The Online Library of Liberty

A project of Liberty Fund, Inc.

• Translator's Preface to First Edition.
• Introductory Essay, By J. Shield Nicholson
• Memoir.3
• Some Extracts From the Author's Preface to the First Edition.
• First Book: the History
• Chapter I: The Italians.
• Chapter II: The Hansards.
• Chapter III: The Netherlanders.
• Chapter IV: The English.
• Chapter V: The Spaniards and Portuguese.
• Chapter VI: The French.
• Chapter VII: The Germans.
• Chapter VIII: The Russians.
• Chapter IX: The North Americans.
• Chapter X: The Teachings of History.
• Second Book: the Theory
• Chapter XI: Political and Cosmopolitical Economy.
• Chapter XII: The Theory of the Powers of Production and the Theory of Values.
• Chapter XIII: The National Division of Commercial Operations and the Confederation of the National Productive Forces.
• Chapter XIV: Private Economy and National Economy.
• Chapter XV: Nationality and the Economy of the Nation.
• Chapter XVI: Popular and State Financial Administration, Political and National Economy.
• Chapter XVII: The Manufacturing Power and the Personal, Social, and Political Productive Powers of the Nation.
• Chapter XVIII: The Manufacturing Power and the Natural Productive Powers of the Nation.
• Chapter XIX: The Manufacturing Power and the Instrumental Powers (material Capital) of the Nation.
• Chapter XX: The Manufacturing Power and the Agricultural Interest.
• Chapter XXI: The Manufacturing Power and Commerce.
• Chapter XXII: The Manufacturing Power and Navigation, Naval Power and Colonisation.
• Chapter XXIII: The Manufacturing Power and the Instruments of Circulation.
• Chapter XXIV: The Manufacturing Power and the Principle of Stability and Continuity of Work.
• Chapter XXV: The Manufacturing Power and the Inducement to Production and Consumption.
• Chapter XXVI: Customs Duties As a Chief Means of Establishing and Protecting the Internal Manufacturing Power.
• Chapter XXVII: The Customs System and the Popular School.
• Third Book: the Systems
• Chapter XXVIII: The National Economists of Italy.
• Chapter XXIX: The Industrial System (falsely Termed By the School 'the Mercantile System').
• Chapter XXX: The Physiocratic Or Agricultural System.
• Chapter XXXI: The System of Values of Exchange (falsely Termed By the School, the 'industrial' System)—Adam Smith.
• Chapter XXXII: The System of Values of Exchange (continued)—Jean Baptiste Say and His School.
• Fourth Book: the Politics
• Chapter XXXIII: The Insular Supremacy and the Continental Powers—North America and France.
• Chapter XXXIV: The Insular Supremacy and the German Commercial Union.
• Chapter XXXV: Continental Politics.
• Chapter XXXVI: The Commercial Policy of the German Zollverein.
• Appendices Appendix A.
• Appendix B.
• Appendix C.
• Appendix D.

FIRST BOOK

THE HISTORY

Chapter I

THE ITALIANS.

AT the revival of civilisation in Europe, no country was in so favourable a position as Italy in respect to commerce and industry. Barbarism had not been able entirely to eradicate the culture and civilisation of ancient Rome. A genial climate and a fertile soil, notwithstanding an unskilful system of cultivation, yielded abundant nourishment for a numerous population. The most necessary arts and industries remained as little destroyed as the municipal institutions of ancient Rome. Prosperous coast fisheries served everywhere as nurseries for seamen, and navigation along Italy's extensive sea-coasts abundantly compensated her lack of internal means of transport. Her proximity to Greece, Asia Minor, and Egypt, and her maritime intercourse with them, secured for Italy special advantages in the trade with the East which had previously, though not extensively, been carried on through Russia with the countries of the North. By means of this commercial intercourse Italy necessarily acquired those branches of knowledge and those arts and manufactures which Greece had preserved from the civilisation of ancient times.

From the period of the emancipation of the Italian cities by Otho the Great, they gave evidence of what history has testified alike in earlier and later times, namely, that freedom and industry are inseparable companions, even although not unfrequently the one has come into existence before the other. If commerce and industry are flourishing anywhere, one may be certain that there freedom is nigh at hand: if anywhere Freedom has unfolded her banner, it is as certain that sooner or later Industry will there establish herself; for nothing is more natural than that when man has acquired material or mental wealth he should strive to obtain guarantees for the transmission of his acquisitions to his successors, or that when he has acquired freedom, he should devote all his energies to improve his physical and intellectual condition.

For the first time since the downfall of the free states of antiquity was the spectacle again presented to the world by the cities of Italy of free and rich communities. Cities and territories reciprocally rose to a state of prosperity and received a powerful impulse in that direction from the Crusades. The transport of the Crusaders and their baggage and material of war not only benefited Italy's navigation, it afforded also inducements and opportunities for the conclusion of advantageous commercial relations with the East for the introduction of new industries, inventions, and plants, and for acquaintance with new enjoyments. On the other hand, the oppressions of feudal lordship were weakened and diminished in manifold ways, owing to the same cause, tending to the greater freedom of the cities and of the cultivation of the soil.

Next after Venice and Genoa, Florence became especially conspicuous for her manufactures and her monetary exchange business. Already, in the twelfth and thirteenth centuries, her silk and woollen manufactures were very flourishing; the guilds of those trades took part in the government, and under their influence the Republic was constituted. The woollen manufacture alone employed 200 manufactories, which produced annually 80,000 pieces of cloth, the raw material for which was imported from Spain. In addition to these, raw cloth to the amount of 300,000 gold gulden was imported annually from Spain, France, Belgium, and Germany, which, after being finished at Florence, was exported to the Levant. Florence conducted the banking business of the whole of Italy, and contained eighty banking establishments.4 The annual revenue of her Government amounted to 300,000 gold gulden (fifteen million francs of our present money), considerably more than the revenue of the kingdoms of Naples and Aragon at that period, and more than that of Great Britain and Ireland under Queen Elizabeth.5

