XIII. DEVELOPMENT OF THE MEDIEVAL ORGANIZATION OF COMMERCE
=127. Types of medieval traders; pedler, shopkeeper.=—Enough has already been said to guard the reader against the idea that great wholesale merchants of the modern type were common in the Middle Ages. The regular type of trader was the artisan who manufactured the goods he sold, or the pedler who collected a stock of goods in a town and carried them about in a pack for sale. The pedler’s stock was not unlike that which he would carry around the country nowadays,—sewing materials, toilet articles, etc. An illumination in a manuscript of the fourteenth century, representing monkeys opening a pedler’s box, shows vests, caps, gloves, musical instruments, purses, girdles, hats, cutlasses, pewter pots, and other articles. An English statute of the fourteenth century, describing a similar stock in trade, mentions rabbit skins as one of the articles which the pedlers took in exchange for their wares, and an English author of the period accuses them of catching cats for their skins. The petty shopkeeper stood a step above the pedler. He had a regular shop in a town, where he displayed his wares, and often went on trips to the markets of other towns, where he set up a booth and carried on such trade as the town regulations allowed.
=128. Merchants.=—Still another step above the shopkeeper was the real merchant, who had his warehouse, from which he supplied the retail traders, and who bought up considerable quantities of goods at the great fairs at home and abroad. It is doubtful whether we can find in this class in northern Europe any men who devoted themselves entirely to wholesale trade; and merchants had not yet specialized so that each would devote himself exclusively to the trade in a particular ware. We can illustrate the point by a German merchant, whose account books have been preserved so that it is possible to follow his business operations exactly. Vicko von Geldersen was a draper of Hamburg, where he rose to wealth and a high position. He imported cloth wholesale, and sold it both wholesale and retail. But he made use of his connection with Bruges, which was the great cloth market, to send there for sale iron, honey, meat, butter, etc., and to import such wares as oil, spices, figs, and almonds, which he sold to smaller dealers in many cities of Germany.
Members of the class to which Vicko belonged were the leaders of commerce in the North of Europe during the Middle Ages; they accumulated wealth which seemed great at the time, and formed an aristocratic class in social and political life. Their sons were brought up to follow the family business, and often trained to it by extensive study and residence in foreign countries.
=129. Development of commercial association in the Middle Ages.=—In the Middle Ages we find the beginnings of that process of association which can be traced step by step to the formation of the great “trusts” of the present day, and which forms one of the most important features in the development of commerce. To point out the various advantages which arise from the association of laborers and of capitalists would lead us into political economy; and to describe in detail the development of the various forms of association would require an excursion into legal history equally out of place. We must content ourselves with indicating some of the main features which are easily intelligible.
The need of association was felt especially in the Middle Ages because it was necessary that a merchant or his representative should accompany his wares on the road. It was often difficult for a merchant to look after a commercial venture in person; he could not trust it to a hireling; and the slight development of the carrying and commission profession made it impossible for him to leave it to a class of persons who nowadays make it their business to attend to such matters. The merchant, therefore, would associate with him some one who could represent his interests; and a modern author asserts that in comparison with the amount of business many more commercial companies were formed then than at present. The merchant would choose by preference a member of his family, and family partnerships were the prevailing form of association at first. With the growth of commerce, however, greater freedom of association was demanded, and the group ceased to be limited by considerations of relationship.
=130. Advantages of association.=—By joining together, two or more men could follow different lines; one would stay at home while another could accompany the wares, and perhaps still another could attend to sales in a distant city. The advantages of this are apparent, and of not less importance are the benefits arising from the better utilization of capital. A person who had accumulated wealth, but who on account of advanced age, physical disability, or other circumstance could not himself employ it in commerce, would join with him a man who contributed to the enterprise the necessary business activity.
Capitalists gained also in another way, for they were enabled by association to share the risks of an enterprise. A man who put all his money into one ship or cargo ran the risk of being ruined; and foregoing paragraphs have shown that the dangers in the path of commerce were by no means slight. By distributing his capital in a number of enterprises, however, as could easily be done if he entered into association with others, he could hope to make up for any probable loss by the profits of his successful ventures, and can be regarded as insuring himself. We find, in fact, that the shipping business was for the most part carried on in this way.
=131. Forms of association; partnership.=—Commercial association took ordinarily the form of a “commenda” (Latin commendare, entrust). The “commendator” contributed capital in the form of money, wares or a ship, while the other party, called the “tractator” contributed only his personal services to the enterprise; of the profits one fourth went to the tractator and the remainder to the commendator. The tractator who saved his earnings could in time also contribute capital, and was given a greater share of the profits and more freedom in conducting the business.
The commenda, corresponding to a “silent partnership,” was older and of more importance in commercial undertakings than the ordinary partnership of the present day; but the latter form of association grew up also at this time, and was used in commerce as well as in industry. The joint-stock corporation belongs in its important applications to a later period.
=132. Spread of the practice of association from Italy.=—The different forms of partnership developed especially in Italy in the last few centuries of the Middle Ages, when the growth of commerce was most rapid, and they became extraordinarily extensive and important. They secured the union of capital and executive ability which enabled far greater enterprises to be carried on than would have been possible without them. The Italian commercial house of the Peruzzi, for instance, had fourteen branches and one hundred and fifty factors or agents. Even the assistants in the business, who did not themselves contribute capital to it, were interested in its success by a system of profit sharing. From Italy the practice of association spread to the North of Europe, and it became practically universal in commercial undertakings. Each of the larger firms had its characteristic trade-mark, distinguishing its bales of goods.
=133. Position of the Jews in medieval commerce.=—The Jews held a peculiar position in medieval Europe. They were distrusted and disliked by the Christians, because of their difference in religion, and because of their business ability, which made competition with them a difficult matter. Though they were scattered throughout Europe they kept touch with each other, and so enjoyed exceptional advantages in the pursuit of commerce and the extension of business relations. In the early part of the Middle Ages they were indispensable; Christians were not educated up to their level in business, and had to leave to them the major part of the slight commerce of the times. As Christian peoples developed, however, they demanded for themselves the place which the Jews had won; and by a long series of restrictions and persecutions they forced the Jews into some particular branches of business where the Christians could not follow them. The church taught for a time that it was wrong to lend money at interest, and discouraged Christians from seeking gain by this means. The Jews, therefore, seized the opportunity which was denied to Christians, and became money-lenders. Their position was always precarious, for the law gave them no protection, and they were subject constantly to robbery by feudal princes and by the people, who believed everything evil of them. From England they were banished altogether, for several centuries. They showed astonishing skill and fortitude, but in the last centuries of the Middle Ages they lost their position even as leaders in credit operations. The church then permitted money-lending if the terms were not extortionate; and Christians from southern Europe, “Caursines” (named from Cahors, in the south of France) and “Lombards,” succeeded the Jews as the money-lenders of Europe.
=134. Character of currency in the Middle Ages.=—One of the serious obstacles to the development of commerce was the character of the currency in the various countries of Europe. Assuming that the reader appreciates the importance of money as facilitating the operations of exchange, and knows the qualities of good money, we may confine ourselves to pointing out some of the characteristic faults of medieval currency.
(1) Merchants could not rely upon the government to maintain the standard of value. In many countries the kings debased the coinage again and again, to secure the means of carrying on war or paying public expenses of other kinds. Every debasement, as it left the coins with less pure metal, lowered their purchasing power and raised prices; many innocent people suffered and everybody grew reluctant to make bargains and contracts.
(2) In many countries, especially those on the Continent, the privileges of the great feudal lords included the right to keep a mint and to issue coins. The central government restricted this right, as it grew stronger, but in general the currency of medieval Europe was made up of a vast variety of coins of standards even less reliable than that of the king’s coinage. There was danger that a coin, even if it was of good weight, could not be passed at its full value outside the locality where it was minted.
(3) Even in countries like England, where feudal coinage was put down and where debasement by the government was exceptional, counterfeits were not rare, and the clipping of coin was very common.
These characteristics of medieval currency made the money-changer a necessary figure in the commercial world; he was to be found everywhere, even in the small towns, buying and selling the various coins in circulation.
=135. Difficulty in making payments in distant places.=—While the money-changer facilitated payments in any given place, he was not of much assistance to a merchant desirous of making a payment in a distant town or country. The merchant, it is true, could buy from him foreign money with which to make the payment; but the transportation of the actual coin was not only dangerous and expensive, but also subject to legal restriction, and was to be avoided if possible. The merchant would probably prefer to send instead of money some ware, which he could sell to advantage at the destination, and then with the proceeds make his payment. For example, when Michael Behaim of the Nuremberg Company wanted to send 1,000 gulden from Breslau to Nuremberg, he found it expedient to buy an amount of wax which he could sell in Nuremberg for the required sum, and he shipped that instead of money.
=136. Introduction of the bill of exchange.=—It might not, however, always be convenient for a man to meet his obligations in this way; he might not have the commercial knowledge, or perhaps he might have no good opportunity to ship a ware. Behaim, in the case cited, had in fact resorted to the wax shipment only from necessity, after he found it impossible to make his payment by the means of remittance now become general, the bill of exchange.
Suppose that B. in Breslau owed the 1,000 gulden, to A. in Nuremberg, for spice; and suppose that D. in Breslau was the creditor of another Nuremberg merchant C, to the extent of 1,000 gulden, perhaps for furs. It would be absurd for B to ship the money or to go out of his way to ship wax to A, and for C to ship the same value to D, when the payments could be made to cancel each other. Why should not B pay to D in Breslau the 1,000 guldens due him, and tell C to pay the same amount to A in Nuremberg? This could be accomplished by means of bills of exchange; D could write out an order to C directing him to pay the money, and sell it to B, who would thus have the means of paying his debt in Nuremberg to A.
Such an operation implies, however, not only regular commerce of considerable volume but also mutual confidence among the participants. How could B know whether D actually had a correspondent in a distant place who would meet his obligations promptly? It was not, in fact, until the thirteenth century that bills of exchange were used to any considerable extent; then they were developed in Italy, and spread from there.
=137. Development of banking in Italy.=—In Italy, also, the money-changers developed other forms of banking. As they were dealers in money, business men in want of capital for their operations naturally sought it of them. The money-changers might lend it from their own stock or act as brokers and secure the money from some man who had a surplus. The short step from this to the common form of modern banking was made when merchants deposited their surplus cash with the money-changer, and he had thus a considerable stock, which he could lend so long as he kept sufficient reserve to meet the demands of depositors. It soon became unnecessary for money to pass at all in large transactions; a man could get a loan from a bank simply by having a deposit ascribed to him on the books, and could assign this loan to others as he chose to pay it out. The characteristic danger of banking, the attempt to make a great deal of credit out of a little capital, appears early in Italy, with its results of failures and crises. The advantages of the banking system, however, the economizing of time and money and the facilitating of business operations, were so clear that banking kept its place, and spread toward the close of the Middle Ages from Italy to other countries.
QUESTIONS AND TOPICS
There is, in the history of commerce, no topic more difficult and none more important than the development of the organization. The student who has learned the facts has made only a beginning; he must grasp the significance of the facts if he is to gain anything from his study. The teacher is advised, therefore, to enlarge on the advantages of association and cooperation, as they are treated, from one point of view, in Adam Smith’s celebrated discussion of the division of labor, and in many manuals of economics.
So much depends on the degree of advancement of the pupil, and on his particular environment in country, town or city, that it is difficult to suggest specific questions or topics. In general, the teacher should suggest the meaning of earlier development by constant reference to the present organization. Why have pedlers disappeared in so many districts, where do they still remain, and why? What is the proportion of retail and wholesale merchants in your city; how far has the specialization of wholesale trade progressed? Answers may perhaps be found in a business directory. The student who is competent to work out the history of business organization in his own town will not fail to get new light on the history of earlier development; and a report on the history of some particular branch of trade at home should be an excellent exercise to be worked out. Another exercise would be the history of the different forms of association (partnerships, joint-stock companies), and a study of the reasons lying behind the rise and fall of a particular form. The choice of questions and topics here must be left to the ingenuity and discretion of the teacher.
The history of the currency in England [see Cunningham] is an easier topic.
On the rise of credit instruments (bills of exchange, banking), the student will probably be best prepared if he is given reading, either in review or in anticipation, in some general manual which will enable him to appreciate the importance of credit institutions now, and will hence interest him in their origin. [Cf. Usher, The origin of the bill of exchange, Journal of Pol. Econ., Chicago, June, 1914, 22: 566-576.]
An exercise which should be profitable and rather easy is a report by the student on the life of some English merchant. [See Fox Bourne, or consult the Dictionary of National Biography on names like Richard Whittington, William Canynges, William de la Pole, etc. Further biographical material is provided by Alice Law, Some notable “King’s Merchants,” Economic Review, 1902, 12: 309 ff.; 1903, 13: 411 ff.]
If Bourne’s Romance of trade is available the student may prepare an abstract of chap. 1 (the Jews) or chap. 4 (money and credit).
BIBLIOGRAPHY
The student will find bibliographies of some of the topics treated in this chapter by consulting the appropriate articles in Palgrave’s Dictionary. Most of the best literature is foreign. The best references in English are to **Ashley and *Cunningham.
The important and difficult subject of the development of capitalistic organization is treated by John A. Hobson, *Evolution of modern capitalism, new ed., 1916, chap. 1, W. Sombart, **The quintessence of capitalism: a study of the history and psychology of the modern business man, London, 1915, and by Pirenne, *The stages in the social history of capitalism, American Hist. Rev., Apr. 1914, 19: 494-515. One aspect of the subject is covered by Arthur H. Woolf, Short history of accountants and accountancy, London, 1912.
XIV. COMMERCE AND POLITICS IN THE LATER MIDDLE AGES
=138. Development of the modern political system in the later Middle Ages.=—Toward the close of the Middle Ages the feudal system of government gave place gradually to a system more like that which the Romans had established and with which we are familiar now. As trade and intercommunication increased, and towns grew up holding a population of considerable wealth, the kings found it possible to make into a reality the position of nominal headship which tradition and the church conferred upon them. They found in the mercantile and manufacturing classes people who could afford to pay taxes, and who were willing to pay large sums to be relieved from the oppressions of the feudal lords. It became possible once more to transport supplies and to send troops to distant localities, and the kings devised means by which they could keep in touch with their officials, and hold them to loyal service. The result was a great increase in the power of the central government, at the expense of the feudal lords.
=139. Variety of development in different countries.=—The development, as sketched above, was very different in the different countries. It came early in England, and local lords lost practically all of their independence. In France it was a very gradual process, extending over the last four centuries of the Middle Ages. Even in the sixteenth century and later, the kings, though they seemed to enjoy great power, did not abolish all the remnants of feudalism, which continued down to the French Revolution in 1789, to the great harm of industrial development. In Spain the union of the crowns of Castile and Aragon just before 1500 completed the process, by establishing nearly absolute royal authority over the greater part of the peninsula. In Germany and Italy the result was different. The same man, who called himself the Emperor of the Romans, claimed the royal power in both countries, but in attempting too much he lost everything. He wasted the royal resources in vain attempt to establish his authority, and became a mere figure-head. The control of government passed in those countries to local authorities; but it is important to note that these included not only feudal lords, but also cities which had become strong enough to throw off feudal authority and to establish for themselves almost complete independence.
=140. Effect on commerce of a strong and of a weak central government.=—In a country in which the cities established complete independence they seemed for a time to have gained by throwing off the royal power. Each city could control its affairs and shape its policy to suit local interests; and the great cities of Italy and Germany before the close of the Middle Ages were the most advanced and prosperous parts of Europe. Though they controlled only small areas of land they had great resources from their commerce, and even in war could hold their own with the feudal lords fighting in the old-fashioned way.
They were strong enough to fight a feudal lord; they were not, however, strong enough to fight a modern king. While they were building up their power at the expense of rival cities and at the expense of the country districts, the kings of lands to the west of them were quietly engaged in uniting all the cities and the country districts, too, under one rule. The cities in France and England seemed for a time to lose, because they were forced by the kings to make concessions to each other and to the country districts. When, however, they had become used to consider themselves as only parts of a bigger whole, the nation, they found that their sovereign was far better fitted to represent their interests and further their progress than any one of them was individually. The struggle of the independent cities of Italy and Germany against the national states of England, Spain, and France was not decided until after the discovery of America and the sea-route to Asia, when the national organization proved decisively its superiority to the municipal.
=141. Rise of a national commercial policy.=—The rise in power of the central government in countries like England and France is proved by the appearance, toward the close of the Middle Ages, of a national commercial policy. The reader will remember that even in these countries the towns were at first so independent that each adopted a commercial policy of its own; as though, nowadays, for instance, Boston and New York and Philadelphia should each have its own independent tariff and set of commercial regulations. A merchant of Dover was a foreigner in Southampton, and if he wanted to collect a debt due him from a Southampton merchant he would appeal, not to the central government and the law of the land, but to the Dover government; and the Dover government would put pressure on the Southampton government, perhaps by arresting any merchant from Southampton and holding his goods, until the debt was paid. About 1300 the English king was at last strong enough to make general regulations in matters like this of the collection of debts, and about the same time he established a national tariff at the ports, as a regular system, and forced the various towns to give up the right to levy what dues they pleased. A similar change took place in France at nearly the same time; the idea grew strong that the general interest of all Frenchmen was superior to the particular interests of any town or individual, and the people of France began to look to the king instead of to the local authorities for protection and control.
=142. Medieval ideas on commerce.=—When commerce was undeveloped and only an incidental feature in the economic life of peoples, those high in authority in church and state held ideas of it which have faded away as commerce has proved its power and shown its benefits. Many kinds of commerce, including some forms of money-lending now considered legitimate, were prohibited because they seemed to give a man something for nothing. In ordinary trade one man was thought to make his profit at the expense of another, and government was always vigilant to protect the weaker party. A government, moreover, looked on foreign commerce rather as a privilege of its citizens than as their right, and used it freely as a political weapon instead of considering it an economic necessity. The ports of the kingdom were the “king’s gates,” which he could open or close at his pleasure, to further his royal policy.
=143. Characteristic features of commercial policy.=—Among the characteristic features of national economic policy in the later centuries of the Middle Ages we find the following:
(1) Export and import could be carried on only by favor of royal license, which was granted to and withdrawn from groups of natives and foreigners as suited the king’s ideas.
(2) The export of necessaries was frequently prohibited (as had previously been the custom with the towns), to increase the supplies of the kingdom and keep an enemy from getting the good of them.
(3) The export of money, as a specially valuable asset of the kingdom, was prohibited and its importation was favored.
(4) The growth of native industries was stimulated by a variety of regulations. The English cloth manufacture was protected, for instance, in the following ways: the export of raw material (wool, teasles, etc.) was forbidden from time to time, that the home manufacturer might supply himself more cheaply; the import of foreign cloth was restricted; and the wearing of fur was limited to certain classes, that the home market for woolen manufacture might be larger. Among the protected industries was shipping. “Navigation acts,” requiring the use of native ships, were common, though they ordinarily remained in force but a short time and had not yet hardened into a system.
(5) The foreign trade of a country was not only restricted, as at present, to certain points on the frontier where duties could be collected, but was often concentrated in one or more special places, the “staples.” The government could then oversee the trade more easily, could collect its dues, insure good quality, and protect merchants more readily, and it could also make better use of trade as a weapon of policy, directing the stream of goods where it pleased, and so rewarding or punishing other states.
QUESTIONS AND TOPICS
1. Review the sections on feudalism, and see how the modern system of government grew up from feudalism as the forces which had created feudalism were reversed. [Cf. Seebohm, Prot. Rev., pp. 15-21.]
2. Write a report on the rise or decline in power of the central government in one of the following countries, in the period 1100-1500: France, England, Germany, Italy, Spain. [Consult the current history manuals, or the encyclopedia.]
3. In connection with sect. 140 read the sections in a later part of the book, describing the advantages which have come to Germany and Italy in recent times by their union under strong central governments.
4. Write a report on medieval doctrines on one of the following subjects:
(a) Loans at interest.
(b) Profits in trade.
[Cunningham, Growth, or Ashley, vol. 1, chap. 3; vol. 2, chap. 6.]
5. Write a report on “protection” in the medieval state. [See Cunningham or Ashley on commercial policy, or read J. S. Nicholson, The English corn laws.]
6. What has been the history of the meaning of the word staple? [Dictionaries, especially Murray’s New English Dict.; Cunningham.]
BIBLIOGRAPHY
The subject of this short chapter takes the reader within the bounds of political history, and he is referred to the many history manuals for further reading and references. The growth of the French monarchy has been well treated by Adams, Civilization, chap. xiii, or Growth of the French nation.
XV. EXPLORATION AND DISCOVERY
=144. The revolution about 1500; topics to be considered.=—The period centering about the year 1500 was marked by changes so rapid and so extensive that they deserve the name of revolution. The changes affected not only the intellectual life of Europe (the Renaissance) and its religious life (the Protestant Revolt or Reformation); they caused a revolution also in the world of politics and in the world of industry and commerce. It will be necessary to survey some of these changes before we return to the narrative of the history of commerce. Three main topics will occupy the attention: first, the extension of the commercial area by exploration and discovery; second, the development of the commercial organization by new forms of cooperation; third, the rise of modern states in Europe, and their influence on the growth of commerce.
