MERCANTILISM. - M. is the theory that subjects the entire economic activity of a nation to state intervention, so that through the active protection of the domestic and foreign market the State may acquire the economic means necessary for a policy of power. It represents the extreme expression of the voluntaristic conception of the economy, which had dominated throughout classical antiquity and the Middle Ages. But it is a completely new voluntarism, in which the economy is withdrawn from the limits of the moral and religious conscience, in order to become a pure instrument for asserting the political power of the State.
I. HISTORICAL NOTES
Its rise coincides with the formation of the great absolute monarchies, which tend to centralize in their hands the entire internal life of the nation, to form permanent national armies, to carry out an expansionist international policy. It also coincides with the affirmation of the bourgeois class, to the detriment of a nobility essentially rooted in landed estates: and with the ever greater discoveries of new lands.
Mercantilism developed in a philosophical climate that strengthened it and rationally justified it. This climate, characteristic of the second half of the sixteenth century and of the whole seventeenth century, depends on many and disparate factors: the autonomy of politics from morality; the theory of reason of state; the theory of the immediate divine origin of the sovereign's authority; the doctrine of individual instincts as essentially egoistic and therefore harmful to the common good; the Protestant glorification of professional activity. The philosopher who best justifies mercantilism is certainly Hobbes.
When one speaks of mercantilism, one must not understand an organic and fixed system of doctrines, but rather a general attitude. The general attitude is given by the following alleged economic principle, characterizing mercantilism: money is the greatest means of enriching a nation, and therefore the quantity of money possessed is the cause of the economic power of the State. The surplus of the balance of trade thus becomes the fundamental interest of economic policy.
Through more or less simplistic observations and under the pressure of contingent necessities, this policy of an active balance of trade oriented itself along certain fundamental lines: 1) Strengthening of industrial production to the detriment of agricultural production. It was believed that the effect of state intervention on agriculture was of almost no efficacy, because in it natural factors dominate, over which human will can do little and slowly. One will then understand how a State desirous of rapid and easy monetary enrichment abandoned every aspiration toward an agrarian policy, in order to concentrate all its energies on industries, which, by ever more increasing manufactured products, allowed the conquest of international markets and therefore the influx of money. 2) Customs protectionism suited to bringing ever more gold and silver into the country and preventing their outflow.
Thus there came about the absolute prohibition of the exportation of precious metals and of raw materials useful to the industries of competing nations; the imposition of heavy duties on the importation of finished products. 3) And this in order to arrive at the conquest of international markets, overcoming the competition of other nations in the sale of products and in the cornering of raw materials. 4) Maritime policy: directed toward the maximum strengthening of the merchant fleet and the defense of the freedom of the seas with a strong military fleet. 5) Colonial policy: the conquest of colonies had an eminently economic purpose. From the new lands precious metals and raw materials could be obtained, and in them one had a secure market for the sale of one's own finished products. 6) Demographic policy: an abundance of population contributed to the military power of the nation and also to its economic enrichment.
Mercantilism had its origin in the second half of the sixteenth century, with the theory of chrysohedonism. The sudden imbalance of prices, due to the ever increasing influx into Europe of precious metals from the newly discovered lands, induced scholars to interpret the serious phenomenon and to reach the simplistic conclusion that the quantity of money was the surest guarantee of the country's enrichment. Malestroiet, Bodin, Scaruffi, Davanzati took part in the discussion, and in Spain and Portugal, which had felt most the gravity of the phenomenon, where chrysohedonism developed: López de Gómara, Ortiz, De Monchada, Olivarez, Gomez, De Castanares.
Mercantilism began to take on a definite physiognomy at the beginning of the seventeenth century, when the monetary defense of countries was attributed to state intervention with the theory of the balance of contracts, regulating international commerce, and then with the definitive theory of the balance of trade.