We thus see Italy in the twelfth and thirteenth centuries possessing all the elements of national economical prosperity, and in respect of both commerce and industry far in advance of all other nations. Her agriculture and her manufactures served as patterns and as motives for emulation to other countries. Her roads and canals were the best in Europe. The civilised world is indebted to her for banking institutions, the mariner's compass, improved naval architecture, the system of exchanges, and a host of the most useful commercial customs and commercial laws, as well as for a great part of its municipal and governmental institutions. Her commercial, marine, and naval power were by far the most important in the southern seas. She was in possession of the trade of the world; for, with the exception of the unimportant portion of it carried on over the northern seas, that trade was confined to the Mediterranean and the Black Sea. She supplied all nations with manufactures, with articles of luxury, and with tropical products, and was supplied by them with raw materials. One thing alone was wanting to Italy to enable her to become what England has become in our days, and because that one thing was wanting to her, every other element of prosperity passed away from her; she lacked national union and the power which springs from it. The cities and ruling powers of Italy did not act as members of one body, but made war on and ravaged one another like independent powers and states. While these wars raged externally, each commonwealth was successively overthrown by the internal conflicts between democracy, aristocracy, and autocracy. These conflicts, so destructive to national prosperity, were stimulated and increased by foreign powers and their invasions, and by the power of the priesthood at home and its pernicious influence, whereby the separate Italian communities were arrayed against one another in two hostile factions.

How Italy thus destroyed herself may be best learned from the history of her maritime states. We first see Amalfi great and powerful (from the eighth to the eleventh century).6 Her ships covered the seas, and all the coin which passed current in Italy and the Levant was that of Amalfi. She possessed the most practical code of maritime laws, and those laws were in force in every port of the Mediterranean. In the twelfth century her naval power was destroyed by Pisa, Pisa in her turn fell under the attacks of Genoa, and Genoa herself, after a conflict of a hundred years, was compelled to succumb to Venice.

The fall of Venice herself appears to have indirectly resulted from this narrow-minded policy. To a league of Italian naval powers it could not have been a difficult task, not merely to maintain and uphold the preponderance of Italyin Greece, Asia Minor, the Archipelago, and Egypt, but continually to extend and strengthen it; or to curb the progress of the Turks on land and repress their piracies at sea, while contesting with the Portuguese the passage round the Cape of Good Hope.

As matters actually stood, however, Venice was not merely left to her own resources, she found herself crippled by the external attacks of her sister states and of the neighbouring European powers.

It could not have proved a difficult task to a well-organised league of Italian military powers to defend the independence of Italy against the aggression of the great monarchies. The attempt to form such a league was actually made in 1526, but then not until the moment of actual danger and only for temporary defence. The luke-warmness and treachery of the leaders and members of this league were the cause of the subsequent subjugation of Milan and the fall of the Tuscan Republic. From that period must be dated the downfall of the industry and commerce of Italy.7

In her earlier as well as in her later history Venice aimed at being a nation for herself alone. So long as she had to deal only with petty Italian powers or with decrepit Greece, she had no difficulty in maintaining a supremacy in manufactures and commerce through the countries bordering on the Mediterranean and Black Seas. As soon, however, as united and vigorous nations appeared on the political stage, it became manifest at once that Venice was merely a city and her aristocracy only a municipal one. It is true that she had conquered several islands and even extensive provinces, but she ruled over them only as conquered territory, and hence (according to the testimony of all historians) each conquest increased her weakness instead of her power.

At the same period the spirit within the Republic by which she had grown great gradually died away. The power and prosperity of Venice—the work of a patriotic and heroic aristocracy which had sprung from an energetic and liberty-loving democracy—maintained itself and increased so long as the freedom of democratic energy lent it support, and that energy was guided by the patriotism, the wisdom, and the heroic spirit of the aristocracy. But in proportion as the aristocracy became a despotic oligarchy, destructive of the freedom and energies of the people, the roots of power and prosperity died away, notwithstanding that their branches and leading stem appeared still to flourish for some time longer.8

'A nation which has fallen into slavery,' says Montesquieu,9 'strives rather to retain what it possesses than to acquire more; a free nation, on the contrary, strives rather to acquire than to retain.' To this very true observation he might have added—and because anyone strives only to retain without acquiring he must come to grief, for every nation which makes no forward progress sinks lower and lower, and must ultimately fall. Far from striving to extend their commerce and to make new discoveries, the Venetians never even conceived the idea of deriving benefit from the discoveries made by other nations. That they could be excluded from the trade with the East Indies by the discovery of the new commercial route thither, never occurred to them until they actually experienced it. What all the rest of the world perceived they would not believe; and when they began to find out the injurious results of the altered state of things, they strove to maintain the old commercial route instead of seeking to participate in the benefits of the new one; they endeavoured to maintain by petty intrigues what could only be won by making wise use of the altered circumstances by the spirit of enterprise and by hardihood. And when they at length had lost what they had possessed, and the wealth of the East and West Indies was poured into Cadiz and Lisbon instead of into their own ports, like simpletons or spendthrifts they turned their attention to alchemy.10

In the times when the Republic grew and flourished, to be inscribed in the Golden Book was regarded as a reward for distinguished exertions in commerce, in industry, or in the civil or military service of the State. On that condition this honour was open to foreigners; for example, to the most distinguished of the silk manufacturers who had immigrated from Florence.11 But that book was closed when men began to regard places of honour and State salaries as the family inheritance of the patrician class. At a later period, when men recognised the necessity of giving new life to the impoverished and enfeebled aristocracy, the book was reopened. But the chief title to inscription in it was no longer, as in former times, to have rendered services to the State, but the possession of wealth and noble birth. At length the honour of being inscribed in the Golden Book was so little esteemed, that it remained open for a century with scarcely any additional names.

If we inquire of History what were the causes of the downfall of this Republic and of its commerce, she replies that they principally consisted in the folly, neglect, and cowardice of a worn-out aristocracy, and in the apathy of a people who had sunk into slavery. The commerce and manufactures of Venice must have declined, even if the new route round the Cape of Good Hope had never been discovered.

