the King. Instead of taxation, in the monopoly granting rights the state has not to check the possible taxable values of goods. Moreover the problem of corruption is nearly crossed out. It is important to highlight that the growth of the France Mercantilist State is related to the extension and consolidation of monopoly power in the economy. The economy therefore become highly monopolized and controlled. This situation was present also in England, but in France was magnified exponentially. Mercantilism, or colbertism, thus is an important element in order to interpret that period.

Colbert with mercantilism could sustain France on its main wars. This economic system permitted the development of many sectors, such as silk, or wool. For example, the production of wool in 1680 became so important that many quantitates were exported all over Europe. Another example is the development of the luxurious goods. Colbert and Louis XIV were very interested in the production of luxurious goods. Lyon in that period became the biggest producer of silk of the entire Europe. Other examples are: mirrors, embroideries and horses.

All these trade policies that were proposed by these States resulted sometimes in effective wars. Following the worsening of the relations between England and Holland, there have been fought three wars: 1652-1654, 1665-1667, 1672-1674. These wars were won by the Kingdom of England that through the years will impose his supremacy over the sea. Another important conflict that conditioned the seventeenth century was the France-Dutch war of 1672-1678. This war was principally caused by the 1667 tariffs of Colbert on imported goods. Colbert, willing to promote the French manufactories, posed a very high tax on all the foreign goods sold in France. Holland responded to this tariff, as often happens, with cutting imports from France. Louis XIV so decided to invade the Republic of the United Provinces. The war ended in 1678 with all the states very damaged. England so took advantages of the Dutch weakness to establish his control over the seas. The effective establishment of his power occurred after the Spanish Succession War (1702-1713) when England with the Treaty of Utrecht secured the Asiento, a contract over the slave trades.

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The Royal Prince and other vessels at the Four Days Fight in 1666 during the Second Anglo-Dutch War. Abraham Storck.

In conclusion, the importance that international trade took in the lives of major European states emerges with clarity examining the stakes of the various conflicts that characterized the century between 1660 and 1760. The most important I believe is the 7 year war. With the Treaty of Paris of 1763, France was ousted from America and Canada and lost many settlements in India. England therefore could confirm his power over the extra-European market. Undoubtedly it is an exaggeration to say that all the wars of the 1700 had only an economic motivation. However, one thing can be said. The outcome of the main wars not only arranged the relations of power between the different States in Europe, but also allowed the winners to access to major world markets. As a result, the losers were excluded from many of these vital sectors of the international trade. Mercantilism therefore ceased to be an efficient economic policy.

Mercantilism was the main feature for England and France in order to prepare for war. Tariffs on imports, monopolies and the effort to a positive trade surplus, were the main policies of this economic system. Mercantilism in France financed the huge expenses of Sun King. The policies of Colbert helped the development and the establishment of many industrial sectors. This economic idea, that can be assimilated to protectionism, helped the weak economies of these countries to grew, but as announced by the classic economic theory, at a certain point became inefficient. As Ricardo has stated, there is a competitive advantage in countries where there is a comparative avantage in the production of that good. Mercantilism in fact, also if some tariffs and laws remained for a long time applied, basically left the economic scene with the start of the industrial revolution. Furthermore Mercantilism needed many enforcments costs in order to be applied. These costs became no longer justifiable. The improvements in technology that the industrial revolution brought in the nineteenth century allowed the technology specialization, and the political costs of a closed country, such as a mercansitlistic country, were not anymore justifiable by the economic results.

| di Sebastiano Totta |

SATIRO SAGGIO LOGO

References:

Root, H.L. (1994), The fountain of privilege. Berkeley: University of California Press. Ch. 8, pp. 163-178

Ekelund, R.B. and R.D. Tollison (1997), Politicized economies. Monarchy, monopoly and mercantilism. Ch.4, pp. 92-123

Rude’ George. Europe in the 18th Century: Aristocracy and the Bourgeois Challenge. Harvard University Press, 1985

F.M. Feltri, M.M. Bertazzoni, F. Neri, I giorni e le idee Vol II. Il Settecento e l’Ottocento. SEI, 2006.

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