=145. Growth of geographical knowledge. Asia.=—About the year 1000, to most people in Europe “the world” meant scarcely more than the village in which they lived, so limited were their interests and their knowledge. Pilgrims to the holy places in Palestine brought back with them knowledge of this edge of Asia, but what the Greeks and Romans knew of that continent and of Africa had been forgotten, and even the better educated people thought of the outer parts of the world as mysterious regions, wrapped in darkness or peopled with prodigies, when they thought of them at all. The growth of the Levant trade and the crusades caused an increase in interest and in information. After the year 1200, when a great Mongol or Tartar Empire was established in inner Asia by Genghis Khan, Europeans began to penetrate Asia seeking aid from the Mongols against their enemies the Turks. Ambassadors, missionaries, merchants, and explorers made the journey so frequently that a regular guide-book was written by an Italian soon after 1300; and about the same time the Venetian Marco Polo returned from a long stay in China and described his travels. He had gone by land, through Persia, Turkestan, and Mongolia, and, returning by sea, he could tell also about Japan, the great Malay islands, Burmah, India, etc. Before the invention of printing knowledge spread slowly, but the maps of the fifteenth and sixteenth centuries show that the results of these explorations were not lost, and Europe had become conscious that Asia was bounded by a sea on the east.
=146. Need of a sea route to Asia; means of navigation.=—The explorations by land in Asia were of great importance in spreading knowledge of the countries from which the wares of the Levant trade came, but they were of little assistance to traders who sought to develop commerce on the old routes. With the decline of the Mongol power and the spread of the Turks, passage across Asia became constantly more difficult. The available routes finally narrowed to one, that through Egypt, and trade on this route was burdened with very heavy tolls. The European people were urged by powerful economic motives to seek out the sea route to India which was now believed to exist.
The means of navigation were still those of the later Middle Ages. The ships in which some of the most adventurous voyages were taken were of fifty tons or even less. The rig had been improved slightly, so that the ships could be handled more readily than when they bore the old square sails; and instruments for ascertaining the position at sea were also improved. Still, when we add to the actual peril of distant voyages the imagined dangers which the minds of men ascribed to unknown seas, we must admit that the early explorers met a test of courage to which men nowadays are rarely put.
=147. The lead in maritime exploration taken by Prince Henry of Portugal.=—Italians were, in general, the guides who led Europeans through the seas of darkness to the East. Conditions at home, however, forced them to seek service abroad in realizing their plans, and Portugal was the first of the European countries to effect great oceanic discoveries. The country was small and undeveloped, but it enjoyed in the fifteenth century the guidance of a singularly able line of kings. It had in the person of Prince Henry, “the Navigator,” an enthusiast who devoted practically his whole life and fortune to the cause of discovery. When but twenty-four years old he retired from the world to a promontory at the southern extremity of the country, and there he worked for over forty years, until his death in 1460. Prince Henry combined the commercial motive with missionary zeal and a medieval hostility to the Mohammedans, but the character of his work was entirely modern and business-like. He gave what was most needed for success, organization; he attracted sailors and pilots from all Europe; stimulated development in the science and art of navigation; equipped and inspired expeditions.
=148. Exploration of the West Coast of Africa; difficulties, real and imagined.=—The great achievement of Portuguese navigation was the discovery of the sea route to India around Africa. The coast of the northwest corner of Africa was well known to sailors of several European countries, and the belief was current in many minds that circumnavigation was possible. Some Genoese sailors had actually attempted to reach India in this way in the thirteenth century, but they had disappeared without leaving a trace. There was all the difference in the world between the theory and the practice of European navigators; the limit of their voyages had practically always been Cape Bojador, far north on the west coast. A strong inshore current and short but furious storms made coasting dangerous. The coast of dreary sand dunes afforded no good anchorage; mist or dust dimmed the air and frightened sailors with the thought that they were actually entering the sea of darkness; Cape Bojador was a forbidding obstacle in that it projected far out beyond the coast line, and was supposed to be extended by perilous reefs. Furthermore, most people submitted to the opinion of ancient philosophers, that the tropics were uninhabitable by reason of the intense heat of a blazing sun, which approached nearer the earth in those regions.
=149. Discovery of the Cape of Good Hope (1487) and of the sea route to India (1498).=—Under the stimulus of Prince Henry the Portuguese passed Cape Bojador in 1434, and were rewarded on a more extended voyage about ten years afterward by the discovery of Cape Verde. The name, “Green Cape,” is significant; the explorers had passed the southern edge of the desert and found a watered country with waving palms. In this enterprise, as in most others, the first steps proved to be the hardest. Though progress was steady it was slow, and at the death of Prince Henry in 1460 the Portuguese had not passed beyond Sierra Leone. They had, however, accumulated valuable experience and gained confidence; the long period of preparation fitted them to advance more rapidly as time went on. In 1471 they passed the equator, without the scorching that some had feared; and in 1487, under Diaz, they turned the southern extremity of the Continent, named by the sailor the Cape of Storms, but renamed Cape of Good Hope by the King, as an augury for the future. The illness and death of the King prevented the Portuguese from utilizing their discovery immediately; but in July, 1497, Vasco da Gama was despatched with a fleet bound for India, which anchored at Calicut (southwest coast; not Calcutta), in May, 1498. Oceanic commerce with India had begun, and the tolls and charges which had hampered trade by the land routes were things of the past.
=150. Belief that Asia could be reached by sailing westward.=—While the Portuguese were pushing on down the west coast of Africa in their search for a route to India, the minds of some men were occupied with the thought that the same object could be attained more easily by sailing directly west from Europe. The earth was known to be round and was thought to be smaller than it actually is. Asia was known to be bounded by a sea on the East. Why not reach India by sailing around the globe? Perhaps, they thought, the east coast of Asia was but a little way from the west coast of Europe or Africa. Skippers who ventured to the Azores, the Canaries, and other islands not far from Europe, brought back stories of foreign objects washed up on the beaches, or of land dimly descried on their voyages.
The belief that land existed beyond the horizon was commonly held, and Columbus does not deserve the credit of originating the idea. Nor can his discovery of the New World in 1492 be regarded as one of those acts without which the history of the world would be very different. The Portuguese were certain to touch America sooner or later in circumnavigating Africa, for they planned to steer due south from Guinea to the latitude of the Cape, to avoid the calms and currents of the coast, and an equatorial current carried their ships westward. Under these conditions the Portuguese Cabral, on his way to India around the Cape, actually did land on the coast of what is now Brazil, in 1500.
=151. Discovery of America (1492); partition of the world outside Europe between Spain and Portugal.=—Columbus, however, certainly deserves the fame which has been given him, for the courage he showed in turning theory into action; and the consequences of the discovery, however we apportion the credit for it, make it one of the turning-points in the world’s history. Europe was disappointed, it is true, in the hope that a shorter route to India had been found. Balboa proved by the discovery of the “South Sea,” or Pacific Ocean (1513), that the new land was a continent by itself, and the great distance between America and Asia became known by the voyage of Magellan around the earth (1519-1522), “doubtless the greatest feat of navigation that has ever been performed.” Time was needed to prove that America offered more than Asia to build up European commerce, and the full measure of its possibilities was not realized until the nineteenth century. At the time Portugal seemed to have gained more than Spain. The non-Christian world was divided between these two powers, by a papal decree, which gave to Portugal Africa and Asia (except the Philippines) and to Spain the Americas (except Brazil). So long as other European states obeyed papal authority and feared the might of Spain and Portugal, they were bound to respect this division; and the first period of discoveries was followed by a series of voyages, carried on especially by English and Dutch, seeking a passage northeast or northwest through Arctic seas, that would enable them to evade the monopoly granted by the Pope.
=152. Effect of the discoveries on the field of commerce; growth of a world commerce.=—Contrasting medieval and modern commerce we find that the discoveries produced great changes both in the area and in the articles of trade. Maritime commerce in the Middle Ages was restricted in general to the seas of Europe (Baltic, North, Mediterranean, Black) and to the edge of the Atlantic; exchange was hindered not only by physical obstacles but also by the claims of various states to the exclusive control of inland waters (Hansa in the Baltic, Venice in the Adriatic). When once sailors had learned to leave the coast and steer boldly into the open ocean, secure in the consciousness that they were approaching not a “sea of darkness” but a land much like that which they had left behind them, the ocean became a means of uniting continents rather than of separating them. The principle that the sea is free to all was not accepted, it is true, for some time; states tried to extend to the open sea the same narrow principle of exclusion that had been practised with respect to interior waters. These claims led to bitter national conflicts in the sixteenth and seventeenth centuries, but they fell gradually into oblivion as the hopelessness of making them effective became apparent; and the European commerce of a former period expanded into a world commerce.
=153. Effect of the discoveries on the wares of commerce.=—Europe had become acquainted with Asiatic wares in the course of the Levant trade, so that the market for them was well established when the first Portuguese ships returned from India. Transportation by the sea route, however, with its diminished costs and with the greatly increased cargoes, caused such a decline in the price of eastern goods that the market for them expanded immensely. What had before been costly luxuries for the rich became now a part of their regular necessaries, and became for other classes luxuries or comforts which they could afford to purchase. It is in this period that tea, coffee, and sugar became common articles of consumption in some of the European countries. The part played by those three articles in the commerce of an advanced country can be seen from the fact that before the end of the eighteenth century they formed over one fourth of the total imports of England. Other wares, such as Indian textiles, which had been known to Europe before, but which were too bulky to pay for the import of cheaper grades, could now be placed on the market in large quantities, when protective duties did not exclude them.
=154. Importance of the precious metals in the American trade; effect on prices in Europe.=—The American continent offered at first only one class of wares of prime importance, namely, the precious metals. The Spanish secured great quantities of gold in the early years of their conquests, but about 1550 the output of gold was exceeded by that of silver, which reached enormous proportions, as a result of the discovery of new mines in Mexico and Peru, and by the use of the amalgamation process. Before 1550 the production of the precious metals in Europe and Africa exceeded the supply from the New World, but then the balance changed; and during the seventeenth century the American supply was more than five-fold that gained in the Old World. The result was an increase in the stock of money in Europe so great that a revolution in prices ensued; silver became so plentiful that a given weight of it would purchase only one half or one third, sometimes even one fourth or one fifth, of what it would have bought before the discovery of the American mines. The serious results of this price revolution on different classes in Europe must be left to the imagination of the reader, as they lie outside the scope of this manual. No other American product competed in importance with silver, in the early period, but as the North American continent and the West Indies were settled with whites and negroes some important staples were brought from those parts to Europe. The islands proved to be especially well suited to the production of sugar, while the mainland contributed in tobacco, a ware before unknown in Europe, but one which could soon rely on a large and increasing demand. Food staples like maize and potatoes continued unimportant, not only as wares of commerce but also as articles of European production, until comparatively recent times.
=155. Improvement in the means and methods of navigation.=—With the extension of navigation new qualities were needed in ships; speed to cover the great distances, carrying capacity for the storage of bulky cargoes, and stability sufficient to ensure safety in tropical hurricanes or eastern typhoons. The medieval galley, rowed with oars, was, of course, unsuited to long voyages, and sails came into universal use. The favorite types of vessel all showed, however, the influence of medieval models. The caravel, of small tonnage and easily managed, was simply a galley fitted with masts and sails. The galleon was larger, having two or three decks; in it the attempt was made to unite the lines and speed of a galley with the stability and dimensions of a cargo carrier. Finally, the carrack, with four or five decks, combined great carrying capacity with the defensive strength of a floating fortress. Piracy continued to be a plague, especially in the Mediterranean and in waters outside Europe, and the large merchantman with a considerable number of guns enjoyed a great advantage over smaller vessels. We read of ships of a thousand tons and over. The size of the Hanseatic ships trading to London increased so much in the sixteenth century that they could no longer pass London Bridge, or lie at the wharf of the Steelyard; and the increase in the size of ships caused changes in the importance of ports, by which Seville gave place to Cadiz, Rouen to Havre, Dordrecht to Rotterdam.
Improvements were effected also in the art of navigation, especially in the means of determining the position east and west. The simple means of the later Middle Ages could give some idea of a vessel’s latitude, but very little of its longitude. The introduction of the log in the seventeenth century enabled a sailor to measure distance traversed more accurately, and the invention of the chronometer in the eighteenth century gave at last a reliable and practical means of determining longitude at sea. Progress in scientific astronomy was made of service to sailors by tables which were the forerunners of the modern “nautical almanac”; and charts and sailing directions became, as the result of generations of experience, more trustworthy and more useful.
QUESTIONS AND TOPICS
1. Character and life of Prince Henry of Portugal. [E. G. Bourne, Prince Henry the Navigator, Yale Review, Aug., 1894, 3: 187-202, reprinted in Essays in historical criticism, N. Y., 1901; or one of the readings in the bibliography.]
2. Measure on the map the distances traversed in the voyages in search of the sea-route to India; indicate these distances on a straight line, with the dates, that the rapid increase in the extent of the voyages may be apparent.
3. Early life and first voyage of Columbus. [Bourne, Spain, chaps. 1 to 3.]
4. Early Christian pilgrimages to the East. [Beazley, chap. 1.]
5. European explorers in Asia. [Cheyney, chap. 3; Verne, vol. 1, part 1; Beazley, chap. 3.]
6. Write a report on one of the countries of the East visited by Marco Polo. [See the translation of his travels.]
7. Development of geographical science before 1500. [Beazley, Introduction, chap. 5.]
8. Make tracings of typical maps, of antiquity, of the Middle Ages, and of the period of the great discoveries; and compare them with a modern map of the world. [See maps in Beazley and Cheyney.]
9. Maritime exploration before the fifteenth century. [Beazley, chap. 4.]
10. What were the means and methods of navigation in the fifteenth century? [See Cheyney, p. 53 ff., and Fiske, Discovery.]
11. Voyages in search of a passage to India through the Arctic Ocean. [Oxley, Romance, chap. 6; Verne, vol. 1, part 2, chap. 3; or Payne.]
12. Write a report on the history of tea, coffee, or sugar as a ware of commerce. [Use the references suggested for wares of the Levant or Baltic trade.]
13. Write a similar report on gold, silver, or tobacco.
14. Effect of the fall in value of silver in England. [Cunningham, Growth, vol. 2, sect. 182.]
15. Development of the art of navigation in modern times. [Encyc. Brit., Navigation.]
BIBLIOGRAPHY
Classified bibliographies of the period of the discoveries will be found in Cheyney, and in Cambridge modern hist., vol. 1.
General accounts will be found also in those two sources. Cheyney’s ** European Background includes some half dozen chapters on important topics in the history of commerce; these chapters offer, in some cases, the only available reading in English, and the book can be warmly recommended. Another book, which is inexpensive, readable, and very valuable, is Beazley’s **Prince Henry; this is full on the beginnings of exploration, and has an especially good collection of early maps. The first part of Fiske’s **Discovery of America presents an admirably written survey of conditions leading to the explorations. The first volume of the Exploration of the World by Jules Verne, N. Y., Scribner, 1879, 3 vols., covers the medieval period as well as that of the great discoveries; it has the merits and failings which the author’s name suggests.
For Prince Henry and the Portuguese discoveries see **Beazley, Stephens, Portugal, chap. 7, Cheyney, chap. 4, or, for a brief and readable account, Oxley, Romance, chap. 7.
For the period following the discoveries, E. J. Payne, Voyages of the Elizabethan seamen, London, 1880, can be recommended; it contains original accounts of the exploits of the great English seamen of the time of Elizabeth (Hawkins, Frobisher, Drake, etc.). Howard Pyle, *The Buccaneers, N. Y., Macmillan, and David Hannay, The sea trader, London, 1912, continue the narrative to a later period.
XVI. DEVELOPMENT OF THE ECONOMIC ORGANIZATION
=156. Agriculture.=—The next important subject to be discussed in considering the great changes in commerce in the modern period is the development of the economic organization. The influence of the discovery of new lands, new routes, and new wares is so obvious that the discoveries are often represented as the chief cause of the growth of commerce in the modern period. They were unquestionably very important factors in this growth, but European commerce was developing without them, and would have felt their influence much less if it had not been changing in its internal structure. Men were applying new methods of cooperation, which enabled them to make more of their resources at home and to utilize with greatest effect the opportunities for gain abroad. Even at the end of the period the commerce of England with Europe was larger than with all the other continents together.
We shall review briefly in the following sections the main changes in the different branches of production. The topic of agriculture must be dismissed with but a few words. There was a general movement toward freedom of the agricultural classes of western Europe at the beginning of the period. Wars and other political interruptions checked the movement in France, and brought about an actual decline of the cultivators in Germany; England was the only important country in which the country classes became perfectly free. In Europe as a whole, however, the conditions of production in agriculture were decidedly better than they had been in the Middle Ages, and the increased product supported a larger population and furnished a basis for a more extended trade.
=157. Development of manufacturing organization in England; persistence of gild restrictions elsewhere.=—In manufactures, also, there was a movement toward freedom in the more favored countries. We shall see, in the history of England, how greatly English manufactures, and the commerce depending on them, advanced under the leadership of merchants and capitalists who broke through the old gild restrictions. The striking feature, however, in the manufactures of most countries of this period is the maintenance of the gild system, which became a most serious check on industrial advance. It will be remembered that the gilds grew originally out of the union of artisans in any trade, who banded together to protect their interests, and who were granted certain privileges, especially that of monopoly, that they might regulate the trade more efficiently and so protect the interests of consumers also. At the present time the interests of consumers are sufficiently protected by the competition of producers, who do not need government regulations to tell them that they must sell good wares at low prices if they desire to succeed; and just as soon as exchange becomes sufficiently active to stimulate competition the public gains by having restrictions abolished. In most of the European countries, however, the gild privileges and restrictions were retained until the nineteenth century, with results set forth in the following paragraph.
=158. Evils of the gilds.=—(1) The privilege of monopoly was abused by limiting entrance to the gild in various ways, so that production was restricted and prices were raised to the detriment of merchant and consumer. Laborers suffered, also, by the lessened demand for their services. (2) Gilds came into frequent conflict over the question as to which had the right to exercise a particular branch of trade or manufacture; these quarrels were similar to those arising between trade unions at the present time. Manufacturers suffered from the separation of allied trades; and time and money, which ought to have gone into the business, were wasted in long lawsuits. (3) The full members of the gilds, the masters, tried to keep the laborers (apprentices and journeymen) in an inferior position, and granted promotion by favor rather than by merit; laborers lost the incentive to good work and were tempted to idleness and disorder. (4) The masters tried to preserve equality among themselves. Any master who was sufficiently enterprising to attempt to extend his business by introducing improvements or by employing more men was pulled back to the general level. (5) Technical improvements were prevented also by the regulations which were adopted originally to secure good quality of the product, but which hardened into a routine prescribing the details of every process of manufacture. (6) After all the restrictions, consumers did not get good quality even when they paid high prices. They could not punish the producers of poor goods by withdrawing their custom; and scamped work, adulteration, and fraud were common.
=159. Development of the commercial organization. Rise of wholesalers.=—Reviewing the substance of the last few paragraphs we find that the advance in agriculture was local and incomplete, while in manufactures it failed, in great measure, to displace a wornout system inherited from a preceding period. Only in commerce itself were the changes rapid and general in western Europe. Methods of business which before had been practised in only a few Italian cities, were now adopted in the country north of the Alps, and developed rapidly in the leading commercial districts.
A class of professional wholesale merchants now sprang up. Before this time, of course, merchants had on occasion dealt in considerable quantities of wares, but even the leading medieval merchants seem to have been glad to keep up their business by selling in small quantities to consumers. Only in the last century of the Middle Ages do we find in Germany merchants who confined themselves entirely to wholesale trade. As yet they had not become specialists in any one particular ware. An idea both of the variety and of the extent of their transactions can be gained from the business of John von Bodeck, who was a merchant in Frankfort about 1600. He bought silk and drugs in Venice, spices in Amsterdam, and sent them for sale to Hamburg; he bought iron and wax in Hamburg and sent them to Spain; he bought indigo and wool in Spain and sent them to Amsterdam and Antwerp; he bought rye in Amsterdam and sent it to Genoa.
=160. Development of the commission trade; services of factors.=—Bodeck must have traded in these wares often without knowing much about them himself, and generally without seeing them. Such a business would have been impossible in the Middle Ages when a merchant accompanied his wares or shared his responsibilities with a few associates. It was made possible now by the development of the commission trade. Commission merchants, or factors, made it their profession “to buy and sell for other business men for a certain profit which is given them for their trouble by the principals.” Sometimes they were in business on their own account also; sometimes they were specialists in various lines. A writer of the seventeenth century distinguished five classes: those who lived in a manufacturing or commercial center and bought goods for others; those who sold goods for others; the correspondents of business men and bankers who made collections and remittances of money for them; forwarders, who received and forwarded goods at places of transshipment; and, finally, the agents for carriers, who distributed and collected the load of a freight wagon in a city. The duties of a mercantile factor, in general, were to advise his principal frequently concerning the market for wares, the course of exchange, etc., to acknowledge letters punctually, and to follow orders exactly. The commission varied from 5 per cent of the value of the goods in the West Indies to 2 per cent or even less in some of the European countries.
=161. Improvement in means of communication; posts.=—Commission business of the kind described in the preceding paragraphs implied much greater frequency of communication among merchants, and it is noteworthy that the system of public posts was founded in Europe about the beginning of this period, and developed rapidly during it. Relays of horses with postilions and with the necessary officials were established by the governments of various countries, to insure regular communication; the system was meant at first only for official business, but was soon extended to serve the needs of private individuals. Some idea of the advance can be got from a statement made at the opening of the railroad from Strassburg to Basel, giving the time required to go from the one to the other of these places in earlier times. The distance, about seventy-five miles, or less than the distance between New York and Philadelphia, was covered in the sixteenth century by a coach in eight days, in 1600 by a diligence in six days, in 1700 by the same vehicle in four days, and in 1800 by “express” (Eilwagen) in two days and a half. In the eighteenth century a man in England could send a letter fifteen miles for a penny, thirty miles for twopence, and so on up, the sum increasing with the distance; postage from London to France was tenpence, to New York a shilling.