The cause of it, as of the fall of all the other Italian republics, is to be found in the absence of national unity, in the domination of foreign powers, in priestly rule at home, and in the rise of other greater, more powerful, and more united nationalities in Europe.

If we carefully consider the commercial policy of Venice, we see at a glance that that of modern commercial and manufacturing nations is but a copy of that of Venice, only on an enlarged (i.e. a national) scale. By navigation laws and customs duties in each case native vessels and native manufactures were protected against those of foreigners, and the maxim thus early held good that it was sound policy to import raw materials from other states and to export to them manufactured goods.12

It has been recently asserted in defence of the principle of absolute and unconditional free trade, that her protective policy was the cause of the downfall of Venice. That assertion comprises a little truth with a great deal of error. If we investigate the history of Venice with an unprejudiced eye, we find that in her case, as in that of the great kingdoms at a later period, freedom of international trade as well as restrictions on it have been beneficial or prejudicial to the power and prosperity of the State at different epochs. Unrestricted freedom of trade was beneficial to the Republic in the first years of her existence; for how otherwise could she have raised herself from a mere fishing village to a commercial power? But a protective policy was also beneficial to her when she had arrived at a certain stage of power and wealth, for by means of it she attained to manufacturing and commercial supremacy. Protection first became injurious to her when her manufacturing and commercial power had reached that supremacy, because by it all competition with other nations became absolutely excluded, and thus indolence was encouraged. Therefore, not the introduction of a protective policy, but perseverance in maintaining it after the reasons for its introduction had passed away, was really injurious to Venice.

Hence the argument to which we have adverted has this great fault, that it takes no account of the rise of great nations under hereditary monarchy. Venice, although mistress of some provinces and islands, yet being all the time merely one Italian city, stood in competition, at the period of her rise to a manufacturing and commercial power, merely with other Italian cities; and her prohibitory commercial policy could benefit her so long only as whole nations with united power did not enter into competition with her. But as soon as that took place, she could only have maintained her supremacy by placing herself at the head of a united Italy and by embracing in her commercial system the whole Italian nation. No commercial policy was ever clever enough to maintain continuously the commercial supremacy of a single city over united nations.

From the example of Venice (so far as it may be adduced against a protective commercial policy at the present time) neither more nor less can be inferred than this—that a single city or a small state cannot establish or maintain such a policy successfully in competition with great states and kingdoms; also that any power which by means of a protective policy has attained a position of manufacturing and commercial supremacy, can (after she has attained it) revert with advantage to the policy of free trade.

In the argument before adverted to, as in every other when international freedom of trade is the subject of discussion, we meet with a misconception which has been the parent of much error, occasioned by the misuse of the term 'freedom.' Freedom of trade is spoken of in the same terms as religious freedom and municipal freedom. Hence the friends and advocates of freedom feel themselves especially bound to defend freedom in all its forms. And thus the term 'free trade' has become popular without drawing the necessary distinction between freedom of internal trade within the State and freedom of trade between separate nations, notwithstanding that these two in their nature and operation are as distinct as the heaven is from the earth. For while restrictions on the internal trade of a state are compatible in only very few cases with the liberty of individual citizens, in the case of international trade the highest degree of individual liberty may consist with a high degree of protective policy. Indeed, it is even possible that the greatest freedom of international trade may result in national servitude, as we hope hereafter to show from the case of Poland. In respect to this Montesquieu says truly, 'Commerce is never subjected to greater restrictions than in free nations, and never subjected to less ones than in those under despotic government.'13

Chapter II

THE HANSARDS.

THE spirit of industry, commerce, and liberty having attained full influence in Italy, crossed the Alps, permeated Germany, and erected for itself a new throne on the shores of the northern seas, the Emperor Henry I., the father of the liberator of the Italian municipalities, promoted the founding of new cities and the enlargement of older ones which were already partly established on the sites of the ancient Roman colonies and partly in the Imperial domains.

Like the kings of France and England at a later period, he and his successors regarded the cities as the strongest counterpoise to the aristocracy, as the richest source of revenue to the State, as a new basis for national defence. By means of their commercial relations with the cities of Italy, their competition with Italian industry, and their free institutions, these cities soon attained to a high degree of prosperity and civilisation. Life in common fellow citizenship created a spirit of progress in the arts and in manufacture, as well as zeal to achieve distinction by wealth and by enterprise; while, on the other hand, the acquisition of material wealth stimulated exertions to acquire culture and improvement in their political condition.

Strong through the power of youthful freedom and of flourishing industry, but exposed to the attacks of robbers by land and sea, the maritime towns of Northern Germany soon felt the necessity of a closer mutual union for protection and defence. With this object Hamburg and Lubeck formed a league in 1241, which before the close of that century embraced all the cities of any importance on the coasts of the Baltic and North Seas, or on the banks of the Oder, the Elbe, the Weser, and the Rhine (eighty-five in all). This confederation adopted the title of the 'Hansa,' which in the Low German dialect signifies a league.

Promptly comprehending what advantages the industry of individuals might derive from a union of their forces, the Hansa lost no time in developing and establishing a commercial policy which resulted in a degree of commercial prosperity previously unexampled. Perceiving that whatever power desires to create and maintain an extensive maritime commerce, must possess the means of defending it, they created a powerful navy; being further convinced that the naval power of any country is strong or weak in proportion to the extent of its mercantile marine and its sea fisheries, they enacted a law that Hanseatic goods should be conveyed only on board Hanseatic vessels, and established extensive sea fisheries. The English navigation laws were copied from those of the Hanseatic League, just as the latter were an imitation of those of Venice.14

England in that respect only followed the example of those who were her forerunners in acquiring supremacy at sea. Yet the proposal to enact a navigation Act in the time of the Long Parliament was then treated as a novel one. Adam Smith appears in his comment on this Act15 not to have known, or to have refrained from stating, that already for centuries before that time and on various occasions the attempt had been made to introduce similar restrictions. A proposal to that effect made by Parliament in 1461 was rejected by Henry VI., and a similar one made by James I. rejected by Parliament;16 indeed, long before these two proposals (viz. in 1381) such restrictions had been actually imposed by Richard II., though they soon proved inoperative and passed into oblivion. The nation was evidently not then ripe for such legislation. Navigation laws, like other measures for protecting native industry, are so rooted in the very nature of those nations who feel themselves fitted for future industrial and commercial greatness, that the United States of North America before they had fully won their independence had already at the instance of James Madison introduced restrictions on foreign shipping, and undoubtedly with not less great results (as will be seen in a future chapter) than England had derived from them a hundred and fifty years before.