There are three principal mercantilist authors: Antonio Serra, Antoine de Montchrétien, Thomas Mun. These are followed in the seventeenth century by Turbolo, Bocchi, Montanari, Lunetti, Sully, who attempted an agrarian protectionism in France, Child, Temple, Davenant, Höringk, Schröder, etc. In the seventeenth century mercantilism found its most important application in England with Cromwell and in France with Colbert, from whom mercantilism also took the name of Colbertism. In the eighteenth century there are still mercantilist theorists, even if often with attitudes much attenuated by various reservations: Law, Nation, Dutout, Genovesi and, at bottom, also Galliani.
Criticisms of mercantilism began above all in England, where individualism, both philosophically and politically, soon got the better of monarchical absolutism, and where the application of mathematics to the study of social phenomena led ever more to the search for constant laws in politics and economics. Already in the second half of the seventeenth century the economic observations of John Locke and the quantitative methods applied to the social world by William Petty, by John Grant and by Gregory King pave the way for the English pre-naturalist movement of the first half of the eighteenth century. Among all the pre-naturalists the Englishman Richard Cantillon (1697-1734) dominates, whose posthumous work Essai sur la nature du commerce en général (1755) is of capital importance in the history of economic doctrines. In France and in Italy the criticisms against mercantilism had a rather contingent significance, although they served as preparation for the advent of physiocratism and take the name of agrarian protectionism. The principal exponents are Boisguillebert (1646-1714), Vauban (1633-1707), Bandini (1677-1760), Pascoli (1674-1744). Pre-naturalists and agrarian protectionists are usually grouped under the single denomination of liberal mercantilists, although they express quite different attitudes of thought and practical implementations. Liberal mercantilism is the complex of those economic theories which, while subordinating economics to politics and invoking state intervention for a sound economy, defend the existence of natural economic laws and the importance of private initiative. To liberal mercantilism can also be attributed those writers who go under the name of syncretists, because, notwithstanding the affirmation of physiocratic and liberal naturalistic theories, they sought to reconcile the postulates of these doctrines with those of mercantilism. Deserving particular mention for the eighteenth century are: Beccaria, Verri, Filangeri, Carli, Ward, Tucker. In our own day mercantilism is judged less severely than the liberal authors of the past century did. Indeed, contemporary neo-voluntarism allows for accepting a moderate active intervention of the State in economic life. Moreover, one cannot deny the importance of mercantilism in the development of modern history and in the very evolution of economic doctrines.
II. EVALUATION
1. Philosophical value
Compared with medieval voluntarism, mercantilism certainly represents a regression. Indeed, once detached from ethical principles, the economy loses completely its human meaning and becomes an instrument of utilitarian competitions, all to the detriment of the true civilization and prosperity of men. Politics, likewise independent of ethical principles, considers the economy simply as an empirical means for the implementation of its plans of power.
A positive significance of mercantilism can be seen in its having emphasized the social value of the economy, raising it from an absolutely private plane to that of the public good. However, even in this respect, the lack of a philosophical-ethical foundation meant that the ever greater importance given to the economy educated minds to see in material prosperity the principal end of social and individual life.
2. Economic value
It is necessary to distinguish the economic value of the doctrines from the practical results achieved by mercantilism. Mercantilist doctrines undoubtedly reveal the superficiality of their observations and the gratuitousness of many important conclusions; nevertheless they represent a great step toward the formation of modern economic science. The immediate practical results were: the constitution and independence of the individual national economies; the development of movable wealth and of the economic functions of the State; the growth of international trade; the birth of very important industries; the formation of an active and competent bourgeoisie. The remote and general effects, on the other hand, were very serious, because a state intervention so integral and unsupported by sufficient knowledge of economic laws, and indeed guided by partial or fallacious explanations, was bound to lead to the most disastrous economic imbalances.
3. Historical value
«Voluntarism contributed enormously to feeding the struggle of the nascent State against residual particularism and to imposing on private initiatives distant goals useful to the community. It encouraged private initiative and largely succeeded in making it an instrument of an assiduous policy of power. It transformed the economies of nations, created the modern physiognomy of French industry, laid the foundations of the Dutch colonial empire, built the maritime power of England, and marked the era of the birth of modern Russia and of Prussia» (A. Fanfani, Storia delle dottrine economiche: il volontarismo, 3rd ed., Milan 1943, pp. 244-245).