Merchants needed no longer to rely upon the friendly offices of the traveler who happened to be going in the desired direction, and were free from the expense of special couriers. Knowledge of market conditions in distant places spread more broadly and more rapidly than it had ever done before. Shrewd speculators could still sometimes make great profits by getting possession early of some special bit of news, but the essentials of commercial information were available for all. The modern newspaper grew up, by several stages, from written reports that were passed around as circulars in this period, telling of the state of the market, prices, conditions of transportation, etc.
=162. Need of closer association among merchants; risks of commerce.=—The most striking change in the organization of commerce, regarding especially that with distant countries and other continents, was the growth of association among merchants. We have noted the development in the Middle Ages of the partnership and other forms of association; we have now to study the rise of great companies which form a connecting link with the corporations and trusts of the present day.
Among the reasons for the rise of great commercial companies the following are to be noted. (1) Distant commerce was exposed constantly to armed attack. The protection of a country’s navy extended but a small distance from home. Ships in European waters were threatened by pirates in times of peace, by privateers in times in war; in waters outside Europe they faced trade rivals from other European countries, and hostile natives who were not bound by the civilized rules of peace and war. Distant commerce was essentially military in character, and required for successful prosecution greater military force than a small group of men could afford. (2) Partly because of dangers suggested above, partly because of the natural perils of the sea under the conditions of navigation at the time, partly because of the very novelty of the trade, distant commerce was very hazardous. If five men sent out a ship they might make a great fortune, but they might lose everything. If they associated themselves with ninety-five others and together sent out twenty ships they were pretty sure to lose some of these, but they were pretty sure to make from the other ships enough to return large profits.
=163. Association required by government; reasons.=—It was natural, under the circumstances, that associations of men should spring up for carrying on commerce in distant parts. We must note further, however, that these associations were required by European governments, that a certain field was assigned to each company in which it was given a monopoly, and that in this field trade by individuals and by other associations was prohibited. The reasons for this course were, in brief, as follows:
(1) The peoples of distant countries did not distinguish between individual merchants. As all Chinamen look alike to us, so all Englishmen or even all Europeans were alike to them. An unscrupulous trader, who cheated, robbed, or killed a native, escaped the consequences of his crime and left them to be borne by his countrymen who sought later to carry on the trade. The home government could not punish such offences, and it could not afford to let them continue. It required, therefore, that a man proposing to trade to a distant country should have an interest in the permanent welfare of the trade, by making him contribute money to the association, and subscribe to its rules.
(2) The government could diminish the risks of distant commerce by assuring merchants who spent money in building up a trade that they should not be deprived of the fruits of their labors by newcomers who had made no sacrifices. It seemed as proper to encourage in this way the investment of capital in commerce as to encourage investment in manufactures by granting patents.
(3) Finally, governments were led naturally to apply the prevalent ideas of guild regulation to distant commerce, and found some practical advantages in doing this; it was easier to tax and to regulate an association of men than a number of individuals.
=164. Association in the form of the regulated company.=—Many of the objects enumerated above could be obtained by union in what was called a “regulated company.” The regulated company had a monopoly of a certain field of trade, and established regulations which were binding on the members trading in that field. Every one, however, who secured admission by paying the entrance fee and promising obedience to the rules, traded thenceforth with his own capital, and kept his profits for himself; there was no pooling of capital or profits. The character of such a company may be suggested to readers by the organization of the modern stock exchange. No one who is not a member can trade on the exchange, and every member is bound to follow certain rules in his dealings, but every member keeps his capital and profits distinct from those of the others.
The larger part of the early English commercial companies were regulated companies of this kind. To a certain extent they attained the objects of association which have been enumerated above; some of the worst evils of individual trade were impossible so long as the company adopted wise regulations and could force members to live up to them.
=165. Objections to the form of the regulated company.=—Still, the regulated company was at best a loose association. Individual traders had no greater interest in it than the amount of their entrance fees, and regarded their momentary individual interests as more important than the permanent interests of the group. This weakened the control of the company over the associates, and rendered difficult the prevention of abuses. A strong and active policy was hardly possible, moreover, when associates kept the bulk of their capital in their own hands, and could withdraw in periods of adversity, so that the resources available to push the interests of the association diminished when most needed.
The problem set before Europe in this condition of affairs was as important as it was difficult. The future of European commerce, even of European civilization, depended on some solution which would make from the individual impulse to gain, the instinctive selfishness of every man, a collective force which would enable a number of men to work for gain together. The partnership had united the interests of a very few men, simplifying the problem by starting with members of the same family, who were naturally bound together. The relation of merchant and factor was another move in the right direction, as it united in loyal support of each other two men separated by considerable distance, and with no other common interest than that of their business. The principle of association must, however, be extended far beyond the bounds of factorship, or partnership, or of the regulated company, if Europe was to rise to the opportunity presented by trade with distant countries.
=166. The joint stock company, and its advantages.=—The problem, reviewed briefly, was to get: (a) a permanent stock of capital, (b) so large that it must be contributed by a very considerable number of people, (c) under the management of a few people who would employ it efficiently, and for the advantage of all the contributors. The solution was the joint stock company. Early examples of this form of association are to be found in Italy, but it developed north of the Alps only after the founding of the Dutch and English East India Companies about 1600.
Let us see how the stock company meets the demands for an improved form of association which were imperative at this time. (1) It insures permanence of operation. Individual stockholders or managers may die, but the company does not die with them; their places are filled, and the company continues with its original capital. (2) The contributor does not, like a partner, need to be a business man; does not, like a silent partner, need to have especial trust in the person of the managers. The contributor may be a foreigner, a child, or a woman, and the sources from which capital may be drawn are thus immensely extended. (3) Capitalists of every class are willing to contribute to the undertaking because of the peculiar safeguards which this form of association offers to them. In the first place, though the investment is permanent, from the standpoint of the company, and so enables the management to carry out far-sighted plans, yet it endures, from the standpoint of the individual subscriber, only so long as he pleases. The system of transferable shares enables a stockholder to sell out his interest at any time, and so change his investment. In the second place, the stockholders have a voice in the management of the company proportionate to their interest in it. They choose the persons to whom they will entrust the active direction of affairs, require periodical reports on the course of business from the managing directors, and have the power to change the directors if the conduct of affairs is not satisfactory.
=167. Good and bad sides of joint stock companies.=—The reader would err if he assumed that all the advantages suggested above were secured immediately on the founding of the first stock companies. Experiments of various kinds were tried at the start, and only gradually did the companies take the form which they have assumed in modern law. The English East India Company, for instance, which was founded in 1600 as a regulated company, was made over into a joint stock company by degrees, and could not be regarded as permanently established on this basis for over fifty years. Generations of bitter experience were required to teach people the possible dangers as well as the possible benefits of this form of association.
Incompetence and corruption were prevalent in the management of affairs. The worst abuses of our modern corporations give one but a faint idea of the enormities that were perpetrated in the early period of joint stock history. In spite of all, the joint stock companies accomplished the purpose for which they were created; they attracted capital at home, stimulated the prosecution of a definite policy abroad, and extended commercial interests as individuals or other forms of association would have been unable to do. The American reader may remember that Virginia was founded and Massachusetts was developed by joint stock companies. Other forms of association, especially partnership, were more suitable for many purposes, and increased constantly in number; but alongside them several hundred stock companies grew up in Europe of which perhaps a hundred were founded to develop great commercial and colonial undertakings.
QUESTIONS AND TOPICS
1. Write a report on the break-up of the manor and the rise of modern farming in England. [Cheyney, Indust. hist., chap. 5, or one of the other manuals of English economic history.]
2. Write an essay comparing the restrictions of the guilds with those of modern trade-unions.
3. What are the functions of wholesale merchants and hence what was the importance of their rise at this time?
4. Who were some of the notable merchants of the period? [Bourne, Romance, chap. 12, or English merchants.]
5. What examples can you find nowadays of the different classes of commission merchants mentioned in the text? What commission do they charge?
6. Write a report on the rise of the modern postal system. [See Encyc. Brit., articles Post-office, Postage stamps.]
7. Write a similar report on the history of the newspaper. [Encyc. or Bucher, **Indust. Ev., chap. 6.]
8. Endeavor to understand the reasons for mercantile association, and for the requirement of this association by the government, by reviewing the changes in conditions since this period, and seeing why association is not necessary or compulsory now.
9. Study Cunningham, Growth, vol. 2, sect. 188, on regulated and joint-stock companies, and pick out examples of each type in the following sections.
10. Write a report on the various forms which the (English) East India Company assumed during the first century of its existence, and the reasons for the changes. [Cunningham, or Hunter, **Hist. of British India.]
11. Write a report on abuses and corruption in this company. [Hunter.]
BIBLIOGRAPHY
A bibliography accompanies the chapter by Cunningham on **Economic change, Cambridge mod. hist., vol. 1, which furnishes the best brief account in English of topics considered in this chapter.
Histories of various countries at the period of the Reformation present descriptions of their agricultural, industrial, and commercial organization; but I know of no general and comprehensive treatment in English of topics treated here.
The only topic on which there is abundant material available is that of commercial organization. See Cheyney, **Eur. background, chap. 7 (chartered commercial companies), chap. 8 (typical American colonizing companies); Hewins, **English trade, chap. 3 (trading companies); Hunter, Hist. Brit. India (East India Co.). R. B. Westerfield, *Middlemen in English business, Trans. Conn. Acad., May, 1915, 19; 111-445, is a scholarly study of the development of the organization of marketing, and W. R. Scott, *The constitution and finance of joint-stock companies, Cambridge Univ. Press, 3 vol., 1910-1912, is an authoritative work on the history of that subject.
XVII. CREDIT AND CRISES
=168. Growth of credit business and of banking.=—The rise of the joint stock companies was a great step in the development of the power of capital and of credit. Individual savings, which before might have been hoarded and made useless to society, were drawn from their hiding-places to form the capital and loans by which the great companies extended the scope of commerce in this period. Another step in advance, which deserves notice here, was the extension of banking north of the Alps. The medieval doctrine that it was wrong to take interest on loans lost its force when it appeared that loans were wanted by merchants who would put them to a good use; and society concluded that it was wise to encourage the lending of money by permitting the lender to take interest for it. There is a great difference, however, between the lending by an ordinary individual, who has more than he knows what to do with, and the business of lending as practised by a banker. The difference is this, that an ordinary individual lends his own money, while a banker lends that of somebody else. When credit operations have become sufficiently extensive the banker appears as a man who makes dealing in credit his profession. He steps in between the people who have capital but lack the ability or inclination to employ it profitably, and the people who have the ability and inclination to conduct business enterprises but lack the desirable amount of capital. The banker is a specialist in this profession, and by his special knowledge can do more than any one else could to collect the surplus capital and place it where it can be used to the best advantage.
=169. Description of the rise of discount and deposit banking in England.=—The history of banking is too large a topic to be considered here in detail. The early banks were marked by a number of individual peculiarities, and occupied often a public position as agents of the government; these points need not detain us. The development of ordinary commercial banking can be illustrated by the business of the London goldsmiths in the seventeenth century. The goldsmiths were required by the character of their stock to keep strong-boxes (“safes”), which served the purpose of a modern safe-deposit vault; and they united dealings in gold and silver coin with their original business. They were naturally the persons to whom a man would apply who wanted the means of keeping cash and other valuables more securely than was possible on his person or at his office or home; and thus they received in time considerable deposits from merchants and others. Probably they made some charge at first for the accommodation, but soon they were encouraging deposits by paying some interest, and by undertaking to perform services such as collection and remittance for their customers. They could afford to do this by reason of the fact that they did not let the cash lie idle in their vaults, but lent it to the government and to business men; they had become banks of discount and deposit. A tract published in 1676, entitled “The Mystery of the New fashioned Goldsmiths or Bankers,” gives this account of their operations. “Having thus got Money into their hands, they presumed upon some to come as fast as others was paid away, and upon that confidence of a running Cash (as they call it) they begun to accommodate men with moneys for Weeks and Moneths, upon extraordinary gratuities, and supply all necessitous Merchants that overtraded their Stock, with present Money for their Bills of Exchange, discounting sometimes double, perhaps treble interest for the time, as they found the Merchant more or less pinched.”
=170. Rise of “money-power” as shown in the history of the Fugger family.=—The reader will perhaps comprehend more clearly the great development of business in the modern period if we follow here the history of one of the families of South Germany which rose to the first rank among the money powers. The Fugger family was descended from a simple country weaver, who settled in Augsburg and died there in 1409. His sons rose to high place in the crafts of weavers and merchants, and accumulated wealth, like many others, by trade in spices, silks, and woolen cloth. Under a grandson, Jacob (1459-1526), who had been trained in Venice, the family business underwent a striking change. We should call Jacob a financier rather than a merchant. He and his brothers continued, it is true, to deal in merchandise, but they made their great profits by dealing in money and capital. If a prince or king wanted a loan they made it to him, charging a good round sum in commission and interest, gaining often a security for their advance, such as a mine or the right to collect some taxes, from which they could make good profit. If a king like Charles V, whose dominions were widely scattered, wanted to disburse some of his revenues in a distant province, they undertook to sell him the necessary exchange and avoided the transportation of the coin itself. Their business extended from Hungary and Poland in the East to Spain in the West, from Antwerp in the North to Naples in the South.
=171. Description of the Fugger business.=—The records of the Fugger firm have been preserved, and we can learn the extent and character of its business by the statement of its resources as they appeared in 1527. The figures are in florins, of which each had a purchasing power equal roughly to eight dollars to-day.
Mines (Tyrol, Hungary) 270,000 Other real estate (city and country) 150,000 Merchandise (copper, silver, brass, textiles) 380,000 Cash (in home office and 14 factories) 50,000 Loans 1,650,000 Private accounts of associates 430,000 Various current affairs 70,000 --------- 3,000,000
The reader will note the large sums appearing under mines and merchandise, showing that the Fuggers still maintained their dealings in wares, after they made finance their special business. The chief item, however, is that of loans, which included sums borrowed by the Pope, the Emperor, and kings of Europe. The Fuggers and other great financiers had immense influence on the politics of their time, for they could command money and credit while sovereigns were still trying in vain to build up an adequate revenue system. They made fabulous profits, over 50 per cent a year, in prosperous periods, and the Fuggers managed to make an average profit of over 30 per cent a year for over thirty years. In the case of most firms, however, there were lean years as well as fat ones, and the general average would be very much less. More striking than the rate of profit is the increase in the size of the capital. Taking two Italian banking firms, the Peruzzi about 1300, and the Medici about 1440, and comparing them with the Fuggers in 1546, we find that the capital was about as follows, expressed in modern purchasing power: Peruzzi, $800,000, Medici $7,500,000, Fuggers $40,000,000.
=172. Weakness of the Fugger and other banking firms.=—The great financial firms of the sixteenth century seem to have been premature. They lacked the permanence of the later joint stock companies, for they still retained the medieval form of a company based chiefly on family relationship, and required constant reorganization. Their success in the hazardous operations of the time depended entirely on the sagacity of the heads of the family, and as genius cannot be transmitted indefinitely they went to pieces ordinarily in the third generation from their establishment. The head of the Fugger firm about 1550 tried to wind up the business and withdraw the capital, but found it impossible to do this, and became involved in more and more enterprises. The balance of the firm in 1563 showed decided weakness; members of the family began to quarrel among themselves; and the firm finally lost in unfortunate loans practically all its accumulations. The bankruptcy of one of these firms involved wide-spread disaster, for as time went on they carried on their business less and less on the money contributed by members, and more and more on their credit. All classes in the community—nobles, burghers, peasants whose savings did not exceed ten florins, even servants—deposited their money at interest with the financiers, and were involved in their fall.
=173. Description of business in Antwerp in the sixteenth century.=—After considering the new forms of business from the standpoint of individual firms it will be profitable to study them in the city that was the business center of the time, where all the great firms were represented by agents. This city, in the first part of the sixteenth century, was Antwerp, which rose as the medieval port of Bruges declined. There have been, of course, greater cities and greater markets since that time, but never before or since, it is said, has the world seen such concentration of the trade of different peoples in a single place. The town owed its development almost entirely to the foreigners who flocked there to trade, and though it saw less of Italians and Hanseatics than Bruges had done, it was the one great gathering place for the Portuguese, Spanish, English, and German merchants who were now the leaders. It is said that over five hundred vessels sailed in or out of the port in one day, and that the English merchants alone employed over 20,000 persons in the city. The poet Daniel Rogiers said of the Antwerp exchange, “One heard there a confused murmur of all languages, one saw there a motley mixture of all possible costumes; in short the Antwerp bourse seemed to be a little world in which all parts of the great were united.” In contrast with Bruges, trade in Antwerp was almost entirely unrestricted, and this was perhaps the chief reason why the merchants of the time selected it as the place in which to develop the new forms of business.
=174. Rise of the Antwerp exchange; its significance.=—Antwerp presented in the sixteenth century the first case of a great bourse or exchange, that is, a place in which men meet daily and effect their exchanges without displaying and transferring the wares themselves, by the use of paper securities representing the wares. Such an institution cannot exist until the volume of trade is large enough to cause a steady and continuous flow of wares, in contrast to the spurts that marked the period of the fairs. It requires, moreover, that the objects dealt in be of such a kind that they can be represented at the exchange by some document or sample, so that the buyer can learn the quality of the ware without actually inspecting it. This is possible when a ware can be graded, put into a certain class the characteristics of which are so closely defined and so well known that the buyer needs only to decide whether he cares to take a certain quantity at a certain price.
=175. Development of business on the exchanges; produce and money.=—The use of the word “ware” in the foregoing description may suggest the produce exchange as the earliest and most important form of the exchange. Produce of various kinds, especially pepper, did form an object of exchange trade in Antwerp; and there was a considerable development of the produce exchange later in Amsterdam. At the “candle-auctions” on the Royal Exchange of London in the seventeenth century, goods were offered with an inch of lighted candle on the desk, and were knocked down before the candle went out; a single parcel of silk, indigo, or spice sold in this way was sometimes worth half a million dollars. The produce exchange, however, did not reach its full development until the nineteenth century, and we shall leave its significance in the commercial organization for later consideration.
The “ware” which formed the main object of trade on the Antwerp exchange was loanable capital, represented by various paper instruments. Princes who desired to borrow money, and who formerly would have applied to individual financiers like the Fuggers, turned to the exchange of Antwerp or of Lyons, where loanable capital from all over Europe was collected. Through the medium of the exchange a French king could and did borrow money of a Turkish pasha; and it was said that payments amounting to a million crowns were made in a single morning without the use of a penny of cash.
=176. Advantages offered to industry and commerce by the exchanges.=—Antwerp and Lyons had served especially political needs in their loans; they were embarrassed by the insolvency of royal debtors, and soon declined. Their place was taken by Amsterdam, London, Hamburg, Frankfort, and other cities, and with the rise of these new money centers a change of importance is to be noted. The new exchanges attracted capital for investment in private or semi-private economic undertakings, serving the needs of the new companies which were being established. Ordinary people with comparatively small savings would not have known (as they would not know now) where to invest their money if they had not had the stock exchange to turn to for an indication of enterprises seeking capital, and of the current price of the stock. The stock exchange was the natural and necessary accompaniment of the stock company.
Shares of trading and industrial companies and of public debts became the objects of a regular commerce, which was not confined by national boundaries, but which drew capital from all sources. When shares of the Dutch East India Company were put on the market in 1602 they were taken up to a considerable extent by capitalists of Antwerp who no longer had use for their money at home; much of the money needed to rebuild London after the fire of 1666, and a large part of the capital of the Bank of England, came from the Dutch; shares of the English companies trading with Asia and Africa circulated freely on the Amsterdam exchange; a loan to the German Emperor was floated in London.
=177. Growth of speculation; early abuses.=—Modern forms of speculative business grew up with the exchanges. A pamphlet published as early as 1542 described the “monstrous thing” that Antwerp merchants had devised; they bet with each other on the course of foreign exchange, one saying it would be 2 per cent, one 3 per cent, etc., and afterwards they settled by paying the differences. This is substantially the same operation as that which is carried on regularly to-day. When the trade in shares of stock was established traders would speculate on a rise or a fall, or a combination of both. Shrewd speculators organized a system of news gathering and forwarding which gave them the first knowledge of important events affecting the price of securities, and enabled them to anticipate the turn of the market. London speculators got word through a private channel of the signing of the treaty of Rijswijk in 1697, a day before the English ambassador arrived with the official announcement; their eagerness to buy bank stock aroused suspicion, and the reason for their purchase appeared when the news was published and the price of the stock rose from 84 to 97.
Underhanded methods of trade were common. Speculators would set afloat rumors to depress the price of securities, and then buy in. One day during the reign of Anne in England a well-dressed man rode furiously through the street proclaiming the death of the Queen. The news spread and the funds fell; the Jew interest on the exchange bought eagerly, and were suspected later of being responsible for the hoax, though it was not proved against them. The Englishman, Child, who made a fortune in speculation, and who was called in a pamphlet of 1719 “the original of stock-jobbing,” would have one set of brokers spread rumors of disaster, and sell a little of his stock publicly, while another set bought for him “with privacy and caution”; in a few weeks he would reverse the process and come out ten or twenty per cent ahead.