The northern princes, impressed with the benefits which trade with the Hansards promised to yield to them—inasmuch as it gave them the means not only of disposing of the surplus products of their own territories, and of obtaining in exchange much better manufactured articles than were produced at home, but also of enriching their treasuries by means of import and export duties,17 and of diverting to habits of industry their subjects who were addicted to idleness, turbulence, and riot—considered it as a piece of good fortune whenever the Hansards established factories on their territory, and endeavoured to induce them to do so by granting them privileges and favours of every kind. The kings of England were conspicuous above all other sovereigns in this respect.

The trade of England (says Hume) was formerly entirely in the hands of foreigners, but especially of the 'Easterlings'18 whom Henry III. constituted a corporation, to whom he granted privileges, and whom he freed from restrictions and import duties to which other foreign merchants were liable. The English at that time were so inexperienced in commerce that from the time of Edward II. the Hansards, under the title of 'Merchants of the Steelyard,' monopolised the entire foreign trade of the kingdom. And as they conducted it exclusively in their own ships, the shipping interest of England was in a very pitiable condition.19

Some German merchants, viz. those of Cologne, after they had for a long time maintained commercial intercourse with England, at length established in London, in the year 1250, at the invitation of the King, the factory which became so celebrated under the name of 'The Steelyard'—an institution which at first was so influential in promoting culture and industry in England, but afterwards excited so much national jealousy, and which for 375 years, until its ultimate dissolution, was the cause of such warm and long-continued conflicts.

England formerly stood in similar relations with the Hanseatic League to those in which Poland afterwards stood with the Dutch, and Germany with the English; she supplied them with wool, tin, hides, butter, and other mineral and agricultural products, and received manufactured articles in exchange. The Hansards conveyed the raw products which they obtained from England and the northern states to their establishment at Bruges (founded in 1252), and exchanged them there for Belgian cloths and other manufactures, and for Oriental products and manufactures which came from Italy, which latter they carried back to all the countries bordering on the northern seas.

A third factory of theirs, at Novgorod in Russia (established in 1272), supplied them with furs, flax, hemp, and other raw products in exchange for manufactures. A fourth factory, at Bergen in Norway (also founded in 1272), was occupied principally with fisheries and trade in train oil and fish products.20

The experience of all nations in all times teaches us that nations, so long as they remain in a state of barbarism, derive enormous benefit from free and unrestricted trade, by which they can dispose of the products of the chase and those of their pastures, forests, and agriculture—in short, raw products of every kind; obtaining in exchange better clothing materials, machines, and utensils, as well as the precious metals—the great medium of exchange—and hence that at first they regard free trade with approval. But experience also shows that those very nations, the farther advances that they make for themselves in culture and in industry, regard such a system of trade with a less favourable eye, and that at last they come to regard it as injurious and as a hindrance to their further progress. Such was the case with the trade between England and the Hansards. A century had scarcely elapsed from the foundation of the factory of the 'Steelyard' when Edward III. conceived the opinion that a nation might do something more useful and beneficial than to export raw wool and import woollen cloth. He therefore endeavoured to attract Flemish weavers into England by granting them all kinds of privileges; and as soon as a considerable number of them had got to work, he issued a prohibition against wearing any articles made of foreign cloth.21

The wise measures of this king were seconded in the most marvellous manner by the foolish policy pursued by the rulers of other countries—a coincidence which has not unfrequently to be noted in commercial history. If the earlier rulers of Flanders and Brabant did everything in their power to raise their native industry to a flourishing condition, the later ones did everything that was calculated to make the commercial and manufacturing classes discontented and to incite them to emigration.22

In the year 1413 the English woollen industry had already made such progress that Hume could write respecting that period, 'Great jealousy prevailed at this time against foreign merchants, and a number of restrictions were imposed on their trade, as, for instance, that they were required to lay out in the purchase of goods produced in England the whole value which they realised from articles which they imported into it.'23

Under Edward IV. this jealousy of foreign traders rose to such a pitch that the importation of foreign cloth, and of many other articles, was absolutely prohibited.24

Notwithstanding that the king was afterwards compelled by the Hansards to remove this prohibition, and to reinstate them in their ancient privileges, the English woollen manufacture appears to have been greatly promoted by it, as is noted by Hume in treating of the reign of Henry VII., who came to the throne half a century later than Edward IV.

'The progress made in industry and the arts imposed limits, in a much more effective way than the rigour of laws could do, to the pernicious habit of the nobility of maintaining a great number of servants. Instead of vying with one another in the number and valour of their retainers, the nobility were animated by another kind of rivalry more in accordance with the spirit of civilisation, inasmuch as they now sought to excel one another in the beauty of their houses, the elegance of their equipages, and the costliness of their furniture. As the people could no longer loiter about in pernicious idleness, in the service of their chieftains and patrons, they became compelled, by learning some kind of handiwork, to make themselves useful to the community. Laws were again enacted to prevent the export of the precious metals, both coined and uncoined; but as these were well known to be inoperative, the obligation was again imposed on foreign merchants to lay out the whole proceeds of goods imported by them, in articles of English manufacture.'25

In the time of Henry VIII. the prices of all articles of food had considerably risen, owing to the great number of foreign manufacturers in London; a sure sign of the great benefit which the home agricultural industry derived from the development of home manufacturing industry.

