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Bullionists and Mercantilists

In the period of the formation and rise of the nation states, a new kind of thinking on economic phenomena arose alongside that of the theologians and philosophers with the ‘counsellors of the prince’. In their writings, these authors adopted the viewpoint of the economic power of the prince as a complement to and necessary prerequisite of his military power. Significantly, a group of authors of this period was designed as cameralists, since they approached economic issues as members of the chamber of the counsellors to the sovereign. The notion of national wealth thus took on a central role in economic thinking.

We may distinguish two kinds of interpretations for the economic views prevailing in this period. On the one hand, the counsellors of the prince were accused (for instance by Adam Smith) of holding a basically erroneous notion of wealth: the so-called ‘chrysoedonistic view’, namely the simplistic identification of wealth with gold and precious metals in general. Hence the term Bullionists, utilised for authors such as Thomas Gresham and John Hales in sixteenth- century England. On the other hand, beginning with the German historical school and Schumpeter (1914), we see a revaluation of these authors, credited with a less simplistic view, for instance justifying their preoccupation with monetary issues by the fact that the stock of metallic money might be considered an index of national wealth in a period when there was virtually no statistical information on the yearly product of a country.

Defending the right of the Company to export precious metals to the East in exchange for local commodities often destined to be re-exported to other European countries, as influential an author as Thomas Mun (1571-1641), a managing director of the India Company, maintained that the export of money allowed the country to increase its wealth. In fact, through international trade, the commodities available to the country are increased, even more than through manufacturing and, at a still lower level, agriculture.

Mun’s writings may be taken as the reference point for the transition from bullionism to mercantilism, characterised by a fully developed theory of the balance of trade, which viewed the balance of the foreign trade of a country as a whole rather than bilateral balances computed for each foreign country taken in isolation. Mercantilism is a rather generic label, to be utilized with caution: it embraces authors who were often quite heterogeneous and active over a long period of time, stretching from the sixteenth to the eighteenth century, up to the publication of Adam Smith’s Wealth of Nations. In general, immediate practical interests dominated over theoretical work.

Another interpretation only partly justified by the writings of certain mercantilist authors concerns the explanation of the origins of profits as profit upon alienation, i.e. profit deriving from sale and hence born of the circulation process, or in other words commerce. According to this thesis, profits stem from buying cheap and selling dear. It was a thesis in consonance with the stage of mercantile capitalism, which, among other things, accounted for the privileged role attributed to foreign trade. In fact, the gains obtained by one party to the act of exchange correspond to the losses of the other party, so that when buyers and sellers belong to the same country the gains of some exactly offset the losses of the others. Therefore, trade may be the source of gains for the wealth of a country only when we consider exchanges with other countries.

This thesis underplays the role of production in generating a surplus, which was to be stressed by Classical authors; yet, behind it, we can detect crucial signs of the times: the importance of military power in international economic relations, the spread ofthe colonies and the monopolistic nature of the big trading companies. If we also include in foreign trade the transference of wealth enacted by force, the importance that this sector took on for what Marx called ‘original accumulation’ becomes clear, and the impression of unequal exchange that the theory of profit upon alienation conveys appears fully justified.

 
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