=178. Dangers of the new system of business; promotion of unprofitable enterprises.=—The appeal of joint stock companies to the public through the medium of the stock exchange proved to be so effective in gathering capital that a great many worthless undertakings were floated. When times were good, that is, when enterprises had proved successful, when people had saved money for investment and looked with confidence to the future, almost anything in the shape of a company could get subscribers to its stock. The reader should note that there were two sides, one good and one bad, to the new methods by which commerce was being developed. The facility of getting capital from a great number of subscribers made possible more and larger undertakings than had been known before, and was an unmixed benefit when the new undertakings were devised to fill a real need of society. There was, however, a separation before unknown between the subscriber and the undertaking; the contributor of capital might be entirely ignorant of the economic basis of the enterprise, and might sink his money for a return which came late or not at all. There was thus a chance for the diversion of the capital of society to worthless purposes; the business organization had become more powerful, but at the same time more delicate and subject to derangement. We find in this period the beginning of commercial crises marked by the misdirection of invested capital, disappointment of investors, and distrust and lethargy, until spirits rose with the recovery of lost ground, and good times began again.
=179. Description of the “Bubble Period” in England.=—Commercial crises occurred in all of the advanced countries during this period. We shall not, however, attempt an enumeration of them here, but shall use the available space for a description of the most important crisis, that which affected both England and France about 1720.
The crisis in England was closely connected with the course of the South Sea Company, which had been established in 1711 as a trading corporation. The company had secured the right to export slaves to the Spanish colonies, had developed a promising whale-fishery, and was thought to be a large and flourishing concern. It was then transformed into a financial company, with the bold plan of assuming the whole national debt, for which it made extravagant offers. “The large sum offered by the company, which made success impossible, stimulated the imaginations of the people, who fancied that a privilege so dearly purchased must be of inestimable value, and the complication of credulity and dishonesty, of ignorance and avarice, threw England into what it is scarcely an exaggeration to term a positive frenzy.”
All classes rushed to buy the stock, which at one time was quoted at 1,000. Then the weakness of the scheme became apparent; the stock fell as rapidly as it had risen, and investors or speculators were ruined in large numbers. This was only one of the bubbles which were inflated and which burst about this time. Other companies were promoted for making salt water fresh, for extracting silver from lead, for trading in human hair, and for a wheel of perpetual motion. Insurance was now coming into prominence, and this offered a favorite field for promoters. Subscriptions were received for companies that proposed to insure against losses of servants, against burglars and against highwaymen; one scheme was “Plummer and Petty’s Insurance from Death by drinking Geneva” (gin). We get a vivid idea of the spirit of the period from the fact that one promoter, who announced a company “for an undertaking which shall in due time be revealed,” secured 2,000 guineas in a single morning, with which he immediately made off.
=180. The crisis of the Company of the Indies in France.=—Just before the time of the English crisis one curiously similar in character occurred in France. A Scotchman, John Law, who was an able banker and financier, promoted a Company of the West, expanded later into the Company of the Indies, which united with its commercial projects an attempt to finance the government. Extravagant ideas were formed of the possibilities of Law’s “system,” and the roads to Paris were blocked by people hurrying there to speculate in shares. Two of the ablest scholars in France deplored the madness at one interview, and at the next found themselves bidding against each other. Coachmen, cooks, and waiters became millionaires by lucky speculation; tradespeople in the street where the exchange was established made fortunes by letting out their stalls and chairs. The price of stock rose until it frightened even the promoter of the system, who interfered in the hope of checking speculation, but who found soon that he was unable to check either the rise or the fall of the stock. The crash which quickly followed was especially serious, as the whole currency consisted now of discredited notes issued by the company. Ruin was widespread, and credit received a blow which made the promotion of legitimate enterprises difficult for a long time thereafter.
QUESTIONS AND TOPICS
1. Prepare yourself to see the significance of the facts of this chapter by reviewing the functions and benefits of credit institutions like banks. [See Bullock, Introd., chap. 9, or other current manuals of economics.]
2. Write a report on the way in which churchmen and scholars came to justify the taking of interest on loans. [Cunningham, Growth, or Ashley, **Ec. hist., vol. 2, sect. 65 and others following, esp. 72.]
3. Fill in the outline of the text, sect. 169, by details to be found in Cunningham, Growth, vol. 2, sect. 180.
4. Write a report on the business career of Sir Thomas Gresham, one of the great English financiers of the sixteenth century. [Encyc., Dict. of nat. biography, and references in those sources.]
5. Write a report on Antwerp in the sixteenth century. [See Motley, Rise of Dutch Republic, N. Y., 1858, vol. 1, 81 ff., chap. 13.]
6. Benefits and dangers of speculation. [Hadley, Economics, chap. 4.]
7. Manias and panics, modern and recent. [Bourne, Romance, chap. 11.]
8. Write a report on one of the following topics:
(a) The tulip mania. [Oxley, Romance of commerce, chap. 3.]
(b) The “Bubble” period in England, [Cunningham, Growth, vol. 2, sect. 218; Oxley, chap. 2; cf. Lecky, Hist. of England, and cf. Macaulay’s history of bubbles about the time of the founding of the Bank of England.]
(c) John Law and the Mississippi Bubble. [Oxley, chap. 1.]
(d) The Fugger family. [Paul Van Dyke, A captain of industry of the sixteenth century, Harper’s Magazine, June, 1910, 120: 276-284.]
BIBLIOGRAPHY
As the subjects of this chapter have been treated generally by specialists, and considered in their relation to modern economics rather than earlier history, the reading is scattered, and, for our purposes, unsatisfactory.
The chapter by Cunningham in the first volume of the Cambridge modern history covers in part the ground of this chapter. The important commercial crises are described in the histories of England, France, etc.
XVIII. THE MODERN STATE AND THE MERCANTILE SYSTEM
=181. Growth of modern states under the influence of commerce.=—If the modern reader is impressed, in studying the history of Europe before 1500, with the influence on commerce of the lack of strong government, he will be equally impressed, in the period from 1500 to 1800, with the strength of government and with the important part it played in commercial development. We have here to sketch in brief the changes in political conditions, leaving to later chapters a consideration of the details as they appear in the history of different countries. Commerce itself was the great force that broke the power of feudalism. Commerce crept through the barriers that kept localities apart; it established a circulation of wares through a large area of country; and it concentrated wealth in the cities which it built up. These were the very changes needed to allow the world to escape from feudal anarchy, and to construct a system of government similar to that which the Romans had employed. Kings had now subjects able and willing to pay taxes, and, by means of commerce, they could transport their taxes, turn the proceeds into any shape they chose, and apply them wherever it was necessary.
=182. Decline of feudal power with the rise of mercenary armies.=—A large part of the new revenues was spent by governments in strengthening their military position. Feudal lords were good fighters in the old-fashioned way, and would not give up their local power without a struggle. They had to yield finally, however, before the standing armies which kings called into existence towards the close of the Middle Ages. Feudal lords loved to fight, but they were only amateurs, after all, and did not make fighting a business. The mercenaries, on the other hand, whom kings collected as soon as they could afford the expense, were professionals, who submitted to a certain amount of discipline because they could make a living by doing so. Enterprising men collected a number of recruits, taught them to use their arms, and drilled them until they counted for far more than an equal number of untrained men; the leaders studied tactics and strategy, and knew how to make the most of their superiority. The leaders were perfectly willing to let their troops to any one who could pay the price, but as feudal lords were always in want of ready money the advantages of the new armies went almost entirely to the kings. The introduction of gunpowder in warfare increased the superiority of the mercenary armies, by adding to the value of training, and here again the kings, with ready money to invest in the latest improvements, had an advantage.
=183. Growth in power of the central government as shown in the development of taxation.=—By the year 1500 the process had gone so far that many of the states of Europe had assumed a shape substantially like that which they have to-day; and feudalism as a great political force was dead. Government could now proceed to develop on the basis of an extended territory. Some measure of the gain of the central government in power can be had by noting the increase of its resources from taxation. English taxes yielded about half a million pounds in the sixteenth century, seven and a half million in the next century, and about forty million towards 1800. In little over a hundred years the yield of taxes in Prussia increased twenty-eight fold. The revenue system was still crude and wasteful. Every European state followed at one time or another the practice of raising money by selling the right to hold an office. Every European state lost money, not only by the inefficiency of the revenue system, but also by corruption of officials; often half or more of money that the people paid in taxes never reached the treasury. In spite, however, of these inevitable faults, national resources were concentrated as they had never been before, and the central government gained a power before unknown.
=184. Persistence of medieval conditions in the modern period.=—From the modern standpoint no better field could be found for the use of this power than in the reform of internal conditions. Centuries after feudalism had lost its controlling position the local differences and the spirit of separatism which marked the feudal period remained to plague the merchant and the statesman. Commerce was hindered by local variations in laws and in weights and measures; by the persistence of barriers to the development of trade and manufacture which had grown up in the medieval system of tolls and gilds; by the maintenance of the class distinctions marking feudal society, and putting on a different basis the merchant, the agriculturist, and the noble. A country like England, which early threw off the most oppressive of its medieval institutions, gained a great start over countries where they were allowed to continue. Statesmen in these other countries recognized the need of reform, and made attempts to realize it from time to time; they made slow progress, not only because the task of reforming old customs was at best tedious and expensive, but also because their attention was distracted from the task for much of the time by the pressure of foreign affairs.
=185. Attempts at reform, leading in many cases to over-regulation.=—All the European governments in this period did pay attention to the development of internal resources. One of the chief features of the mercantilist theory, that animated government policy during the seventeenth and eighteenth centuries, was the emphasis laid on the circulation of money and wares inside the country. The new national governments helped to further internal commerce by repressing disorder, and by reforming, to some extent at least, the system of laws and courts to which business men could appeal for the settlement of disputes. Most of the governments paid considerable attention also to the development of the postal system.
Governments could serve their people well in ways like these, but unfortunately they expended their energy on other objects that were useless or harmful. “The state moulds men into whatever shape it pleases,” was an idea of the time, which led to an enormous amount of government regulation. In few states of the Continent was a man free to seek his profit where he would; he was entangled in a network of government regulations that fixed the rules of his trade, the prices of his wares, even the articles which he might or might not consume. An excellent example is furnished by the grain trade, which governments regulated so strictly that in many cases laws caused the very famines which they were designed to prevent.
=186. Attention distracted from internal reforms by foreign interests.=—A consciousness that government regulation had gone too far for the interests of commerce grew strong before the end of the eighteenth century, when a school of thinkers, the physiocrats, protested earnestly against it. Their formulas, “don’t govern too much,” “let things alone” (laisser faire), were to be realized in the nineteenth century. At the time, however, they had little effect; the faith in the power of government was still strong in the minds of rulers, and their attention was distracted by other interests. When rulers had crushed the resistance of their subjects, and established their absolute authority, they had a surplus of power which they were inclined to apply abroad. The period from the sixteenth to the eighteenth centuries is filled with strife between the European states, each attempting to get possession of some of the territory and power of a rival. The states of Europe were still young, with all the vigor and all the inexperience of youth, and not until they had tried conclusions with each other were they willing to settle down as they have done in the nineteenth century. It was said above that internal reform was the best object of government expenditure “from the modern standpoint.” Kings and peoples were not modern, and to a king of the time one of the best objects appeared to be a war with another king by which he might get more people under his power.
=187. Wars occasioned by religious and dynastic interests.=—In tracing later the commercial histories of the different countries it will be necessary to refer occasionally to these wars, but it will conduce to clearness if we stop a moment here to examine their causes and character. Some of the wars were religious, growing out of the Protestant revolution. The states of the South remained Catholic, and those of the North became Protestant with comparatively little opposition, but in the center, in France and Germany especially, where neither side had at first a clear supremacy, the Protestant movement led to disastrous civil wars.
Another series of wars may be called dynastic, as they grew out of the ambitions of rulers to extend their power in Europe at the expense of other ruling families. In the sixteenth century the chief contestants were Spain and France. Spain dropped from the first rank, and France and Austria continued the struggle for supremacy through the seventeenth and eighteenth centuries. The dynastic wars seem to the student of the history of commerce as unfortunate as those that came from religious differences. They diverted men and resources from production to destruction; they checked at the same time commercial development and the reform of government.
=188. Wars occasioned by commercial interests; military aspect of commerce in this period.=—Still another class of wars can be distinguished in which the religious or dynastic motive might enter to some extent, but in which the commercial motive was predominant. The reader should be cautioned against an extravagant idea of the power of government to extend commerce. At the present time this power seems very slight indeed. It was, however, far greater in the period under consideration. References in preceding sections to the prevalence of piracy and to the warlike attitude of merchants of different nations toward each other have suggested the military character of commerce, inviting the armed protection of the state. “One fact stands out clearly,” says a recent authority on the history of India, “No European nation has won the supremacy of the East which did not make it a national concern.” The prize in distant commerce went not to the best producers and merchants, but to the group of the best fighters; not size and resources, but ability to organize and willingness to risk resources in conflict, determined the question of success. The little state of Holland made her fortune by an eighty years’ war, in which she broke the power of the Portuguese and Spanish in the East. The English were still unready to embark their national resources in distant ventures, but they won their position in continental India in the eighteenth century by military support which the French kings refused their subjects.
=189. Wars arising from the conflict of colonial interests in the New World.=—Between 1600 and 1815 was a constant succession of wars, arising from the fact that five European powers had colonies in the New World which they were seeking to maintain or to extend. Holland and Portugal lacked the territorial basis to maintain their struggle when larger states armed for the conflict; France and Spain found their best energies absorbed by dynastic interests in Europe which tied their hands abroad; England emerged victorious from the conflict and found herself repaid, by a position of commercial supremacy, for the expense to which she had been put. Out of the one hundred and twenty-six years between 1688 and 1815 she had spent more than half, sixty-four, in wars ranging from seven to twelve years in length.
=190. Political importance of commerce in this period, connected with the desire of governments for ready money.=—Commercial expansion in this period depended, as said above, on the political power of the home country. Did not, on the other hand, the political power of the state depend on commerce? A statesman of the time would have answered this question in the affirmative, and with an emphasis which would seem strange now. We think nowadays that the resources of a state depend upon the prosperity of the people, no matter whether this prosperity comes from agriculture or from manufactures, from internal trade or from foreign trade. Statesmen, however, of the period under discussion, set a peculiarly high value on foreign commerce, and regarded it as a more important branch of industry than any other.
The chief reason for this view lay in the fact that most of the European states produced little or none of the precious metals, and could get them only by trade with a neighbor or with a distant country. Now money is “the sinews of war,” and when states were constantly at war with each other, a good supply of money seemed to the statesman a matter of the first necessity. We regard money nowadays only as a means of procuring other forms of capital by exchange, and do not worry about the money supply so long as capital in other forms is abundant. It may have been the fact, however, that in the early period of the modern state the fiscal and military systems operated more smoothly when the stock of money in the country was abundant.
=191. The mercantile system, aiming to increase the stock of ready money in the country.=—Whether rulers were justified or not in the anxiety that they showed about the money supply, they made it a cardinal point in their policy to regulate commerce so as to increase, if possible, the stock of the precious metals in the country. They argued that the country would make money if it sold more merchandise to foreigners than it bought of them, for then the foreigners would have to make up the balance in coin or bullion. This was called “a favorable balance of trade,” as tending to bring money into the country. On the other hand, if the country became indebted for foreign merchandise to an amount greater than could be offset by the exports, the country would owe a cash balance abroad, and this was an “unfavorable” balance of trade. At the beginning of the period the government tried to effect its object simply by prohibiting the export of bullion (gold and silver); this was the “bullionist” policy.
Prohibitions were found to be ineffective, however, and were a serious hindrance to some branches of commerce, that with the East especially, in which the foreigners demanded considerable supplies of the precious metals. The export of bullion, therefore, was generally permitted, and the government contented itself with a regulation of the commerce in merchandise which, it hoped, would bring more bullion into the country than was carried out.
=192. Features of the mercantile system; restriction of imports.=—If the student will remember that the main object of the mercantile system, as it was expressed in the commercial policy of the seventeenth and eighteenth centuries, was to increase the credits in a country’s foreign trade, and diminish the debits, so as to get a balance in cash, the main features of the policy will be easily intelligible.
In the first place, imports were discouraged. A Spanish mercantilist thought that his country suffered “an infinite wrong” from the importation of fish from abroad, which, by his reckoning, cost the country three million piasters a year; he suggested either that home fisheries should be built up so that the money need not leave the country, or that permission be obtained from the Pope to eat meat on Saturdays, which would diminish the necessity for importation. A typical example of the ideas underlying the policy is furnished by an appeal of the English salt-makers in the seventeenth century, urging that the use of foreign salt in the curing of fish be prohibited on the ground that it was the “wisdom of a kingdom or nation to prevent the importation of any manufacture from abroad which might be a detriment to their own at home, for if the coin of the nation be carried out to pay for foreign manufactures and our own people left unemployed, then in case a war happen with our potent neighbours, the people are incapacitated to pay taxes for the support of the same.”
Mercantilism and modern protectionism easily ran together, as is apparent in the quotation, but the spirit animating restrictions was in this period mainly mercantilist, based, that is, on consideration of the flow of precious metals. The methods of tariff regulation, moreover, differed from those of modern protectionism; statesmen did not, in most cases, attempt to scale the duties so as just to balance the advantages of the foreign producer, but resorted to downright prohibition of the wares which they desired to exclude from the home market.
=193. Encouragement of exports, manufactures, and shipping.=—In the second place, exports were encouraged, for they represented the credit items in a country’s trade, and might bring home a balance in cash. Even imports could be tolerated if they led to a more than corresponding increase in exports. The trade with East India was looked on with suspicion for some time because, as said above, it required the export of considerable bullion; but finally it established itself in public esteem, on the ground that a large part of the eastern wares was transshipped in England and exported to other European countries, so that the bullion was recovered from them. Altogether the best kind of imports, however, was held to be the raw materials of manufacture; if these could be worked up in England and exported, the country cleared not only the sum originally due for the imported material, but also the extra charge for the manufacture. Home industries were given various privileges by the government, because they either spared the importation or increased the exportation of the wares which they produced.
Shipping and the fisheries were regarded with special favor, not only because they helped to produce a favorable balance of trade, but also because they were feeders for the national navy, and thus augmented the strength of the country in war.
=194. Failure of the mercantile system to affect the distribution of the precious metals.=—Such were, in brief, the characteristics of commercial policy in the time of the mercantile system. The word “system” may give a false impression, for though the main ideas of mercantilism were generally accepted during the seventeenth and eighteenth centuries, they were greatly modified in their practical application, and were seldom carried to their logical conclusions. For example, though statesmen professed a desire to stimulate exports, yet export duties were generally retained in this period for the revenue that they returned, and they hurt in some cases, without question, the sale of wares abroad.
After this review of the characteristics of commercial policy the reader will naturally inquire what were its effects. On one point an answer can be given with considerable assurance; the policy had no important effect on the distribution of the precious metals. Gold and silver were brought from America, the chief source of supply, to Spain, and flowed from Spain to the countries where they were needed in business; it seemed as though all the people of the world were in an unconscious conspiracy to defeat the plans of statesmen for checking or directing the flow. It is noteworthy that Spain, the country which had the best chance apparently to accumulate treasure and which pursued a policy of exaggerated mercantilism, was always complaining of the dearth of gold and silver, while Oriental states, which had never heard of mercantilism, accumulated large stores of bullion. The attempts of European countries to rob other countries of their treasure by legislation present, from one point of view, an absurd spectacle, for they were all applying the same principles in much the same way, action and reaction were equal, and no amount of political straining affected the distribution due to economic demand.
=195. Important effects of the mercantile system in other ways.=—The commercial policy of the mercantilist period had effects in other directions, if it did miss the mark at which it aimed. It was important, considered merely as a policy of restriction, in checking the exchange of commodities between states. Just as manors and the districts centering around a city had aimed at self-sufficiency in an earlier period, so the states of this period were led by their dislike of imports to attempt the production of everything possible within their borders; and an international organization, in which each state would specialize in the products for which it was best fitted, and would depend on commerce with others for supplying deficiencies, was hindered from developing. The mercantile system furnished a natural basis for the system of national protection, which grew up from it, and which has not entirely outgrown even yet its mercantilist origins. One of the most obvious effects of mercantilist commercial policy can be traced in its influence on the foreign relations of states. It was not, as is often said, the chief cause of the many wars which vexed Europe at this period; their cause lay deeper than any theory of favorable or unfavorable balances of trade. The balance of trade theory did, however, affect the political grouping of countries to a considerable extent, and inclined statesmen to look for friends or foes in the countries with which the balance was favorable or unfavorable. England, for example, made herself the ally of Portugal through a large part of the modern period, because Portugal bought her manufactures, and sold in return wines and other commodities which could not be produced at home; and England kept alive the traditional hostility toward France because the trade with that country showed regularly an unfavorable balance.
=196. Colonial policy.=—Based on considerations like the preceding, the colonial policy of this period was marked by restrictions entirely opposed to modern ideas of commercial freedom. A government which permitted or encouraged the establishment of colonies in distant lands, considered it a duty to itself to see that other governments or the colonists themselves did not rob it of the rewards of success. The colonial policy of the period has sometimes been pictured as purely one-sided, selfishly sacrificing the colonists to the interests of the people at home. This view leaves out of account not only the generous help given by European governments to their dependencies, but also a great mass of legislation aiming to benefit the colonists by assuring them a market in the home country, and imposing sometimes serious restrictions on the inhabitants there. A government did no more than hold resolutely to the idea that emigrants, wherever they might be, were still citizens of their native state and bound to help maintain its power. The government tried ordinarily to frame its regulations so that mother country and dependency would devote themselves to different lines of production, and so supplement rather than compete with each other. It considered it only natural and proper that the colony should trade mainly or entirely with the mother country. As said above, this was a period of bitter conflict among the European states, and a country’s commerce was thought to be one of the mainstays of its military and naval power; it seemed, therefore, to be the plain duty of colonists to contribute by their commerce to the resources on which the independent existence of the whole nation was thought to depend.