The king, however, totally misjudging the causes and the operation of this phenomenon, gave ear to the unjust complaints of the English against the foreign manufacturers, whom the former perceived to have always excelled themselves in skill, industry, and frugality. An order of the Privy Council decreed the expulsion of 15,000 Belgian artificers, 'because they had made all provisions dearer, and had exposed the nation to the risk of a famine.' In order to strike at the root of this evil, laws were enacted to limit personal expenditure, to regulate the style of dress, the prices of provisions, and the rate of wages. This policy naturally was warmly approved by the Hansards, who acted towards this king in the same spirit of good-will which they had previously displayed towards all those former kings of England whose policy had favoured their interests, and which in our days the English display towards the kings of Portugal—they placed their ships of war at his disposition. During this king's whole reign the trade of the Hansards with England was very active. They possessed both ships and capital, and knew, not less cleverly than the English do in our days, how to acquire influence over peoples and governments who did not thoroughly understand their own interests. Only their arguments rested on quite a different basis from those of the trade monopolists of our day. The Hansards based their claim to supply all countries with manufactures on actual treaties and on immemorial possession of the trade, whilst the English in our day base a similar claim on a mere theory, which has for its author one of their own Customhouse officials. The latter demand in the name of a pretended science, what the former claimed in the name of actual treaties and of justice.

In the reign of Edward VI. the Privy Council sought for and found pretexts for abolishing the privileges of the 'Merchants of the Steelyard.' The Hansards made strong protests against this innovation. But the Privy Council persevered in its determination, and the step was soon followed by the most beneficial results to the nation. The English merchants possessed great advantages over the foreign ones, on account of their position as dwellers in the country, in the purchase of cloths, wool, and other articles, advantages which up to that time they had not so clearly perceived as to induce them to venture into competition with such a wealthy company. But from the time when all foreign merchants were subjected to the same commercial restrictions, the English were stimulated to enterprise, and the spirit of enterprise was diffused over the whole kingdom.26

After the Hansards had continued for some years to be entirely excluded from a market which they had for three centuries previously possessed as exclusively as England in our days possesses the markets of Germany and the United States, they were reinstated by Queen Mary in all their ancient privileges owing to representations made by the German Emperor.27 But their joy was this time of short duration. Being earnestly desirous not merely of maintaining these privileges, but of increasing them, they made strong complaints at the beginning of the reign of Elizabeth of the treatment to which they had been subjected under Edward VI. and Mary. Elizabeth prudently replied that 'she had no power to alter anything, but she would willingly protect them still in the possession of those privileges and immunities which they then possessed.' This reply, however, did not satisfy them at all. Some time afterwards their trade was further suspended, to the great advantage of the English merchants, who now had an opportunity of showing of what they were capable; they gained control over the entire export trade of their own country, and their efforts were crowned with complete success. They divided themselves into 'staplers and merchant adventurers,' the former carrying on business in some one place, the latter seeking their fortune in foreign cities and states with cloth and other English manufactures. This excited the jealousy of the Hansards so greatly, that they left no means untried to draw down on the English traders the ill opinion of other nations. At length, on August I, 1597, they gained an imperial edict, by which all trade within the German Empire was forbidden to English merchants. The Queen replied (on January 13, 1598) by a proclamation, in consequence of which she sought reprisals by seizing sixty Hanseatic vessels which were engaged in contraband trade with Spain. In taking this step she had at first only intended, by restoring the vessels, to bring about a better understanding with the Hansards. But when she was informed that a general Hanseatic assembly was being held in the city of Lubeck in order to concert measures for harassing the export trade of England, she caused all these vessels with their cargoes to be confiscated, and then released two of them, which she sent to Lubeck with the message that she felt the greatest contempt for the Hanseatic League and all their proceedings and measures.28

Thus Elizabeth acted towards these merchants, who had lent their ships to her father and to so many English kings to fight their battles; who had been courted by all the potentates of Europe; who had treated the kings of Denmark and Sweden as their vassals for centuries, and invited them into their territories and expelled them as they pleased; who had colonised and civilised all the south-eastern coasts of the Baltic, and freed all seas from piracy; who not very long before had, with sword in hand, compelled a king of England to recognise their privileges; to whom on more than one occasion English kings had given their crowns in pledge for loans; and who had once carried their cruelty and insolence towards England so far as to drown a hundred English fishermen because they had ventured to approach their fishing grounds. The Hansards, indeed, still possessed sufficient power to have avenged this conduct of the Queen of England; but their ancient courage, their mighty spirit of enterprise, the power inspired by freedom and by co-operation, had passed from them. They dwindled gradually into powerlessness until at length, in 1630, their League was formally dissolved, after they had supplicated every court in Europe for import privileges, and had everywhere been repulsed with scorn.

Many external causes, besides the internal ones which we have to mention hereafter, contributed to their fall. Denmark and Sweden sought to avenge themselves for the position of dependence in which they had been so long held by the League, and placed all possible obstructions in the way of its commerce. The czars of Russia had conferred privileges on an English company. The order of Teutonic knights, who had for centuries been the allies as well as (originally) the children of the League, declined and was dissolved. The Dutch and the English drove them out of all markets, and supplanted them in every court. Finally, the discovery of the route to the East Indies by the Cape of Good Hope, operated most seriously to their disadvantage.

These leaguers, who during the period of their might and prosperity had scarcely deemed an alliance with the German Empire as worthy of consideration, now in their time of need betook themselves to the German Reichstag and represented to that body that the English exported annually 200,000 pieces of cloth, of which a great proportion went to Germany, and that the only means whereby the League could regain its ancient privileges in England, was to prohibit the import of English cloth into Germany. According to Anderson, a decree of the Reichstag to that effect was seriously contemplated, if not actually drawn up, but that author asserts that Gilpin, the English ambassador to the Reichstag, contrived to prevent its being passed. A hundred and fifty years after the formal dissolution of the Hanseatic League, so completely had all memory of its former greatness disappeared in the Hanseatic cities that Justus Möser asserts (in some passage in his works) that when he visited those cities, and narrated to their merchants the power and greatness which their predecessors had enjoyed, they would scarcely believe him. Hamburg, formerly the terror of pirates in every sea, and renowned throughout Christendom for the services which she had rendered to civilisation in suppressing sea-robbers, had sunk so low that she had to purchase safety for her vessels by paying an annual tribute to the pirates of Algiers. Afterwards, when the dominion of the seas had passed into the hands of the Dutch, another policy became prevalent in reference to piracy. When the Hanseatic League were supreme at sea, the pirate was considered as the enemy of the civilised world, and extirpated wherever that was possible. The Dutch, on the contrary, regarded the corsairs of Barbary as useful partisans, by whose means the marine commerce of other nations could be destroyed in times of peace, to the advantage of the Dutch. Anderson avails himself of the quotation of an observation of De Witt in favour of this policy to make the laconic comment, 'Fas est et ab hoste doceri,' a piece of advice which, in spite of its brevity, his countrymen comprehended and followed so well that the English, to the disgrace of Christianity, tolerated even until our days the abominable doings of the sea-robbers on the North African coasts, until the French performed the great service to civilisation of extirpating them.29

The commerce of these Hanseatic cities was not a national one; it was neither based on the equal preponderance and perfect development of internal powers of production, nor sustained by adequate political power. The bonds which held together the members of the League were too lax, the striving among them for predominant power and for separate interests (or, as the Swiss or the Americans would say, the cantonal spirit, the spirit of separate state right) was too predominant, and superseded Hanseatic patriotism, which alone could have caused the general common weal of the League to be considered before the private interests of individual cities. Hence arose jealousies, and not unfrequently treachery. Thus Cologne turned to her own private advantage the hostility of England towards the League, and Hamburg sought to utilise for her own advantage a quarrel which arose between Denmark and Lübeck.

The Hanseatic cities did not base their commerce on the production and consumption, the agriculture or the manufactures, of the land to which their merchants belonged. They had neglected to favour in any way the agricultural industry of their own fatherland, while that of foreign lands was greatly stimulated by their commerce. They found it more convenient to purchase manufactured goods in Belgium, than to establish manufactories in their own country. They encouraged and promoted the agriculture of Poland, the sheep-farming of England, the iron industry of Sweden, and the manufactures of Belgium. They acted for centuries on the maxim which the theoretical economists of our day commend to all nations for adoption—they 'bought only in the cheapest market.' But when the nations from whom they bought, and those to whom they sold, excluded them from their markets, neither their own native agriculture nor their own manufacturing industry was sufficiently developed to furnish employment for their surplus commercial capital. It consequently flowed over into Holland and England, and thus went to increase the industry, the wealth, and the power of their enemies; a striking proof that mere private industry when left to follow its own course does not always promote the prosperity and the power of nations. In their exclusive efforts to gain material wealth, these cities had utterly neglected the promotion of their political interests. During the period of their power, they appeared no longer to belong at all to the German Empire. It flattered these selfish, proud citizens, within their circumscribed territories, to find themselves courted by emperors, kings, and princes, and to act the part of sovereigns of the seas. How easy would it have been for them during the period of their maritime supremacy, in combination with the cities of North Germany, to have founded a powerful Lower House as a counterpoise to the aristocracy of the empire, and by means of the imperial power to have thus brought about national unity—to have united under one nationality the whole sea-coast from Dunkirk to Riga—and by these means to have won and maintained for the German nation supremacy in manufactures, commerce, and maritime power. But in fact, when the sceptre of the seas fell from their grasp, they had not sufficient influence left to induce the German Reichstag to regard their commerce as a matter of national concern. On the contrary, the German aristocracy did all in their power thoroughly to oppress these humbled citizens. Their inland cities fell gradually under the absolute dominion of the various princes, and hence their maritime ones were deprived of their inland connections.

All these faults had been avoided by England. Her merchant shipping and her foreign commerce rested on the solid basis of her native agriculture and native industry; her internal trade developed itself in just proportion to her foreign trade, and individual freedom grew up without prejudice to national unity or to national power: in her case the interests of the Crown, the aristocracy, and the people became consolidated and united in the happiest manner.

If these historical facts are duly considered, can anyone possibly maintain that the English could ever have so widely extended their manufacturing power, acquired such an immeasurably great commerce, or attained such overwhelming naval power, save by means of the commercial policy which they adopted and pursued? No; the assertion that the English have attained to their present commercial eminence and power, not by means of their commercial policy, but in spite of it, appears to us to be one of the greatest falsehoods promulgated in the present century.

Had the English left everything to itself—'Laissé faire et laissé aller,' as the popular economical school recommends—the merchants of the Steelyard would be still carrying on their trade in London, the Belgians would be still manufacturing cloth for the English, England would have still continued to be the sheepfarm of the Hansards, just as Portugal became the vineyard of England, and has remained so till our days, owing to the stratagem of a cunning diplomatist. Indeed, it is more than probable that without her commercial policy England would never have attained to such a large measure of municipal and individual freedom as she now possesses, for such freedom is the daughter of industry and of wealth.

In view of such historical considerations, how has it happened that Adam Smith has never attempted to follow the history of the industrial and commercial rivalry between the Hanseatic League and England from its origin until its close? Yet some passages in his work show clearly that he was not unacquainted with the causes of the fall of the League and its results. 'A merchant,' he says, 'is not necessarily the citizen of any particular country. It is in a great measure indifferent to him from what place he carries on his trade; and a very trifling disgust will make him remove his capital, and together with it all the industry which it supports, from one country to another. No part of it can be said to belong to any particular country till it has been spread, as it were, over the face of that country, either in buildings or in the lasting improvement of lands. No vestige now remains of the great wealth said to have been possessed by the greater part of the Hanse Towns except in the obscure histories of the thirteenth and fourteenth centuries. It is even uncertain where some of them were situated, or to what towns in Europe the Latin names given to some of them belong.30

How strange that Adam Smith, having such a clear insight into the secondary causes of the downfall of the Hanseatic League, did not feel himself compelled to examine into its primary causes! For this purpose it would not have been at all necessary to have ascertained the sites where the fallen cities had stood, or to which cities belonged the Latin names in the obscure chronicles. He need not even have consulted those chronicles at all. His own countrymen, Anderson, Macpherson, King, and Hume, could have afforded him the necessary explanation.