QUESTIONS AND TOPICS
The student will do best, probably, to study carefully one of the references to manuals in the bibliography as a means to an understanding of the topics of this chapter.
1. An exercise requiring considerable time, and supposing some acquaintance with narrative history, but promising valuable results, is the following. Select one of the European states: England, France, Spain, the Netherlands. Make a chronological summary of its wars during the period 1500-1789, classifying the wars under one of the heads suggested, and aiming to get the total years spent in each kind of war and at peace. Estimate the gains and losses by war, and so reach a position to judge of the merits of the policy pursued.
2. Sections 181-2 cover, to some extent, the ground of chap. 15. Review that chapter, and, if possible, review the history of some state like France, to appreciate the significance of the political development. [Adams, French nation.]
3. Make a written summary of the hindrances to commerce in France at the end of this period. [Taine, The ancient regime, N. Y., Holt, 1876, $2.50; Edward J. Lowell, The eve of the French Revolution, Boston, Houghton, 1900, $2.]
4. Thomas Mun, an Englishman who lived in the seventeenth century, wrote that the regular means “to encrease our wealth and treasure is by Forraign Trade, wherein wee must ever observe this rule; to sell more to strangers yearly than wee consume of theirs in value.” State the arguments by which Mun would support this proposition, and determine your own opinion on the question.
5. Make a brief written statement of the difference between mercantilism and protectionism.
6. Define the attitude which the mercantilist would assume toward each of the following trade phenomena: import of raw silk, export of silver plate, export of silk goods, import of knives, import of gold bullion, import of salt fish.
7. Study, in a book on economics, the influences determining the distribution of the precious metals, and show how mercantilism was bound to fail in its object of increasing the money in circulation in a given country. [For a brief and clear discussion see F. A. Walker, Pol. econ., advanced, N. Y., Holt, sects. 176-178.]
8. Discover, in the writings and speeches of American protectionists, evidence of mercantilist views. [See, for example, Roberts, Government revenue, Boston, 1884, or R. W. Thompson, History of protective tariff laws, Chicago, 1888.]
9. Criticism of the old colonial policy. [Adam Smith, Wealth of nations, Book 4, chap. 7, part 2, reprinted in Rand, Ec. hist., chap. 1.]
BIBLIOGRAPHY
A bibliography, unfortunately ill suited to the purposes of untrained students, is appended to chap. 22 of Cambridge mod. hist., vol. 3. See also the histories of economics by Cossa and Ingram, under mercantilism.
Of general discussions the student must choose between the chapter noted above, J. N. Figgis, Political thought in the sixteenth century, which is abstruse and theoretical, or Cheyney, Eur. background, chap. 6, Political institutions of Central Europe, 1400-1650, which is concrete and descriptive; neither is satisfactory for our purposes. Probably the most intelligible discussion will be found to be Seeley’s **Expansion of England, especially lecture 4, the old colonial system; and lecture 6, commerce and war. Schmoller, **The mercantile system, deserves its place as an economic classic, but will be found difficult by beginners. A brief account of mercantilism, by Ingram, will be found in the Encyc. Brit., 9th ed., 19: 354-358.
Among the smaller manuals can be recommended: Cunningham and McArthur, chap. 4; Warner, chap. 9. Thomas Mun, England’s treasure by forraign trade, N. Y., Macmillan, 1895, $.75, presents mercantilist views in their typical form, and is an excellent source for somewhat advanced students; chapters may be assigned for discussion and criticism.
XIX. SPAIN AND PORTUGAL
=197. Extent and power of the Spanish monarchy.=—Pursuing now the history of modern commerce by studying its development in different countries, we turn first to the states of the Iberian peninsula, whose great possessions outside of Europe seemed to assure their commercial supremacy.
Shortly before the close of the last century of the Middle Ages three events of great significance occurred in Spanish history. One was the union of the crowns of Castile and Aragon, which brought the greater part of the Iberian peninsula under one ruler. The second was the completion of the centuries old war against the Moors, by the conquest of their last stronghold in Granada. The third was the discovery of America by Columbus. The great Spanish king of the sixteenth century, Charles V, was the most powerful sovereign in the world. He governed at home with undisputed absolutism; he was ruler by one title or another of some of the richest European countries outside of Spain (especially the Netherlands); and he enjoyed in his own right the sovereignty not only over the greater part of America, but over Asiatic and African possessions as well.
=198. Rapid development of Spanish industry and commerce.=—The rise to greatness of the Spanish kings was paralleled by the development of the Spanish industrial organization. Spain had throughout the Middle Ages been rich only in her raw materials; she had exported wool, iron, and wine, and had imported all her manufactures, largely in foreign ships. The long wars against the Moors had turned people from the industrial arts, so that manufactures were primitive except in a few cities like Barcelona. The most advanced classes in manufactures and trade were not the native Christians but Moors or Jews. A decided advance can be noted under Ferdinand and Isabella, but the movement did not gain full headway till the sixteenth century. Then, it is said, the laborers employed in the textile industries of Toledo rose from 10,000 to 50,000 in about twenty-five years, and still merchants could not supply the demand and had orders for five or even ten years ahead. The industries based on wool, it is said, grew till they supported nearly a third of the population; Spain began to import raw silk and export the finished product, a reversal of previous conditions; great factories were established to make soap and other wares; and the amount of business transacted in Spain made the fairs of Medina del Campo one of the important clearing houses of Europe. Over 100 ships measuring from 300 to 500 tons left Spain yearly for the colonies, and at least as many cleared for European ports; 50 ships or more, it is said, often left the harbor of Santa Maria together, carrying away the salt that was manufactured there.
=199. Economic decline in the following period.=—Astonishing as is this rapid economic development, it is less striking than the economic decline that followed. Lack of space forbids the discussion in detail of the complex causes which brought about, first, an actual decline of productive power, and then a condition so nearly stationary that Spain was passed by nearly all the other states of western Europe. One important factor, the colonial system of the Spanish kings, will be reserved for discussion later as a separate topic. In this place we shall take up some of the significant facts showing the decline, and suggest some influences that make it intelligible.
The most serious symptom of decadence was an actual decrease of population. In 1723 the total population of Spain was under six million, three million less than the figures show for 1594, when the decline had probably already begun. This decrease is the more significant in that it affected largely the urban groups whose numbers reflect the prosperity or reverses of industry and trade; large cities lost half or even three quarters of their population in half a century. Before the middle of the seventeenth century the wool manufacture consisted only of a few unimportant factories of coarse materials; the silk tax of Granada brought in less than a quarter of what it had yielded under Charles V; and Spain had to rely on other countries to furnish the manufactured wares for export to her colonies. The decline affected not only the quantity of the population, but, to all appearances, its quality as well; beggary and vagrancy became a national curse.
=200. Causes of decline; faulty political organization.=—The decline in population cannot be explained by emigrations to America, for the drain from that source was small, as will be shown later. Executions by the Inquisition, numerous as they were, could not alone have checked the population. More serious was the expulsion, under ecclesiastical influences, of the Moriscoes of the South, numbering perhaps a million. These people of Moorish blood, the leaders in the agriculture and industry of Spain, in 1609 followed into exile the Jews who had been the leaders in trade; the native Spanish were unfit to fill the gaps thus made in the industrial ranks.
Deeper-lying causes were at work, however. The damage from any single event could have been repaired if there had been wholesome vigor in the Spanish political organization, as there was and as there is still among the Spaniards as a people. It was the fortune of Spain, at this critical period of her history, to have the control of affairs vested in the hands of rulers who were negligent of her condition, by the distraction of their interests or by natural incompetence, and who wasted her resources. The framework of government offered no chance for good councils to reach the monarch’s ears. Men of business sense were excluded from office even in the towns, so far as possible, and were a rarity in the national parliament; power lay in the hands of lay and ecclesiastical lords who had inherited feudal ideas, the reverse of business-like, from the earlier period of the crusade against the Moors, and who had no understanding of the measures needed for industrial development. There can be little doubt that the prime evil from which Spain suffered was (as it still is) bad government.
=201. The burden of taxes.=—The chief political abuse appeared in the form of taxes so burdensome in their amount and in the method of collection that industry was stifled. Taxes increased so rapidly in the sixteenth century that in 1594 it was asserted that they amounted to 30 per cent on a man’s property, and that farmers could not exist no matter how small a rent they paid; they left Spain or went to prison. The “alcabala,” a tax supposed to be 10 per cent on a ware every time it was bought and sold, was raised until it absorbed most of the profits of trade and was a leading factor in the decline of industry. A Spanish author of the eighteenth century (Ulloa) shows that a man engaged in the manufacture of a certain stuff would have had to pay in taxes actually more than he earned; “hence it follows that he would have gained more by making nothing, and in Spain it is profitable not to work.” Some industries, more fortunate, paid 60 per cent or 40 per cent of the value of the goods as a tax to the government.
=202. Customs duties, on the frontier and inside the country.=—The same ruinous excesses marked the policy in customs duties. The government established rates which were for the time enormously high, or absolute prohibitions with the death penalty for infraction. Commerce would have ceased almost altogether if it had not been for the absolute need of foreign wares in Spain after the destruction of home manufactures. The wares were procured partly by smugglers through the corruption of the customs guards, partly by the connivance of the government, which allowed foreigners such favors in measurement and valuation that often not over a quarter of the nominal duty was paid. This allowed wares to enter, but it killed the remnants of active Spanish commerce with Europe, for the favors granted to foreigners were refused to natives. Other measures almost as monstrous were attempted, and failed only because the government lacked power to enforce them. Spanish shipping declined until it practically ceased to exist outside the protected colonial traffic.
Finally, to complete this picture of the difficulties under which commerce labored in Spain, duties existed not only on the frontiers but in the interior of the country, hindering the free passage of goods and the development of resources. Spanish kings made attempts to abolish the internal customs frontiers, which failed through the opposition of interested persons and the royal need for money. It was not until 1717 that the internal duties were done away with, and even then the remedy was insufficient, and Andalusia kept its internal tariff barriers.
=203. Examples of bad policy; the Mesta.=—An excellent example of the evils of the government’s economic policy is furnished by the history of the Mesta, an association of stock raisers largely devoted to the production of merino wool. The flocks grazed in summer on the highlands of Leon, and descended in winter to Estremadura. The Mesta got such privileges that it killed the agriculture within its reach. Where the sheep had once fed the land could never be alienated for another purpose; no one could bid against the Mesta for the lease of pastures; proprietors along the route of the sheep must sit passive and see the crops destroyed by them. Estremadura, once one of the richest provinces of Spain, became one of the poorest, and parts of it now are nearly desert. The policy of favoring one interest, by sacrificing to it other interests more important, was characteristic of the diseased political condition of Spain; and the wasting of national resources shown in the case of the Mesta was but one of many examples of neglect. The canals and aqueducts of the irrigation system, on which the Moors had lavished their care, were allowed to deteriorate and go out of use; and the forests were cut down to the permanent detriment of the soil and water supply.
=204. Failure to develop colonial trade.=—In the foregoing sketch we find sufficient explanation of the decline of the domestic industry and commerce of Spain; we have still left to consider the question why the evils of the home system were not repaired by the chances for commercial development which the discovery of America and of the sea route to eastern possessions opened. Before the attention of Spanish rulers was absorbed by the attempt to suppress the Protestant movement in Europe and to subject the Netherlands, the crown had won an immense area outside of Europe; even to-day the extent of the Spanish possessions at this period is attested by the hold which the Spanish language still has on the world. Of all the European countries Spain was the one which appeared in the sixteenth century to have the best chance to build up a great commercial empire based on world-wide possessions. Why was not this chance accepted?
=205. Spanish colonial policy. Taxes.=—It was a misfortune for the Spaniards that they quickly discovered precious metals in America, and in seeking to increase their supply were diverted from a more substantial basis of prosperity. But the final blame for failure lies again not with the people nor with the nature of the colonies, but with the government. The explanation is to be sought in the colonial policy of the Spanish kings. At first the trade to America was comparatively unrestricted. Before, however, merchants could establish the trade relations which would have enabled them to develop the resources both of Spain and the transmarine possessions, the government laid its heavy hand on the trade and held it down so tightly that it never acquired vigor. Heavy taxes were levied on trade, and, as in the case of taxes at home, these often were framed in such a short-sighted way that they brought far more loss to commerce than gain to the treasury. The “palmeo,” for instance, was an export duty levied in the eighteenth century on wares merely according to their bulk, without regard to their value; its effect was to encourage the export of foreign manufactures, which had great value in a small bulk so that they could afford to pay the duty, while the coarser Spanish exports were taxed out of existence.
=206. Restriction of trade to appointed fleets.=—Ships could not sail to America as might suit the convenience of merchants, but had to sail from a given port (Seville or Cadiz), at a given time, to a given port in America (Porto Bello near the modern Colon, or Vera Cruz). The government by this restriction made it easier to protect the ships at sea, and to collect taxes from their cargoes, but it bound the arms of merchants so fast with its official red tape that they were weak and helpless. In theory two fleets left Spain each year, one for Central America and one for South America; in fact there were years together, especially in the eighteenth century, when fleets did not sail, and when the colonial possessions might have been entirely non-existent so far as regarded benefit to the mother-country.
=207. Restriction of the market by the discouragement of emigration.=—On arrival in America a cargo was sold sometimes for a tremendous advance over cost. Sometimes, however, and more and more frequently as time went on, a fleet would find on arrival that there was no market for its goods, and they would be sacrificed or brought back to Spain unsold. A special reason for this will appear later, when we refer to the growth of smuggling. One general cause, however, for the weakness of Spanish colonial commerce must be noticed in this place. In contrast to the English, who stimulated emigration and so built up a market for their wares in the colonies, the Spanish kings kept emigration under a system of regulation which was almost inconceivably strict. Colonists were discouraged from settling in the New World not only by the difficulty of getting permission to go out, but also by the poor chances for making a living when they arrived. They were strictly forbidden to engage in any industry which could threaten to compete with a Spanish industry; they were tied down to residence in some particular province; and they were prevented from developing the resources about them by restrictions which applied not only to trade with the mother-country but also to intercolonial trade. Trade with the Philippines, for instance, was closely restricted or even prohibited. Districts in the southern part of South America were subject to similar burdensome restrictions. A settler on the La Plata might have to get his European wares by a trip across the Continent to Lima, then up the west coast, and across the isthmus to Porto Bello. When the privilege of receiving two ships a year was granted to Buenos Ayres a customs frontier was established in the interior to prevent goods from reaching Peru by this route.
=208. Supply of the market by smugglers.=—Spanish colonists increased but slowly, therefore, in numbers and riches, and furnished a poor market for Spanish exports. The Indians were even worse customers. Natives who went barefoot and had no beards were forced, it is said, to buy razors and silk stockings at exorbitant prices, but of course they had no natural desire for those or other European wares, and took only an inconsiderable amount. As the home manufactures declined in vigor, exports to the colonies came to consist almost entirely of the wares from other European countries, and even these were obtained mainly through smugglers. The government could maintain its regulations against Spaniards, but not against foreigners, who absorbed the most profitable parts of the trade, and spoiled the market for merchants who obeyed the restrictions. The English and Dutch islands became the stations for an illicit trade which flourished as the regular trade declined. After 1713 England had the right, by treaty, to the monopoly of the African slave trade with the Spanish possessions, and was privileged to send out nearly five thousand negroes a year. The English had moreover the right to send out one trading ship of 500 tons; they secretly enlarged the capacity of the ship and used accompanying transports to carry still more cargo.
=209. Wares of the colonial trade.=—Of the products which Spanish America furnished to commerce silver continued the most important during the colonial period; the list of a ship’s cargo begins always with an enumeration of the “plate,” in bullion and coin, of which but a small part was gold. A fleet which left America in 1582 comprised 37 ships, “and in every one of them there was as good as thirty pipes of silver one with another, besides great store of gold, cochinilla, sugars, hides, and Cana Fistula (arrow-root?) with other apothecary drugs.” Descriptions of cargoes in the eighteenth century are substantially similar; among additional wares enumerated we find indigo, cocoa, vanilla, sarsaparilla, “Jesuit’s bark,” (quinine) “Paraguay tea” (maté), etc. The chief export from the La Plata region was hides, of which two ships brought nearly 40,000 in 1723. Most agricultural products were too bulky to pay for transportation.
The Spanish exported to the colonies assorted cargoes; one of 1625 included “Wines, Figs, Raisins, Olives, Oyle, Cloth, Cursies (kerseys, light woolens named from an English town), Linnen, Iron and Quicksilver for the mines.”
=210. Reform of the colonial system about 1750.=—In the eighteenth century the old Spanish colonial system went to pieces. The government recognized at last that it could not execute the laws which it had made, and that the system which was meant to form the basis of a great empire resulted only in stifling Spanish commerce and in encouraging foreigners to great illegal gains. Foreigners were still excluded in theory; the importance of the change lay in the opening of the trade to the Spanish who had before been excluded by restrictions and taxes. Spanish merchants were allowed first to send out ships independent of the fleets, and then in 1748 the fleets were given up altogether. The prohibition on commerce between the colonies was removed, and many new ports in America were opened to the European trade. An indication of the results that might follow such a change in policy had been furnished by the experience of Havana. When this city was captured by the English in 1762 and thrown open to English trade, 727 merchant vessels entered the harbor in less than a year. Even though the prohibition of trade with foreigners was still retained, the effect of the reform in policy was nothing less than magical. In ten years the trade and the customs duties increased about eightfold.
The reform came too late to benefit the Spanish industrial system. The colonies were destined to exercise their new strength in breaking their old bonds; while the home industries had decayed so far that a revival was impossible in competition with industries of more progressive nations. We leave Spain in the eighteenth century as we found her in the fifteenth century, serving the other countries of Europe by the production of raw materials, and dependent on them for her manufactured goods. Running through the list of the principal Spanish exports in the eighteenth century we find among them some that had undergone the first stage of manufacture, like wine, oil, soap, soda, and iron; but most were simple raw materials such as wool, salt, fruits, and nuts.
=211. Portugal; promise of commercial greatness in the sixteenth century.=—The little country of Portugal, numbering perhaps a million inhabitants, built up in the sixteenth century a commercial empire worthy to rank with that of Spain, and exceeding in importance that which any of the more northern states in Europe had yet established. I have already recounted the achievements of the Portuguese in maritime explorations. The part which they played in these expeditions prepared them for the oceanic commerce which developed after the discovery of America and of the sea route to India. While other nations stronger than Portugal in resources and industrial development were still unready to put forth their strength in distant commerce, Portugal shared with Spain the extra-European world, and gained for herself the richest part, the East. Da Gama returned to Lisbon in 1499 with a cargo which repaid sixty times the cost of the expedition. This was the beginning of a series of voyages devoted especially to the importation of pepper and other spices, which could be bought so cheaply in the East that they returned immense profits in Europe. Even the gold and diamonds which came later from Brazil were less valuable to Portugal than the monopoly she now possessed in the spices, drugs, dyes, and manufactures, which formerly had been obtained only by the expensive land route.
=212. Failure of Portugal to maintain her position.=—Portugal was favored not only by conditions in Europe, which gave her the start on other states, but also by conditions in Asia which enabled her able agents to build up, through naval power, a commercial overlordship which brooked no competitors, either Asiatic or European.
Portugal was, however, destined to play a great part in European commerce for only one century. We cannot, as in the case of Spain, say that a mistaken policy was the cause of her decline, for although the Portuguese commercial policy was very similar to the Spanish and would have shown the same weaknesses if it had been allowed to develop, more important forces were at work to drive Portugal from the rank which fortune had conferred upon her.
=213. Weakness in resources; bad effects of Spanish rule, 1580-1640.=—Portugal was not only small but industrially undeveloped, and from the very first depended on other countries for the wares which she exported to the East. Her explorations and her distant commerce were due to the energy of the dynasty rather than that of the people, and it was the misfortune of the country, in the critical period 1580 to 1640, to fall under the rule of Spanish kings whose influence on her commercial interests was entirely for the bad. Of the 806 vessels which Portugal sent to India, 1497-1612, only 186 sailed after 1580, and not only the number but the quality declined in a period which should have been marked by growth. Countries like England and Holland, which were far stronger economically than Portugal, refused longer to allow her the profits of trade while they did the work of production, and the English broke the power of the Portuguese in India, while the Dutch drove them from the eastern islands.
=214. Failure of Portugal to recover her position by commerce with Brazil.=—After the recovery of her independence in 1640, Portugal could look only to her American possession, Brazil, for the means of developing her commerce. The Dutch were expelled from that possession, and the discovery of gold there stimulated the growth of trade. Comparing the latter part of the eighteenth century with the earlier part of the seventeenth, the commerce between Portugal and Brazil is said to have increased twenty-fold. In place of a dozen ships a hundred sailed every year for America, returning with sugar, tobacco, hides, brazil-wood, gold, and diamonds.
The profits of this commerce, however, went for the most part to foreigners. Conditions at home had gone from bad to worse. The slight advance which the country had achieved in agriculture and manufactures before the discoveries had been lost by the attraction of all energetic spirits into commerce and navigation. African slaves took the place of free men in the fields. Portugal staked everything in the sixteenth century on the chance of commercial greatness, and when she lost, lost all.