How, therefore, and for what reason could such a profound inquirer permit himself to abstain from an investigation at once so interesting and so fruitful in results? We can see no other reason than this—that it would have led to conclusions which would have tended but little to support his principle of absolute free trade. He would infallibly have been confronted with the fact that after free commercial intercourse with the Hansards had raised English agriculture from a state of barbarism, the protective commercial policy adopted by the English nation at the expense of the Hansards, the Belgians, and the Dutch helped England to attain to manufacturing supremacy, and that from the latter, aided by her Navigation Acts, arose her commercial supremacy.

These facts, it would appear, Adam Smith was not willing to know or to acknowledge; for indeed they belong to the category of those inconvenient facts of which J. B. Say observes that they would have proved very adverse to his system.

Chapter III

THE NETHERLANDERS.

IN respect to temperament and manners, to the origin and language of their inhabitants, no less than to their political connection and geographical position, Holland, Flanders, and Brabant constituted portions of the German Empire. The more frequent visits of Charlemagne and his residence in the vicinity of these countries must have exercised a much more powerful influence on their civilisation than on that of more distant German territories. Furthermore, Flanders and Brabant were specially favoured by nature as respects agriculture and manufactures, as Holland was as respects cattle-farming and commerce.

Nowhere in Germany was internal trade so powerfully aided by extensive and excellent sea and river navigation as in these maritime states. The beneficial effects of these means of water transport on the improvement of agriculture and on the growth of the towns must in these countries, even at an early period, have led to the removal of impediments which hindered their progress and to the construction of artificial canals. The prosperity of Flanders was especially promoted by the circumstance that her ruling Counts recognised the value of public security, of good roads, manufactures, and flourishing cities before all other German potentates. Favoured by the nature of their territory, they devoted themselves with zeal to the extirpation of the robber knights and of wild beasts. Active commercial intercourse between the cities and the country, the extension of cattle-farming, especially of sheep, and of the culture of flax and hemp, naturally followed; and wherever the raw material is abundantly produced, and security of property and of intercourse is maintained, labour and skill for working up that material will soon be found. Meanwhile the Counts of Flanders did not wait until chance should furnish them with woollen weavers, for history informs us that they imported such artificers from foreign countries.

Supported by the reciprocal trade of the Hanseatic League and of Holland, Flanders soon rose by her woollen manufactures to be the central point of the commerce of the North, just as Venice by her industry and her shipping had become the centre of the commerce of the South. The merchant shipping, and reciprocal trade of the Hanseatic League and the Dutch, together with the manufacturing trade of Flanders, constituted one great whole, a real national industry. A policy of commercial restriction could not in their case be deemed necessary, because as yet no competition had arisen against the manufacturing supremacy of Flanders. That under such circumstances manufacturing industry thrives best under free trade, the Counts of Flanders understood without having read Adam Smith. Quite in the spirit of the present popular theory, Count Robert III., when the King of England requested him to exclude the Scotch from the Flemish markets, replied, 'Flanders has always considered herself a free market for all nations, and it does not consist with her interests to depart from that principle.'

After Flanders had continued for centuries to be the chief manufacturing country, and Bruges the chief market, of Northern Europe, their manufactures and commerce passed over to the neighbouring province of Brabant, because the Counts of Flanders would not continue to grant them those concessions to which in the period of their great prosperity they had laid claim. Antwerp then became the principal seat of commerce, and Louvain the chief manufacturing city of Northern Europe. In consequence of this change of circumstances, the agriculture of Brabant soon rose to a high state of prosperity. The change in early times from payment of imposts in kind to their payment in money, and, above all, the limitation of the feudal system, also tended especially to its advantage.

In the meantime the Dutch, who appeared more and more upon the scene, with united power, as rivals to the Hanseatic League, laid the foundation of their future power at sea. Nature had conferred benefits on this small nation both by her frowns and smiles. Their perpetual contests with the inroads of the sea necessarily developed in them a spirit of enterprise, industry, and thrift, while the land which they had reclaimed and protected by such indescribable exertions must have seemed to them a property to which too much care could not be devoted. Restricted by Nature herself to the pursuits of navigation, of fisheries, and the production of meat, cheese, and butter, the Dutch were compelled to supply their requirements of grain, timber, fuel, and clothing materials by their marine-carrying trade, their exports of dairy produce, and their fisheries.

Those were the principal causes why the Hansards were at a later period gradually excluded by the Dutch from the trade with the north-eastern countries. The Dutch required to import far greater quantities of agricultural produce and of timber than did the Hansards, who were chiefly supplied with these articles by the territories immediately adjoining their cities. And, further, the vicinity to Holland of the Belgian manufacturing districts, and of the Rhine with its extensive, fertile, and vine-clad banks, and its stream navigable up to the mountains of Switzerland, constituted great advantages for the Dutch.

It may be considered as an axiom that the commerce and prosperity of countries on the sea coast is dependent on the greater or less magnitude of the river territories with which they have communication by water.31 If we look at the map of Italy, we shall find in the great extent and fertility of the valley of the Po the natural reason why the commerce of Venice so greatly surpassed that of Genoa or of Pisa. The trade of Holland has its chief sources in the territories watered by the Rhine and its tributary streams, and in the same proportion as these territories were much richer and more fertile than those watered by the Elbe and the Weser must the commerce of Holland exceed that of the Hanse Towns. To the advantages above named was added another fortunate incident—the invention by Peter Böckels of the best mode of salting herrings. The best mode of catching and of 'böckelling' these fish (the latter term derived from the inventor) remained for a long period a secret known only to the Dutch, by which they knew how to prepare their herrings with a peculiar excellence surpassing those of all other persons engaged in sea fishery, and secured for themselves a preference in the markets as well as better prices.32 Anderson alleges that after the lapse of centuries from the date of these inventions in Holland, the English and Scotch fishermen, notwithstanding their enjoyment of a considerable bounty on export, could not find purchasers for their herrings in foreign markets, even at much lower prices, in competition with the Dutch. If we bear in mind how great was the consumption of sea fish in all countries before the Reformation, we can well give credit to the fact that at a time when the Hanseatic shipping trade had already begun to decline, the Dutch found occasion for building 2,000 new vessels annually.