=215. Dependence of Portugal on England.=—“In 1754 Portugal scarcely produced anything towards her own support. Two thirds of her physical necessities were supplied by England. England had become mistress of the entire commerce of Portugal, and all the trade of the country was carried on by her agents. The English came to Lisbon to monopolize even the commerce of Brazil. The entire cargo of the vessels that were sent thither, and consequently the riches that were returned in exchange, belonged to them. Nothing was Portuguese but the name.” Reviewing the list of exports to Brazil we find, in fact, that they were wares which Portugal was herself unable to produce, and which were supplied by England: woolens, hats, stockings, gloves, metals, linens, etc. England had taken advantage of her economic and political weakness to make a mere dependency of her, imposing treaty obligations which gave the English producers every advantage in her markets, and which reduced her to a state of pitiable subjection.
The great Portuguese statesman, Pombal, who made the statements quoted at the beginning of this section, attempted to reanimate industry, and succeeded to a slight extent in throwing off the English supremacy. At the close of the eighteenth century, however, Portugal had still only one strong national industry, the production of wine (port, so called from its place of shipment, Oporto) for the dinner tables of the English upper classes; and in spite of the efforts of Portuguese statesmen even the wine trade was controlled by English merchants.
QUESTIONS AND TOPICS
1. What are the chief exports of Spain at present? [Commercial geography or Statesman’s Year-Book.]
2. Write a report on beggary and vagrancy in Spain after 1500. [Moses, in Journal Pol. Econ.; Prescott or Motley.]
3. Write a report on the results (especially the economic results) of one of the following:
(a) The Inquisition.
(b) Expulsion of the Jews.
(c) Expulsion of the Moriscoes.
[See the various books by H. C. Lea.]
4. Verify the statements concerning the character of Spanish government in sect. 200. [Prescott or Motley.]
5. With reference to sect. 201, what is regarded as a reasonable rate of taxation in the U. S. now? [See a manual of Civics, that by John Fiske, for instance.]
6. Write a report on the decline of Spain in productive power as the result of bad government. [Moses in Jour. Pol. Econ., Jones in No. Amer. Review.]
7. In what parts of the world is Spanish still the common language?
8. Write a report on the beginnings of Spanish colonial policy. [Bourne, chap. 14.]
9. Write a report on the Spanish system of fleets. [Bourne, chap. 19; Roscher.]
10. Was there any good reason for the sailing of ships in fleets? [See in Oxley the chapter describing the exploits of Drake and other freebooters.]
11. Write a report on the great Spanish fairs in America. [Bourne, pp 291-293; Roscher.]
12. Spanish emigration to America. [Bourne, chap. 16; Moses, Spanish rule.]
13. Restrictions on intercolonial trade. [Bourne, p. 289 ff.; Moses; Roscher.]
14. History of smuggling in the Spanish colonies. [Bourne, chap. 19; Roscher; manuals of English history in connection with the treaty of 1713 and the “War of Jenkins’ Ear,” 1739.]
15. Write a brief report on the characteristics and history as a ware of commerce of one of the following: cochineal, cocoa, vanilla, cinchona, or quinine. [Encyc.; Willis, Practical flora; manuals and encyclopedias of commerce.]
16. Assuming that most of the manufactures in the list of exports from Spain were furnished by other countries, what do you infer as to the economic hold of Spain on her colonies—was trade with the mother-country a necessity to the dependencies?
17. Write a report on the reform of the colonial system and the light that the results throw on early policy. [Bourne, p. 295 ff.; Roscher.]
18. History of the Portuguese in the East in the sixteenth century. [Stephens, chap. 9; W. W. Hunter, History of British India, vol. 1.]
19. Effects of the sixty years of Spanish rule. [Stephens, chap. 13.]
20. History of the Portuguese in Brazil. [Stephens, chap. 10; Keller in Yale Review, Feb., 1906.]
BIBLIOGRAPHY
Reference may be made at this point to C. K. Adams, Manual of historical literature, third ed., N. Y., Harper [1888], as a bibliographical aid which is far from answering modern requirements, but which may still be of use to a teacher in handling such collections of books as may be found in a city library. A bibliography of Spanish history in the sixteenth century is appended to Cambridge Mod. Hist., vol. 1, chap. 11, and is continued in later volumes. A bibliography is given also in Martin A. S. Hume, The Spanish people, N. Y., 1901, a book which covers Spanish history from the earliest to present times, and which pays some attention to social history.
Of general books on Spanish history, Prescott, Motley, etc., may still be put to good use. Attention should, however, be especially directed to the writings of *H. C. Lea, which contain valuable social and economic, material. A useful paper by Bernard Moses, **The economic condition of Spain in the sixteenth century, has been published both in the Journal of Polit. Econ., Chicago, 1892-3, vol. 1, pp. 513-534, and in Report of Amer. Hist. Assoc., 1893, Washington, 1894, pp. 123-133. The Story of Spain in the Story of the Nations series is of no value for our purposes.
On the colonial history and policy of Spain the student has several excellent books: E. G. Bourne, **Spain in America (with bibliography); Häbler, **The colonial kingdom of Spain, in H. Helmolt, Hist. of the World, vol. 1, pp. 386-422, N. Y., Dodd, Mead & Co., 1902; Roscher, ** The Spanish colonial system, N. Y., Holt, 1904, Moses, *The establishment of Spanish rule in America, N. Y., Putnam, 1898.
Two scholarly works in the series of Harvard Economic Studies deserve the attention of the serious student: Clarence H. Haring, Trade and navigation between Spain and the Indies in the time of the Hapsburgs, vol. 19, 1918, and Julius Klein, The Mesta, a study in Spanish economic history, 1273-1836, vol. 21, 1920.
The best single reference on Portugal is H. Morse Stephens, *Portugal. For the Portuguese colonial ventures see Keller, **Colonization, chap. 3, The Portuguese in the East, chap. 4, The Portuguese in Brazil.
XX. THE NETHERLANDS
=216. Establishment of the United Netherlands.=—With the decline of Spain and Portugal the supremacy in European commerce passed definitely to the countries of the North. The country which first took the lead, and which we shall consider next, was the Netherlands, or as it is often called from its main province, Holland. The Netherlands, which has now an area but one fourth of that of New York State, was a part of the possessions which by marriage and politics had come under the rule of the Spanish crown. Its natural resources are slight, and in the early part of the sixteenth century it was far behind the adjoining Spanish territory now known as Belgium, which contained the developed manufactures of Flanders and the great port of Antwerp. The Dutch were strong, however, in the individual capacities of the people, and in spite of the disparity of the contest were able to win their independence from Spain in the Revolution which came in the last part of the sixteenth century.
A variety of causes combined to urge the Dutch to revolt. They suffered under Spanish rulers political oppression, and religious persecution designed to crush the Protestant movement which they had embraced. They suffered also, however, under the commercial restrictions of Spanish policy. These they could bear so long as they found an outlet for their growing commerce by trade with the East through Portugal, but the union of the crowns of Spain and Portugal in 1580 closed even this outlet, and forced them to fight for the means of existence and of growth.
=217. Rise of Dutch commerce.=—The Dutch were forced to the sea by the difficulties of life at home, and had made good progress in commerce with their European neighbors before their revolt. They had become used, also, to distant voyages by explorations designed to open up new routes for trade. In the vain attempt to establish a northeast route to India by the Arctic ocean they showed especial energy; and the names Tasmania, Van Diemen’s Land, New Zealand, attest their boldness later in exploring the southern hemisphere. When, therefore, they had achieved their independence and needed no longer to fear the threats of Spanish and Portuguese rulers, they made rapid strides in oceanic commerce. Before 1602 sixty-five ships had made the return voyage to India, and throughout the seventeenth century an active commerce was maintained with both Asia and America.
=218. Dutch commercial policy.=—We are tempted, by the position that the Netherlands took against Spanish oppression, to ascribe to the Dutch a greater love of liberty than they actually had. The government which they established for themselves was marked by serious faults of oppression and corruption, and their commercial policy was nearly as narrow as that of Spain. The exclusion of foreigners from trade with their distant dependencies was only natural in this period of commerce; even the Dutch, however, were not free to trade as they pleased. The colonial commerce was absorbed by great companies, which were granted a monopoly of trade in certain areas, and which regulated this trade with extreme minuteness. The companies had a complicated organization which prevented efficiency and encouraged the improper use of personal and political influence.
=219. The Dutch West India Company.=—The Dutch West India Company, founded in 1621, controlled the trade west of the Cape of Good Hope, comprising commerce with the west coast of Africa, and the east coast of the Americas. This company was an extraordinary specimen of its kind. It paid high dividends for a time, but its earnings were necessarily precarious for it made them not from the ordinary operations of commerce and colonization, but from armed attacks on the Spanish silver fleets. It was really a corporation of privateers. The character of the company can be estimated from the fact that it actually opposed peace between the Netherlands and Spain; in its remonstrance of 1633 it said that the services desired of it “for the welfare of our Fatherland and the destruction of our hereditary enemy could not be accomplished by the trifling trade with the Indians, or the tardy cultivation of uninhabited regions, but in reality, by acts of hostility against the ships and property of the King of Spain and his subjects.”
The Dutch soon lost their possessions in Brazil and New Netherland (New York), and the original company was dissolved; the possessions which the Dutch retained on the coast of Guinea and in South America were unimportant. Small islands in the Gulf of Mexico, which in themselves produced little of value, served as stations for the Dutch carrying trade, which continued to be considerable.
=220. The East India Company.=—The East India Company, founded in 1602, which secured from the Dutch government the monopoly of trade and rule from the Cape of Good Hope to the Straits of Magellan, enjoyed a longer existence. It established trading stations on various points of the Asiatic coast and in South Africa, but found the mainstay of its power in the rich islands of the Malay archipelago, especially in the small group of spice islands and in Java. Here it broke the power of the Portuguese, and gained for itself a partial or total monopoly of some of the products, which were among the most highly prized luxuries of Europe.
In 1677 a fleet consisting of one small vessel and six large ships, of which each carried a crew of about 100 sailors and 25 marines, brought a cargo booked at nearly two million gulden (or several million dollars). The cargo included immense quantities of pepper, nutmegs, mace, and cinnamon; raw silk, and silk and cotton textiles from Persia and India; indigo, borax, saltpeter, shellac, fine woods, etc. Neither tea nor coffee appears in this list, but in the next century, when the Dutch had developed their commerce with eastern Asia and had stimulated the cultivation of new products in Java, these and other wares became of the first importance. The cargo of a fleet of 1739 included the following wares, in the order of their value; tea, coffee, pepper, sugar, mace, nutmeg, camphor, indigo, cloves, etc.
=221. Leading position of the Dutch in European commerce.=—Historians often speak of this distant commerce of the Dutch as forming the basis for their great prosperity in the seventeenth century. Figures are lacking which would enable us to determine the exact proportion of this distant trade to the total, but the importance of this new branch of commerce was probably exaggerated by reason of the strong appeal it made to the imagination of men of the time. Certainly the Dutch were not dependent on the Indian trade for the position they took among commercial nations then. In the seventeenth century more than half of the Dutch ships sailed for some port on the North or Baltic seas. In 1640, 1,600 ships out of a total of 3,450 passing through the Sound to the Baltic were Dutch; and at this time a Dutch official declared that grass would grow in the Amsterdam exchange and ships would be sold for firewood if the Baltic trade were not kept free.
Thirty to forty Dutch ships went every year to Archangel, then the chief port of Russia, and carried the products in which the Hansa had formerly dealt to the Netherlands and to the west coasts of France and Spain; Dutch ships almost monopolized the trade between Spain and the northern countries after 1648, exporting 15,000 to 16,000 bales of wool a year from that country while French and English together exported but 3,000. Dutch exports reached a figure in the seventeenth century which was not attained by the English until 1740. Even the Dutch fisheries, which employed over 2,000 boats, were said to be more valuable than the manufactures of France and England combined. A Dutch contemporary asserts, indeed, that as many persons were occupied in the fisheries as in commerce.
=222. Growth of business activity.=—The prosperity of Dutch foreign commerce was reflected in business activity at home. The Netherlands rapidly outstripped the southern low countries (now Belgium), which suffered cruel repression under Spanish rule; and the great commerce of Antwerp passed to Amsterdam. Speculation and banking developed in their various forms and the Netherlands became the money center of Europe. Scholars find in the Dutch business life of this period many features which are strikingly modern; speculation in stocks, commercial crises, pools, and “trusts.” Manufactures felt the impulse of progress, and broke the bonds of the old gild system for more modern forms of enterprise. Large establishments grew up; new industries were introduced (hats, silk, tanning, etc.); the Huguenot refugees expelled from France were granted a welcome for which they gave a rich return.
=223. Commercial decline of the Netherlands.=—When and why did the Netherlands lose the commanding position in European commerce? What country took the lead away from it? Those are questions which the student of the history of commerce must face, and in the following paragraphs the answers will be given.
There is no doubt about the last point; Netherland lost the leadership to England. The time when this change occurred can be stated with almost equal brevity; it was during the one hundred years between 1650, roughly the date when Cromwell gathered up the scattered forces of England to use them for her commercial advancement, and 1750, when the commercial supremacy of England could no longer be questioned.
The reasons for the change are as usual the hardest as they are certainly the most valuable topics to be studied. One reason can be stated here as a fact, to be proved afterwards in detail, that England was growing stronger. On the Dutch side, was the Netherlands growing weaker, or did it simply fail to keep pace with the English advance?
=224. Reasons for decline.=—So far as the facts are known Dutch commerce increased in amount till about 1730 and maintained about the same figures afterwards; but world commerce was growing so rapidly that relatively the Netherlands fell behind. The very size of the Netherlands told against the country in a political contest with other powers. It implied, too, a lack of native resources to support commerce when the hold of the Dutch on foreign trade was weakening. Furthermore, the Netherlands was like the Hanseatic League in that it lacked a strong central power and policy, and gave great independence to the separate units of which it was composed. The important units, in the economic aspect, were cities, which were able to carry on a small-scale commerce very successfully, but which could not unite to bring their best people to the front in a big-scale organization which could compete with that of other countries. The Dutch did not pull together to make the most of what they had, and the inefficiency and corruption which had always characterized the local governments grew worse with time. Rule by family rings brought with it favoritism and inordinately high taxes, under which industries labored and dwindled. Manufactures which had formerly flourished now declined. Weak at home, and, in comparison with other European states of the eighteenth century, weak abroad, the Netherlands fell from the first rank of commercial states, retaining in its colonies and in its developed banking system only reminders of its former greatness.
=225. Character of the Dutch East India Company.=—In the eighteenth century, when the Netherlands was struggling to maintain its commercial position, it was hindered rather than helped by the East India Company. The company seemed to have the chance to make stupendous profits, for it sold its wares for very high prices in Europe, and it paid for them in Asia very little or even nothing. It used its power to force the natives to supply it with some of these wares at nominal prices or absolutely gratis. The very fact, however, that the company could get its wares in this way, as a state would get them by taxation, suggests that the company had expenses like those of a state and unlike those of an ordinary commercial corporation. This was the fact; the company had to support the civil and military establishment of a regular government. This government shared, to the full, the political evils of the time; both at home and in the East it was corrupt and inefficient. It was strong enough to hold its own against the Portuguese, or against the English when they began their expansion in the East; but it was no match for the English when their strength developed in the eighteenth century.
=226. Decline of the Company after 1700.=—After 1700 the Dutch East India Company fell behind rapidly. It enjoyed such a high reputation, and kept its condition secret so successfully, that its credit was unimpaired, and it continued to pay dividends by borrowing money. For nearly two hundred years it declared dividends at rates ranging from 12-1/2 per cent to 20, 40, or even 50 per cent; the average dividend from 1602 to 1796 was over 18 per cent. The crash was bound to come finally; the company paid its last dividend in 1782, and was dissolved in 1798, leaving debts of over fifty million dollars, which were assumed by the Dutch government.
QUESTIONS AND TOPICS
1. Commerce and industry of the Netherlands in the fifteenth century. [Blok, vol. 2, chap. 12.]
2. Commercial considerations involved in the revolt of the Netherlands. [Rogers, Holland, Cambridge Mod. Hist., or one of the older books like Motley.]
3. Beginnings of Dutch commerce with the Indies. [Blok, vol. 3, chap. 9.]
4. From what Dutch source were the names Tasmania, Van Diemens Land, New Zealand, derived; when and how were they attached to countries later bearing them? [Encyclopedia.]
5. The Dutch in North America; was their commerce with New Netherlands important, and did the loss of their possession affect seriously their carrying trade? [See manuals of U. S. history and the references given in them; note the effect of the English Navigation Acts.]
6. The Dutch in South America. [See Edmundson, Dutch trade on the Amazon, English Historical Review, 1903, 18: 642-663, and later.]
7. The policy of the East India Company: trade and territorial expansion, monopoly, regulation of production. [Day, Dutch in Java, chap. 2.]
8. The Dutch in the East Indies. [Rogers, Holland, chaps. 20, 22.]
9. Write a report on Dutch commerce at the height of its prosperity: countries traded with, wares, shipping, fisheries. [Blok, History, vol. 4, book 6, part 3, chap. 1, part 4, chap. 4; vol. 5, book 7, chap. 4.]
10. The Bank of Amsterdam; its peculiarities and historical importance. [Rogers, Holland, chap. 24; Adam Smith, Wealth of nations, Book 4, chap. 3; C. F. Dunbar, Theory and history of banking, N. Y., 2d. ed., 1903, chap. 8.]
11. Forerunners of modern trusts in the Netherlands. [A. Sayous, Early trusts in Holland, Political Science Quarterly, N. Y., 1902, 17: 369-380.]
12. The naval war of the English and Dutch in the time of Cromwell and Charles II. [Manuals of English history.]
13. Dutch commerce in the period of its decline. [Blok, History, vol. 5, book 8, chap. 5; vol. 6, book 9, chap. 3, book 10, chap. 4.]
14. Internal troubles of the Dutch. [Rogers, Holland, chap. 34.]
15. The “contingent system” of the Dutch East India Company. [Day, Dutch in Java, p. 61 ff.]
16. Organization of the Dutch East India Company, and its faults [Dutch in Java, chap. 3.]
BIBLIOGRAPHY
The English economist, James E. Thorold Rogers, has included in his *Story of Holland, N. Y., Putnam, 1889, several chapters on topics of economic importance. A better, though larger and more expensive work, is Blok’s **History of the people of the Netherlands. N. Y., Putnam, 5 vol., 1898-1912.
I have attempted to cover the colonial and commercial history of the Dutch in their most important dependency in The Dutch in Java, N. Y., Macmillan, 1904.
XXI. ENGLAND: SURVEY OF COMMERCIAL DEVELOPMENT
=227. Survey of England’s position and resources about 1500.=—The importance which English commerce assumed in this period and has since maintained, justifies us in pausing at the start to consider the conditions prevailing at the beginning of the period, about 1500.
England and Wales together had an area much smaller than that of most of the important continental states, about equal to the area of Illinois, and less than that of New England. Ireland was a sort of colonial possession, counting for little; Scotland remained till about 1700 an independent kingdom, and continued to be relatively unimportant after the union. England (a term which will be used roughly for other parts of the United Kingdom as they were included) had from nature one endowment of supreme advantage, separation by the Channel from the Continent, which made unnecessary for defense the government of a military absolutism, and allowed an early development of popular freedom.
From the economic standpoint, however, the climate favored grazing rather than tillage, and the mineral resources, aside from tin, were still of comparatively little use. England was a poor as well as a small country in 1500, needing to rely upon the energy of the people and upon their cooperation among themselves and with the government to win a place among the leading countries.
=228. England’s chief advantage; her advanced organization.=—Progress had been made, however, in various lines of which the importance was to appear as time went on. Serfdom had disappeared from the country districts, and production was stimulated by a fair reward for work well done. On the basis of their flourishing sheep industry the English had built up a cloth manufacture which had outgrown the narrow restrictions of the old gild system, and won the inestimable advantage of an organization like that of modern times; the industry was not so much ruled by antiquated custom or by the laws of politicians, as guided by specialists who had invested their capital in manufacture or trade, and who linked their fortunes with progress and extension.
=229. Benefits of the English political constitution.=—Finally, in summing up the advantages which the English of this period enjoyed, we must put as perhaps the chief and certainly a very important one, their political development. They were not only spared from the necessity of using their resources to repel a foreign invasion, they had attained to national unity among themselves; and they had a government which, however crude it may seem now, was much more closely in touch with the people than that of most states, and which proved capable of further development at comparatively slight expense, measured in men and money. The student who, in estimating the commercial assets of England during this period, left out of account the English constitution would go wide of the mark. Spanish inquisition and expulsions, Dutch corruption, French oppression and revolution, German or Italian disunion—to be free from these was worth great wealth.
=230. Development of the English into an active commercial people about the fifteenth century.=—The English historian, Seeley, combats the idea that it is “in the blood” of Englishmen, that it is “the genius of the race” to be a maritime and colonizing people. During the Middle Ages, in fact, the English were not great navigators, in spite of the facilities offered by the excellent harbors and the rivers penetrating far inland; English commerce was carried on largely by foreigners, as has been said in a previous section. The advance of the English from passive to active commerce came at the close of the Middle Ages, in the fifteenth and sixteenth centuries. In 1400 English merchandise was mostly borne in foreign ships; in 1500, it is said, English vessels carried more than half of all the cloth exported, and about three fourths of all the other wares.
=231. Agencies helping to extend English commerce.=—Among the influences aiding the development of English commerce in this period we must put the skilful diplomacy of the sovereigns of the Tudor line, which secured important privileges for English merchants in other countries, and the energy of the fellowship of Merchants Adventurers, which made the most of these privileges. The Merchants Adventurers differed from the Merchants Staplers (see section 126), in three important points, each of which marks an advance: they were all native Englishmen instead of foreigners; they exported manufactured goods, chiefly cloth, instead of raw materials; they were not bound to a fixed staple but “adventured” to different places. Though the association was not nearly so close as that of later stock companies, it was strong enough to protect the interests of English commerce against abuses by individual merchants and attacks by foreigners; and was especially helpful in pushing English trade along the coast of the North Sea (Flanders, Netherlands, Germany).
=232. Enlargement of the commercial area.=—Beyond these nearby districts English merchants were building up an important trade with Spain and Portugal in the South, and with the Scandinavian countries in the North, where the Hanseatic League was now unable to hold its own. English ships were voyaging further still. Bristol merchants like Sturmys and Canning built up merchant fleets of considerable size, and sent them as far as the eastern shore of the Mediterranean and the coasts of Iceland and Finland. A London grocer recorded in his diary about 1550 the voyage of an English vessel to “Russier” laden with “English bookes of the Scriptures” and with other wares which probably sold to better advantage.
Nor have we yet reached the limit of English voyages. American readers are familiar with the exploits of the Cabots, which began a series of frequent voyages to America, and which were followed by daring expeditions to the far North in search of a passage to India, either east or west. These distant voyages were too venturesome as yet to be the means of regular commerce; they sought rather discoveries or plunder. The English merchant who went outside the narrow circle of civilized Europe turned his hand chiefly to smuggling, kidnapping, robbery, and murder. John Hawkins shared with Queen Elizabeth the profits of the African slave trade, and was proud to add to his coat of arms a demi-Moor proper, bound with a cord, to record his achievements.
=233. Relative standing of the English ports.=—An idea of the relative rank in foreign commerce of the English ports can be gained from the proportions which they contributed to the customs revenue. The most striking fact is the immense lead of London over other ports, like that of New York in the United States now; it contributed half of the total in the time of Henry VII (say 1500). The second port, Southampton, fell in this period from 18 per cent to 9 per cent; the Flanders galleys had ceased coming, and the Guinea trade, by which it revived later, had not yet begun. Newcastle upon Tyne paid 5 per cent of the total, while the port of Bristol, destined to be later the great haven for the American trade, paid only 3 per cent and was exceeded by Boston. No other port than those named contributed as much as 3 per cent of the total customs revenue. The list of minor ports comprises some which had been great in the Middle Ages but which were now rapidly declining in relative importance (Ipswich, Sandwich, etc.), some, like Hull, which were destined to grow in importance, while great modern ports like Liverpool and Cardiff are not yet heard of at all.
=234. Partition of the field of commerce among companies.=—The reader will remember the discussion in a previous section of the difficulties experienced in this period when commerce was left to individuals, and the reasons for the association of the merchants who traded to any country. With that discussion in mind the organization of English commerce in the period of the later sixteenth century and following years will not seem so strange as it may appear to be at first. An ordinary Englishman could trade about 1600 with only three countries: France, Spain, and Portugal. Commerce with the rest of the world could be carried on only by members of specific companies, who had mapped out and occupied the routes of trade much as modern railroads divide the territory inside a country. Beginning in the North and going around the compass the companies were as follows: the Eastland Company, trading to Scandinavia and the Baltic; the Russia Company; the Merchant Adventurers, controlling trade from Denmark to France, where the free-trade gap appears; the Levant Company, trading in the Mediterranean; the Guinea or Africa Company; the East India Company, with its immense Asiatic field; and then the various companies familiar to students of American History, the Virginia Company, the Plymouth Company, later the Hudson’s Bay Company, etc. By means of the trade of these companies England marketed her surplus wares, especially her woolen fabrics, and imported the goods of which she stood in need—naval stores from the Baltic, manufactures and wine from the Continent, gold from Africa (cf. the English “guinea” of twenty-one shillings), Oriental products, and furs and fish from America. The colonies which had been founded in the New World were still too young to affect greatly the sum total of English trade in the early seventeenth century, but increased rapidly in commercial importance.
=235. Characteristics of the companies.=—In their organization and development these companies show such variety that it is impossible here to do more than indicate some common features of their history. They tended to one of the two types (joint-stock or regulated) which have been described, and sometimes wavered between the two. The monopoly which they enjoyed made them unpopular with the public, who thought that it was used to secure unduly high profits, and still more unpopular with private merchants who were prevented from sharing in the trade. These merchants who could not gain admission to the companies, because of lack of capital, or distance from London, formed a class of “interlopers” or smugglers trading inside the companies’ preserves. Toward the close of the seventeenth century the feeling against the companies grew so strong that reform was forced upon them; entrance fees were lowered or exclusive privileges were taken away and the trade was thrown open. Some of the companies continued to exist, however; the greatest of them all, the East India Company, kept its hold on the trade with Asia, and other companies continued as semi-public or private corporations after their chief privileges had been annulled. The Levant Company was not dissolved till 1825, and the Hudson’s Bay Company is still in existence, as an ordinary trading corporation.
=236. Rapid growth of commerce in the eighteenth century.=—The period in which the companies were most active, roughly the seventeenth century, was preparatory to the period of individual enterprise which in the eighteenth century brought England to the leading position among the commercial states. The advance is shown by the following table, giving in millions of pounds sterling (and a rough equivalent in dollars) the annual average of trade in the different periods:
====================+========================+=================== Average of | Imports | Exports --------------------+------------------------+------------------- 1698-1701 | £ 5.5 $ 27 | £ 6.4 $ 32 1749-1755 | 8.2 41 | 12.2 61 1784-1792 | 17.7 88 | 18.5 92 1802 | 31.4 157 | 41.4 207 ====================+========================+===================
The figures show that the foreign trade of England grew between five and six fold in the course of the century; that it advanced considerably in the first half, but moved with the speed of a revolution in the second.
=237. Relative share of different continents in English commerce.=—An indication of the direction of the trade, and of the relative importance of different elements in it, is given in the following tables, the figures again being simplified to round millions. The commerce of England was distributed as follows: =========+============+===========+===========+===========+=========== | Europe | America | Asia | Africa | Total ---------+------------+-----------+-----------+-----------+----------- 1698-1701| £ 9.2 $ 46 | £ 1.7 $ 8 | £ 0.8 $ 4 | £ 0.1 $ .5|£ 12.0 $ 60 1749-1755| 13.8 69 | 4.5 12 | 1.8 9 | 0.2 1 | 20.4 102 1784-1792| 19.6 98 | 10.8 54 | 4.9 24 | 0.9 4 | 36.2 181 1802 | 39.4 197 | 23.3 116 | 8.7 43 | 1.3 6 | 72.8 364 =========+============+===========+===========+===========+===========
The student may perhaps need the caution that he should not attempt to learn outright such statistics as are given here; the attempt would be a waste of energy. The figures give more concisely than any other method of description the measurement of a country’s commerce, and are valuable for reference. They must, however, be translated into a more simple expression of facts before an ordinary student can grasp their significance and hold it permanently in mind. In the few lines of text following the first table the author has suggested the most obvious conclusions to be drawn from it, and will point out others applicable here.
The trade with Europe was still by far the most important part of English commerce, being equal to more than all the rest of the trade together. It grew steadily throughout the eighteenth century, as the figures show, but still it was a less important part of the whole in 1800 than it had been in 1700. At the earlier date other continents furnished but one fourth of the total; in 1800 they furnished nearly one half. The two most important, America and Asia, were coming up with nearly equal speed, their commerce increasing roughly fivefold in the course of the century. America had a clear lead over its older rival, while Africa counted for very little in the total.
QUESTIONS AND TOPICS
1. Town life and trade about 1500. [Soc. Eng., 3: 131-145.]
2. Economic and social conditions in England in the sixteenth century. [Harrison’s Description, ed. by L. Withington, London, 1902, readable but too diffuse for a student who has not learned to select what he needs from a book.]
3. Significance of the “enclosures” in English agriculture. [Soc. Eng., 3: 544-550; 4: 114-118, 239-241.]
4. Development of the manufacturing system, as seen in the cloth trade. [Ashley, Eng. econ. hist., vol. 2, chap. 3.]
5. Political conditions about 1500. [Seebohm, Prot. rev., 46-55.]
6. The Merchants Adventurers: who were they, in what did they trade and with what countries, principles of organization, services to English commerce? [Lingelbach, Merchants Adventurers, Univ. of Pa. Pub., 2 series, vol. 2, N. Y., 1902, or Cunningham, Growth; brief account in Cheyney, Eur. background.]
7. English discovery and exploration in the sixteenth century. [Soc. Eng., 3: 209-228; 477-508.]
8. Write an account of the career of Hawkins. [Payne, Voyages; J. A. Froude, English seamen, N. Y., Scribner, 1895.]
9. Write a similar report on Drake. [Same references, or Oxley, chap. 5.]
10. Indicate on a sketch map the position of ports named in sect. 233, drawing a line by each port with a length proportional to the importance of the port. What are the chief ports now? [See a later section of this book and its note; Statesman’s Year-Book.]
11. Select one of the companies named in sect. 234 and report in detail on its commerce and career. [Hewins, Eng. trade; Cunningham, Growth, with references. Brief narratives of the East India Company and of the Hudson’s Bay Company will be found in Oxley, chaps. 8. 9.]
12. Struggle between the East India Company and the interlopers. [Cunningham; Hunter, Hist. of British India.]
13. Prepare a graphic chart of the figures in sect. 236 in the following manner. Draw a perpendicular line at the left-hand edge of a sheet of paper, mark off two equal spaces, and place the dates, one at the top, one in the middle, and the last two on either side of the end of the line. Lines are then to be drawn, horizontally, proportional to the figures of trade at each date. This can readily be done with the aid of a foot rule, divided into fractions of an inch. Choose first the largest figures of the table, in this instance those for 1802, to be sure of having room enough on the paper for all the lines. Let one of the small divisions of the rule represent a sum of a million pounds or ten million dollars. If, for instance, 1/16 is taken to represent a million pounds, the line for the imports of 1802 will be a little short of two inches (31/16). Let this line then be continued by a dotted or wavy line to represent exports; the continuation in this case would be a little over 2-1/2 inches, and the whole line would be a little over 4-1/2 inches (72/16). Pursue the same method with the other figures, and the result will be a graphic representation of the course of trade during the period.
The scale may be varied to suit convenience, but of course figures cannot be directly compared with each other unless they are plotted to the same scale.
14. Prepare a chart by similar methods, but using different colors or characteristic lines to indicate trade with different regions.
15. Reduce the figures of trade with different continents to percentages of the total, at different periods.
Make up your mind as to the number of conclusions to be drawn from the tables which you are capable of remembering—whether one, two, or more; resolve to remember those and to refer back to the tables for the others.
BIBLIOGRAPHY
As Gross, Sources, does not cover the modern period, the student in search of more extended bibliographical information than that given here must rely on less satisfactory guides. Cunningham, **Growth, will be the best for an advanced student; see the foot-notes and the bibliographical index. Traill’s **Social England contains less scholarly but perhaps more useful bibliographies on commerce and kindred topics. Some of the school manuals give classified references; Andrews’ *History can be especially recommended.
Of the general works on English history in the period under consideration the following pay some consideration to commercial development, and those which are starred present information that is valuable and easily available: *Busch, Froude, Gardiner, Macaulay, Stanhope, *Lecky. If a single work is desired for collateral reading the best is Traill’s **Social England, to which I have in large part confined my references for topical reading.
Cunningham, **Growth, is indispensable for this period; I assume that this book is in the hands of the teacher and that he will avail himself of the abundant material it offers for reading and written reports. Besides smaller books on English economic history, already mentioned, the following can be made useful: Hewins, **English trade; Seeley, *Expansion; Toynbee, Industrial revolution. Bourne, *English merchants, is useful; his English Seamen is unfortunately out of print. There is a considerable literature, however, on the war and merchant navy, especially in the sixteenth century (see references in Social England); and Lindsay and Cornewall-Jones cover the entire period.
XXII. ENGLAND: EXPORTS
=238. Survey of topics to be considered in studying the development of English commerce.=—Such is the bare outline of the development of English commerce in the period preceding 1800. Two chapters will now be devoted to the discussion of facts which will fill in the outline and will explain the development. That the reader may follow more intelligently a survey will be given in this place of the topics to be considered, and their bearing on the general question.
We must know (1) the character of English exports. The exports of a country show in what lines it is strong enough to compete with foreign producers, and are the means by which it buys commodities produced abroad. We shall then consider (2) the advantages which enabled England to produce these wares so efficiently that other countries were glad to buy of her, and (3) the countries in which these wares found a market. On the other side we want to know (4) the imports, the wares which England wanted but could not herself produce to advantage, and (5) the countries from which the imports came. Another factor of importance will be (6) the development of English shipping. Finally we have to consider (7) the government policy by which statesmen sought to further and regulate the development, as manifested in foreign policy and wars, in the customs tariff, and in the colonial system.
=239. (1) Analysis of exports.=—The total export to foreign countries of merchandise of English origin (i.e., not including goods from other countries transshipped in England) amounted about 1800 to a little over £29,000,000. The most important items were as follows, in millions of pounds: manufactures of wool, 7.7, or over one fourth of the whole; manufactures of cotton, 4.1; manufactures of iron and steel, 2.0; haberdashery, 1.5; linens, 1. These five items include over one half of the total, and no other item amounted to as much as one million. It is noteworthy that all the raw materials together scarcely exceeded one million. When we come to study the internal development of England we must look, evidently, for a great expansion in certain manufacturing industries to explain the position which their products now took in trade.
=240. (2) Development of production, explaining the growth of the export trade. Agriculture.=—Turning our attention now, not to the foreign commerce of England but to the conditions at home which made this commerce possible, we find that during the two centuries following 1600 there was a steady development of internal resources. The growth of population stimulated improvement in agriculture; and cultivators managed, by new crops and methods, to increase largely the output in spite of the disadvantages of soil and climate. Root crops (turnips and carrots) and clover were grown on fields which before had been allowed to lie fallow, and the produce, converted into meat and manure, was almost pure gain. By better feeding and breeding the weight of a head of stock was increased twofold or even more. Potatoes and other vegetables were introduced from America and the Continent. Capitalist farmers effected such a revolution in the methods of agriculture, that pasture farming became relatively much less important, and the production of cereals increased so that there was a food supply to maintain a manufacturing population, and sometimes a surplus for export.
=241. Internal commerce and means of transportation.=—The conditions of internal commerce, measured by the difficulties and dangers of road transportation, were still bad at the beginning of this period, but improved rapidly in the eighteenth century. A writer said in 1767: “There never was a more astonishing Revolution accomplished in the internal system of any country than has been within the compass of a few years in that of England. The Carriage of Grain, Coals, Merchandize, etc., is in general conducted with little more than half the Number of Horses with which it formerly was. Journies of Business are performed with more than double Expedition. Improvements in Agriculture keep pace with those of Trade.” The canals, which were extended rapidly after the success of the Bridgewater Canal, constructed in 1758 to connect Manchester with coal mines seven miles distant, lowered the cost of transportation to one quarter or less, in the districts which they served. As a result manufacturers could rely on a steady supply of raw material for their works, and of food for their employees, and had also a chance to put their finished goods on the market. The eighteenth century, moreover, was a period of great development in English banking, and the extension of credit operations was at the same time an effect and a cause of the growth of trade.
=242. Manufactures; advance from the gild to the domestic system and its significance.=—We turn now to the history of English manufactures, a topic which is not only, as we have intimated, of great importance for the growth of English commerce, but which is of general interest as showing the stages of development through which other countries passed later.
Gilds still persisted in England, but they had lost the power of control which they had formerly had and which they still maintained on the Continent. The more important industries had passed into the stage known as the “domestic system.” The change, at first view, is not striking, for the manufacturing was still done by petty artisans working at home with their own tools. The ownership of the raw material, however, had passed from the artisans to an employer, who took the risk of the manufacture and reaped profits corresponding to his success in conducting it.
Brain power now took a place in manufactures above hand power. The new class of employers were men who could devote their energy entirely to studying the larger questions of production. They had the chance to look away from the petty details of work, which had for centuries absorbed men’s attention, and to become both broad-sighted and far-sighted. They studied the needs of the market, at home and abroad; they bought the raw material wherever it could be had best and cheapest; and then marketed the product, wherever it would bring them the best returns.
=243. The new employers aided by the immigration of foreign laborers.=—Success in manufacture still depended largely on the quality of labor, and one great advantage which England owed to her political and religious freedom was the immigration of skilled laborers seeking refuge from the persecutions of the Continent. Refugees, of whom the Huguenots from France were the most important, brought with them improvements in the woolen manufacture and stimulated the development of other industries: silk, linen, cotton, calico, paper, etc. It is, however, hard to see how the labor of these people could have had a great effect in extending foreign trade if they had not been guided by their employers, who were men of considerable capital, with broad views and wide acquaintance, willing to take large contracts and eager to extend the market for their goods. An English pamphlet of the period says that the towns in which the silk and cotton manufactures developed owed their industries “to the public spirit of two or three men in each.” The development of this process, by which artisans lost their former independence and came to work for an employer, can be seen from a statement of the economist Adam Smith, who wrote in 1776. “In every part of Europe,” he said, “twenty workmen serve under a master for one that is independent.” This was not yet true of “every part” of Europe, and even in the western states of the Continent the process had not advanced so far as in England, where the author had made most of his observations.
=244. Dependence of technical progress on the new class of employers.=—It is noteworthy that the great inventions to which the modern development of manufactures has often been ascribed could not have been made of practical importance unless this system of organization had developed previously. The gilds were bitterly opposed to any changes in their system of routine, and independent artisans would not find it worth their while to introduce costly improvements. Many inventions had been made before the eighteenth century which would have been of the greatest importance in manufacture if there had been any one to take them up and put them through; they fell dead, however, on the world of their time, or were killed by the opposition of petty producers. An illustration of the way in which premature inventions disappeared can be given from the experience of a man who, to all appearances, had devised a repeating firearm before the end of the sixteenth century. A German recommended to an English statesman “one of his countrymen, who had invented a harquebuse, that shall containe ten balls or pelletes of lead, all the which shall goe off, one after another, having once given fire, so that with one harquebuse one may kill ten theeves or other enemies without recharging.” The importance of such an invention needs only to be suggested, but, so far as the writer knows, nothing further was heard of it.
=245. The domestic system preparatory to the great revolution in manufactures in the eighteenth century.=—Not until the latter part of the eighteenth century were the times ripe for the great technical changes in manufacture, which the introduction of machinery implied. Then the advance came with the speed of revolution. In the lifetime of an ordinary man (1770-1840) the whole face of England changed; the great textile towns and the “black country” of the coal and iron industry grew up; canals and railroads cut through the agricultural districts to connect the industries with each other and with the outside world; a social and political revolution accompanied the economic. No attempt can here be made to describe the changes in detail, and the discussion of the factory system and other features of the present organization to which they gave rise can better be postponed. The following paragraphs will suggest the development in some of England’s chief export industries.
=246. Progress of the cotton manufacture.=—The cotton manufacture was the first to show the possibilities of the application of machinery. Two main processes are to be distinguished in the manufacture of cotton, as in that of other textiles; first, the spinning of the yarn from the fiber, and second, the weaving of the yarn into cloth. The first great improvement was the invention by Kay in 1738 of the fly-shuttle, which saved the time and energy of the weaver and enabled him to double his output of cloth. Still, the industry was small and grew slowly. The amount of raw cotton imported from Turkey and the West Indies would seem now perfectly insignificant, and was exceeded by the amount of linen yarn imported from Ireland alone. The cotton manufacture was hampered especially by the slowness of cotton spinning (six spinners working with the old-fashioned wheel were needed to supply yarn to one weaver); and by the weakness of the yarn, which required linen to be used for the warp of cloth. Inventions which met these difficulties were the spinning-jenny of Hargreaves, patented 1770, which enabled a spinner to make eight threads at once instead of one (later, twenty, thirty, even one hundred and twenty); and Arkwright’s roller spinning frame, patented 1769, which made cotton yarn strong enough for warp, by stretching the strand before it was twisted. Improvements followed in other processes (carding, printing, etc.); water-power was used more generally, and a mere beginning made with the application of steam. A Kentish clergyman, Cartwright, invented a power loom which greatly increased the possibilities of weaving but which did not become a practical success until the nineteenth century; long after 1800 the hand-loom weavers kept up a hopeless struggle in competition with it.
The full effect of all these changes was not felt until the nineteenth century, but their importance in this period can be measured by the imports of raw cotton. In the forty-three years, 1741-1784, the annual imports rose from 4,000 to 28,000 bales, while in the sixteen years following they increased to 150,000 bales (1800).
=247. Slower development of the woolen manufacture.=—No such rapidity of development as this can be traced in the woolen manufacture, for it had long been England’s mainstay, and changed more slowly partly because it was so firmly established. Little by little, however, the spinning-wheel was displaced by the jenny, and other sources of power than the human body were utilized. As in the case of cotton, power weaving was not important until after 1800; but the manufacture of worsteds (in which the fibers are longer than in woolens, and are kept parallel) was greatly helped by a second invention of Cartwright, for wool-combing by machinery.
=248. Development of the iron industry with the use of pit-coal.=—The only other industry of this period which our space allows us to treat is that of iron. Until the eighteenth century iron was made almost entirely by smelting with charcoal, the primitive process which can be traced back to prehistoric times. A ton of iron required two loads of charcoal, and a load of charcoal two loads of wood, so that the industry depended largely on the wood supply, and was carried on at petty forges scattered through England, but established mainly in the South. A large proportion of the English iron supply was imported from Sweden. Coal, as we use the word, called then pit-coal or sea-coal, had for centuries been mined for domestic use, but had no importance in manufacture. Various men tried to smelt iron by coal or coke, but their experiments had no practical result till about 1760, when blast furnaces using coal were successfully established, and the industry began a period of rapid development, furthered about 1790 by the application of steam-power to the blast. Henry Cort invented in this period the processes by which pig was changed to malleable iron in a coal-puddling furnace, and the malleable iron was worked into bars by rollers instead of by the slow action of forge hammers. The production of iron had increased fourfold (17,000 to 68,000 tons) in the period 1740-1788, and in the period of eight years following nearly as much again was produced (125,000 tons in 1796). The industries depending on iron passed into a new stage, and the large export of iron and steel in 1800 is explained.
=249. (3) The chief markets for England’s exports.=—The market for English wares varied, of course, according to the country to which they were sent. The most favorable market for manufactures was afforded by the colonies in America, until the outbreak of the war of independence. The colonists were a high grade of customers; they had cultivated tastes and were willing to work hard to gratify them. By reason of natural conditions even more than by legislation they found it difficult to establish manufactures, and bought manufactured wares of England with the raw products which their environment afforded in abundance. A book published just before the revolution says that the “colonies are furnished from England with materials for wearing apparel, household furniture, silk, woolen, and linen manufactures, iron, cordage, and sails, great guns, small arms, ammunition, lead, brass, iron, and steel, whether wrought or unwrought; in a word England furnishes them with almost everything needful for the luxuries, as well as conveniences of life, except provisions.”
In European countries English manufactures did not find such a clear field. There were some branches (silk, linen, lace, paper, tin-plate, etc.) in which other countries were distinctly superior, and no European country depended on England as did the colonies. English woolens, however, went practically everywhere, and other products of the textile and metal industries were sure of a ready market in most countries.
For exports to other continents the English had to choose articles which would stimulate less civilized people to production and exchange. Very considerable sums in gold and silver were sent to Asia, and the half-savage Africans were tempted with gunpowder, iron, rum, spirits, beads, etc.
QUESTIONS AND TOPICS
1. Endeavor to get a clear understanding of the meaning of each of the topics, and of their bearing on each other, by thinking of the present-day commerce of the U. S. and asking yourself: what are the main facts about (1) our exports, (2) our natural advantages, etc. Then ask yourself how knowledge of any one of these topics will be of use to you in understanding the others, and so understanding commerce in general. For instance, what bearing has our tariff policy on our imports and exports, respectively? What are the weaker points in our system of production as shown by imports; what countries are strong in those points? The student is most earnestly advised to learn the contents of this manual by understanding and not by memorizing. He should always be asking himself: what use is this fact to me?
2. Transform the figures, sect. 239, into a graphic chart, and compare the results with exports at the present day. [See Statesman’s Year-Book for recent figures.]
3. Development of English agriculture in the seventeenth century. [Soc. Eng., 4: 115-122, 439-445; Prothero, *Pioneers and progress of English farming, London, 1888.]
4. Development of agriculture in the eighteenth century. [Soc. Eng., 5: 99-110, 301-305, 452-459; Prothero.]
5. Condition of English roads and of carriage by land. [Cunningham, Growth, vol. 2, sect. 232, and references there; Smiles, Lives of the engineers, vol. 1.]
6. Canals, and their benefits. [Soc. Eng., vol. 5, pp. 322-326; Cunningham and references.]
7. Write an essay on the “domestic” system of manufactures, and the contrast it presents with earlier and later systems. [Hobson, Capitalism, chap. 2, sect. 11; Cunningham, Growth, vol. 2, sect. 227 and following.]
8. The influence on English industrial development of immigration from the Continent. [Cunningham, Growth, vol. 2, sects. 172, 199, 229, etc.]
9. Compare with sect. 244 sects. 283 ff., in the chapter on France, to realize the advantages of the English at this period.
10. Write a report on English manufactures in one of the following periods, from the descriptions in Social England.
(a) Seventeenth century [vol. 4, 122-130, 445-454, 581-588.]
(b) Eighteenth century, before the great inventions [vol. 5, 110-117, 305-322.]
11. Write a report on the history of one of the great industries (cotton, woolen, iron), choosing one of the following aspects of it: methods of manufacture, introduction of machinery, change in organization (domestic and factory system, etc.), importance in commerce. [Besides references like Cunningham and Social England the student will find the encyclopedia and Ure’s Dictionary of manufactures helpful, and probably easier to use.]
12. The great inventions. [Social England, 5: 459-474, 591-604.]
13. Write a biographical sketch of one of the following men: Richard Arkwright, Edmund Cartwright, Samuel Crompton, James Watt. [Encyclopedia; Dictionary of national biography; or one of the popular books on the history of invention.]
BIBLIOGRAPHY
On the industrial revolution see, besides Toynbee, Charles Beard, *The industrial revolution, London, 1901, with bibliography of larger works; Usher, *Indust. hist. of Eng., chap. 12-14, treats the technical changes in considerable detail, and gives further references with brief descriptive notes.
The best study of the earlier system of manufacture is George Unwin, Industrial organization in the sixteenth and seventeenth centuries, Oxford, 1904; but Hobson’s *Evolution of modern capitalism, new edition, 1916, is better suited to the needs of the elementary student.
On transportation there are good brief and general surveys by Edwin A. Pratt, *History of inland transport and communication, London, 1912, and by Adam W. Kirkaldy and A. D. Evans, History and economics of transport, London, 2d ed., 1920. The most complete account is provided by W. T. Jackman, *Development of transportation in modern England, 2 vol., continuous paging, Cambridge Univ. Press, 1916.
XXIII. ENGLAND: IMPORTS; SHIPPING; POLICY
=250. (4) Analysis of English imports in the modern period.=—After this survey of one side of English trade we have to consider the other, the imports which England purchased with her surplus wares. In round millions of pounds the imports at the end of the eighteenth century were as follows, in the order of their values: sugar 7.1, tea 3.1, grain 2.7, Irish linen 2.6, cotton 2.3, coffee 2.2, wood 1.5, butter 1.0, tobacco 1.0, hemp 1.0. These wares amounted to more than half of a total import of 42.6. If the list were extended to less important wares a number of manufactured goods would be found on it, but these evidently could in general be produced to better advantage in England than anywhere else. England had already made herself the “workshop of the world,” and drew from other countries mainly raw materials and foods which could not be produced at home. Some of the colonial imports were shipped again, as will be shown later, but a large proportion of them was consumed at home by a population which was not only growing in size, but was enabled by means of commerce to gratify its taste for products comparatively new (sugar, tea, coffee, tobacco).
=251. (5) Sources of the imports.=—At the period when these figures were compiled war had interrupted the trade of England with France and the Netherlands, but an active commerce still continued with other parts of the Continent. The imports from European countries were largely minor manufactures, which do not appear in the list above, but raw materials also were furnished by the less advanced European states. Wool came from Spain; hemp, flax, and tallow from Russia; wood, iron, and copper from Scandinavia.
For some of the most important imports we must look to countries outside of Europe. The trade with Asia supplied all of the tea, and part at least of the other commodities (coffee, cotton, sugar) which we now associate with America, as well as a considerable amount of Indian manufactures, especially textiles. This trade still rested in the control of the East India Company, which had grown to be a great political power in Asia, with a government and army of its own. At home it had had a checkered career. As the result of bitter attacks in the seventeenth century it widened its membership, but it still maintained the monopoly of trade with Asia till 1793, when it conceded to private merchants a certain share in the trade with India.
=252. Peculiar character of the English colonies.=—It is to the continent of America that we must turn for the field outside of Europe that in its performances and in its promises offered most to English commerce. After the early period of exploration, treasure-hunting, and piracy, English colonization in America developed in a form entirely its own. Emigrants went out, not to seek gold mines or to establish trading stations, but to found homes. Emigration was not so much a government policy as a popular movement, that attracted some of the best stock of English blood. There were great differences between the people of the different colonies on the Atlantic coast, as every student of American history knows, and there was again a difference between the colonies in the South and those on the islands. But in general it may be said that no European country could vie with England in the commercial quality of its colonial population. Certainly none could rival England in the quantity of colonists of European stock. The first census of the United States in 1790 showed a population (nearly four million), merely in this group of former English colonies, amounting to nearly half that in England and Wales.
=253. Resources and industries of the colonies in America.=—Though the personal qualities of the English were duplicated on the other side of the Atlantic, the physical environment was absolutely different. Products of the field, the forest, and the sea, which were eagerly desired and hard to get in England, were to be had in abundance in the New World. The conditions for manufacture, on the other hand, were unfavorable; capital and labor found such an attractive field in the extractive industries (the production of raw material), that there was little temptation for the colonies to engage in the finishing of goods. In the plantation colonies of the South and the islands almost nothing was manufactured. Even in the center and North, where the difficulties of life and the talents of the people made manufacture more practicable, most industries were of a household character, rough clothing and implements being made in the spare hours at home; or were ordinary village trades,—milling, tanning, etc. All the fine manufactures were bought from England with raw or semi-raw products.
=254. Specialties of different colonies.=—The island colonies (Jamaica, Barbadoes, etc.) sent plantation products. The sugar-cane supplied sugar and molasses and, by a simple process of manufacture, rum. American cotton until Whitney’s invention of the cotton-gin in 1793 came almost entirely from the islands, and indigo and various drugs were secured from the same source. The colonies on the mainland supplied a greater variety of products, by reason of their climatic differences. Nearly all of them contributed to the supply of skins and furs; and lumber and naval stores (pitch, tar, turpentine) were secured from the forests all the way from New England to Georgia. Different sections, however, had their specialties; the Carolinas sent rice, Virginia tobacco, New England codfish and whale-oil.
=255. Commerce with Africa.=—There was a marked peculiarity in the commerce with Africa. The exports to this country always exceeded the direct imports by a considerable sum. An English writer of the eighteenth century tells about the manufactures which were sent out, and continues: “we have, in return, gold, teeth (i.e., ivory), wax, and negroes; the last whereof is a very beneficial traffic to the kingdom, as it occasionally gives so prodigious an employment to our people both by sea and land.” His meaning is this: the slave trade was so “beneficial” because the slaves which were purchased with beads and rum were not brought to England but shipped to the American colonies where they were put to work. The English figured, therefore, that they got not only the price of the slaves in American products, but also had the business of carrying them to America, and could hope for a future return from their labor in the field. It is estimated that 20,000 slaves a year were sent out during the eighteenth century, and the chief port of the trade, Liverpool, employed 190 ships as slavers in 1771.
=256. (6) Shipping and the carrying trade.=—At the beginning of the period which we are studying (1500-1600) the English, as we have seen, where emancipating themselves from their former dependence on foreign ships. In the course of the period they learned to carry not only their own goods but those of other nations as well, and took from the Dutch the leadership in the carrying trade of the world. The reader will note, if he refers to the figures showing the trade of England about 1800, that the imports amounted to about 42 million pounds, while the exports of British merchandise were but 29 millions. England would seem to have been gaining a great amount of goods for nothing, or to have been going in debt for them. The difference is to be explained in part by the earnings of English freight, which other countries paid in wares, but in the larger part by the export of goods which were brought to England from other countries merely to be transshipped and exported again. At the close of the century foreign merchandise to the value of over 11 millions was exported, the wares being mainly those of colonial origin (coffee, sugar, Indian textiles, tobacco, tea, indigo, etc.).
=257. Struggle of English seamen and government with the Dutch.=—Two separate sets of forces were at work to raise the English merchant marine, those of individuals and those of the government. The English in the seventeenth century could not navigate as cheaply as the Dutch, since they required larger crews for the same work, but they seem in the eighteenth century to have been abreast or ahead of the general development of navigation; and unusual facilities for ship-building were offered to them in their American colonies. The government, on the other hand, was eager to foster every effort to extend English shipping, not only because of its economic advantage, but because of the addition to the naval resources of the kingdom in war with other powers. Until after 1650 the English merchant marine, in spite of individuals and government, was greatly inferior to the Dutch. Statements which are doubtless exaggerated give us still some measure of the difference; the Dutch were said to own four fifths of all the ships engaged in oceanic commerce, or as many as eleven kingdoms of Christendom; ten Dutch ships traded to Barbadoes for one English. The latter half of the seventeenth century is filled with a bitter struggle for supremacy between the English and the Dutch, waged with all the weapons both of peace and war.
=258. The Navigation Acts; victory of English over Dutch shipping.=—“The first nail in the coffin of Dutch greatness,” says an English historian, was the Navigation Act passed under Cromwell in 1651. This was but one of a series of measures extending before and afterward, designed to further the English carrying trade at the expense of rivals. Briefly, goods from a European country could be brought to England only in English ships or in ships of the country, so that, for instance, the Dutch could not carry Baltic wares to England; while the products of other continents could be imported or exported only in English ships; and some wares that were enumerated (sugar, tobacco, etc.) must be brought to England before they could be exported to any other European country. To maintain this policy the English engaged in a long contest with smugglers in America, and fought several great naval wars with the Dutch. The result was, as we have seen, a victory for English commerce over the Dutch, though it is hard to say how much credit should be given the government policy, and how much was due to the energy of the individuals who were building up English business at this period.
The effect of the new oceanic trade was to build up the ports in the West; Liverpool came into prominence in the eighteenth century, and Bristol also grew. The distribution of trade among the ports did not, however, change greatly. An estimate of the eighteenth century gave to London still two thirds of the total, while the remaining third was divided in equal parts among the ports of the east, the south, and the west coasts.
=259. (7) Government policy. Commerce and war.=—Just as in shipping, so in other commercial interests, the efforts of individuals to make money for themselves were restrained or furthered by government regulations aiming to advance the English people as a whole. Every matter of commerce was at the same time a matter of politics. Mention was made in an introductory chapter of the part played by England in the great wars of the period. It will be remembered that English policy in general was characterized by a shrewd recognition of the commercial advantages to be gained in war, either by territorial acquisitions or by trading privileges, and every war in which England engaged ended, as a rule, with a treaty that gave her some new colonial market or some advantages in trade with a European country. England fought France consistently, not because of old traditions of enmity, but because France was a commercial rival, refusing English manufactures and attempting to market her own in England, and because France had possessions in America and India that England desired. England allied herself with Portugal, on the other hand, because the trade of the two countries was complementary rather than competitive.
=260. Customs policy.=—The customs policy of the period was governed by mercantilist ideas, described in an earlier chapter. The government drew a considerable portion of its revenue from the customs duties, but nevertheless subordinated the collection of revenue to other considerations in framing the tariff, and regarded it chiefly as a means of building up national power in contest with other states. To further this end the importation of manufactured wares was in many cases taxed or prohibited, that foreigners might not draw money for work which Englishmen were thought competent to do. Raw materials, like wool, which could be used as the basis of English industries, were kept in the country by duties or prohibitions on export; while the export of other wares, which put foreigners in debt to England, was encouraged. Other measures, now inconceivable, were designed to stimulate certain industries; an Englishman could be buried only in a woolen shroud; a Scotchman only in Scotch linen; buttons and button-holes were regulated by legislation; English ships must carry English sails.
=261. Burden of the tariff.=—In a sense it is wrong to speak of any “system” of customs policy at this time, for the tariff, by constant changes, had become extraordinarily confused, and included many inconsistencies. “The collection and administration of such a complicated system was most wasteful; while the taxes, when taken together, were so high as to interfere seriously with the consumption of the article and to offer a great temptation to the smuggler.” The most rigorous measures failed to stop the smuggling which brought into England a large proportion of the goods on which duties or prohibitions were imposed. Reforms attempted by different statesmen alleviated to some extent the burden of the tariff on merchants, but left it still so heavy and cumbrous that with the advances of the nineteenth century it was felt to be intolerable. In this period almost no one thought of free trade. The tariff undoubtedly stimulated the growth of certain industries (silk, for example), but it is noteworthy that the cotton industry, which was destined to become the most important of any in England, grew up not only without any favor but under actual discouragements.
=262. Colonial policy.=—An English historian who has been quoted several times before said that England “conquered and peopled half the world in a fit of absence of mind,” implying that the movement was one of natural expansion rather than of conscious policy. This seems true when we contrast English colonization with that of other powers. Still, the government held from the first the idea that the colonies were a part of the home country, and should contribute in special ways to its advancement, and these ideas grew stronger and took more definite form as the colonies grew in size. The government permitted the movement of men and capital to America under the condition that the resources of the colonies should be made to supplement, not compete with, the resources of the mother country. We have to note here the regulations in which the government ideas were embodied.
=263. Restrictions on colonial enterprise, regarded as justifiable at the time.=—By the application of the Navigation Acts the colonists were required to employ English ships for their commerce, and to send certain enumerated wares of their production to England before they could be disposed of to another country; and by other acts they were restricted in the manufacture or exchange of certain articles (woolens, hats, bar-iron, and steel) for which English manufacturers desired to reserve the market. Aside from these restrictions the colonists were left free to produce and to trade as they pleased. They paid the usual duties, as a rule, on wares entering the English ports, but were allowed a drawback when the wares were exported again.
Comparing these restrictions with, for instance, those of Spain, we are struck with their liberality; still more so when it is added that the government gave some special favors to the colonists in the form of bounties, and colonial ships were put on an equal footing with those built at home, so that New England was a great gainer by the stimulus to ship-building and sailing. England was the natural market for most of the colonial wares, and the colonists, as we have seen, had few temptations to go into manufacturing. None of these restrictions, therefore, bore with great weight on the colonists, and an attempt to interfere in their trade with the French West Indies (by the Molasses Act of 1733) was evaded. The English colonial system was accepted as natural and reasonable by the colonists in general until shortly before the Revolution.
QUESTIONS AND TOPICS
1. Make a graphic chart of imports and compare with present conditions, as suggested above under exports.
2. Insert the wares named in 251 and the following sections in the chart of imports according to continents, sect. 237.
3. History of the East India Company in the eighteenth century. [Cunningham, Growth; B. Willson, Ledger and sword, London, 1903, vol. 2.]
4. Compare the colonial market of England with that of Spain (see chap. 20) and that of France (see chap. 25).
5. Write a report on the economic and commercial characteristics of one of the thirteen colonies, in the period preceding the Revolution. [See the chapters describing the condition of the separate colonies in 1765, in Lodge, English colonies, N. Y., Harper, 1881, $3.]
6. English imports of naval stores, and schemes to stimulate exports from America. [Lord, Industrial exper., part 2.]
7. Write a report on the commercial history of one of the island colonies, (a) Jamaica, or (b) Barbadoes. [See encyclopedia, and references there; R. Montgomery Martin, History of the British colonies, London, 1834, vol. 2, chap. 2, Jamaica; chap. 7, Barbadoes, chap. 16, West Indian commerce; Amos K. Fiske, West Indies, N. Y., Putnam, 1899, $1.50, chaps. 18-19, Jamaica; chap. 37, Barbadoes.]
8. History of the African trading companies. [Cunningham, Growth, vol. 2, sect. 194.]
9. History of the slave trade. [Cunningham, index, and references in his notes; Weeden, index; Encyc. Brit.]
10. The plantations, the Royal African Company and the slave trade, 1672-1680. [E. D. Collins, in Rep. of Amer. Hist. Assoc., 1900, Washington, 1901, vol. 1, pp. 139-192.]
11. History of the merchant navy; development of ship-building and navigation. [See the articles on the Navy, by W. Laird Clowes, Soc. Eng., vols. 3, 4, 5. The student should endeavor to extract from these articles, which are rather fragmentary, only those facts which bear on the merchant marine, and should guard against confusing this with the war navy.]
12. Write an essay on the colonial and commercial aspects of Cromwell’s foreign policy. [Reference may be made to the following, among the biographies of Cromwell: F. Harrison, Lond. 1888, chap. 13: Firth, N. Y. 1900, chap. 19; John Morley, N. Y. 1900, book 5, chap. 8; Roosevelt, N. Y. 1900, p. 225 ff. See also Frank Strong, The causes of Cromwell’s West Indian expedition, Amer. Hist. Review, Jan., 1899, 4: 228-245; George L. Beer, Cromwell’s economic policy, Polit. Sci. Quarterly, 1901, 16: 582-611; 1902, 17: 46-70.]
13. Of what country would ships have to be, according to the Navigation Acts, to carry: wool from Spain; gold from Africa; spices from India; furs from America?
14. The policy of the Navigation Acts and their effects. [Cunningham, Growth, vol. 2, sects. 204, 222.]
15. Rise of the port of Liverpool. [Encyc., and references there.]
16. Report on one of the three commercial treaties, of 1703, of 1713, and of 1786, as illustrating the policy of the period. [Hewins, English trade, chap. 5.]
17. Abuses of the customs duties, and the reform by the younger Pitt. [Lecky, Hist., chap. 16, Cabinet ed., 5: 295 ff.]
18. The commercial legislation of England and the American colonies, 1660-1760. [See the article with that title by W. J. Ashley, Quarterly Journal of Economics, 1899-1900, 14: 1-29; republished in his Surveys, London., 1900.]
19. American smuggling, 1660-1760: to what extent was it practised; does it prove the English policy to have been oppressive? [Ashley, Surveys, 336-360.]
BIBLIOGRAPHY
See chapter xxi.