From the period when all the Belgian and Batavian provinces were united under the dominion of the House of Burgundy, these countries partly acquired the great benefit of national unity, a circumstance which must not be left out of sight in connection with Holland's success in maritime trade in competition with the cities of Northern Germany. Under the Emperor Charles V. the United Netherlands constituted a mass of power and capacity which would have insured to their Imperial ruler supremacy over the world, both by land and at sea, far more effectually than all the gold mines on earth and all the papal favours and bulls could have done, had he only comprehended the nature of those powers and known how to direct and to make use of them.

Had Charles V. cast away from him the crown of Spain as a man casts away a burdensome stone which threatens to drag him down a precipice, how different would have been the destiny of the Dutch and the German peoples! As Ruler of the United Netherlands, as Emperor of Germany, and as Head of the Reformation, Charles possessed all the requisite means, both material and intellectual, for establishing the mightiest industrial and commercial empire, the greatest military and naval power which had ever existed—a maritime power which would have united under one flag all the shipping from Dunkirk as far as Riga.

The conception of but one idea, the exercise of but one man's will, were all that were needed to have raised Germany to the position of the wealthiest and mightiest empire in the world, to have extended her manufacturing and commercial supremacy over every quarter of the globe, and probably to have maintained it thus for many centuries.

Charles V. and his morose son followed the exactly opposite policy. Placing themselves at the head of the fanatical party, they made it their chief object to hispanicise the Netherlands. The result of that policy is matter of history. The northern Dutch provinces, strong by means of the element over which they were supreme, conquered their independence. In the southern provinces industry, the arts, and commerce, perished under the hand of the executioner, save only where they managed to escape that fate by emigrating to other countries. Amsterdam became the central point of the world's commerce instead of Antwerp. The cities of Holland, which already at an earlier period, in consequence of the disturbances in Brabant, had attracted a great number of Belgian woollen weavers, had now not room enough to afford refuge to all the Belgian fugitives, of whom a great number were consequently compelled to emigrate to England and to Saxony.

The struggle for liberty begot in Holland an heroic spirit at sea, to which nothing appeared too difficult or too adventurous, while on the contrary the spirit of fanaticism enfeebled the very nerves of Spain. Holland enriched herself principally by privateering against Spain, especially by the capture of the Spanish treasure fleets. By that means she carried on an enormous contraband trade with the Peninsula and with Belgium. After the union of Portugal with Spain, Holland became possessed of the most important Portuguese colonies in the East Indies, and acquired a part of Brazil. Up to the first half of the seventeenth century the Dutch surpassed the English in respect of manufactures and of colonial possessions, of commerce and of navigation, as greatly as in our times the English have surpassed the French in these respects. But with the English Revolution a mighty change developed itself. The spirit of freedom had become only a citizen spirit in Holland. As in all mere mercantile aristocracies, all went on well for a time; so long as the preservation of life and limbs and of property, and mere material advantages, were the objects clearly in view, they showed themselves capable of great deeds. But statesmanship of a more profound character was beyond their ken. They did not perceive that the supremacy which they had won, could only be maintained if it were based on a great nationality and supported by a mighty national spirit. On the other hand, those states which had developed their nationality on a large scale by means of monarchy, but which were yet behindhand in respect of commerce and industry, became animated by a sentiment of shame that so small a country as Holland should act the part of master over them in manufactures and commerce, in fisheries, and naval power. In England this sentiment was accompanied by all the energy of the new-born Republic. The Navigation Laws were the challenge glove which the rising supremacy of England cast into the face of the reigning supremacy of Holland. And when the conflict came, it became evident that the English nationality was of far larger calibre than that of the Dutch. The result could not remain doubtful.

The example of England was followed by France. Colbert had estimated that the entire marine transport trade employed about 20,000 vessels, of which 16,000 were owned by the Dutch—a number altogether out of proportion for so small a nation. In consequence of the succession of the Bourbons to the Spanish throne, France was enabled to extend her trade over the Peninsula (to the great disadvantage of the Dutch), and equally so in the Levant. Simultaneously the protection by France of her native manufactures, navigation, and fisheries, made immense inroads on the industry and commerce of Holland.

England had gained from Holland the greater part of the trade of the latter with the northern European states, her contraband trade with Spain and the Spanish colonies, and the greater part of her trade with the East and West Indies, and of her fisheries. But the most serious blow was inflicted on her by the Methuen Treaty of 1703. From that the commerce of Holland with Portugal, the Portuguese colonies, and the East Indies, received a deadly wound.

When Holland thus commenced to lose so large a portion of her foreign trade, the same result took place which had previously been experienced by the Hanseatic cities and by Venice: the material and mental capital which could now find no employment in Holland, was diverted by emigration or in the shape of loans to those countries which had acquired the supremacy from Holland which she had previously possessed.

If Holland in union with Belgium, with the Rhenish districts, and with North Germany, had constituted one national territory, it would have been difficult for England and France to have weakened her naval power, her foreign commerce, and her internal industry by wars and by commercial policy, as they succeeded in doing. A nation such as that would have been, could have placed in competition with the commercial systems of other nations a commercial system of her own. And if owing to the development of the manufactures of those other nations her industry suffered some injury, her own internal resources, aided by founding colonies abroad, would have abundantly made good that loss. Holland suffered decline because she, a mere strip of sea coast, inhabited by a small population of German fishermen, sailors, merchants, and dairy farmers, endeavoured to constitute herself a national power, while she considered and acted towards the inland territory at her back (of which she properly formed a part) as a foreign land.

The example of Holland, like that of Belgium, of the Hanseatic cities, and of the Italian republics, teaches us that mere private industry does not suffice to maintain the commerce, industry, and wealth of entire states and nations, if the public circumstances under which it is carried on are unfavourable to it; and further, that the greater part of the productive powers of individuals are derived from the political constitution of the government and from the power of the nation. The agricultural industry of Belgium became flourishing again under Austrian rule. When united to France her manufacturing industry rose again to its ancient immense extent. Holland by herself was never in a position to establish and maintain an independent commercial system of her own in competition with great nations. But when by means of her union with Belgium after the general peace (in 1815) her internal resources, population, and national territory were increased to such an extent that she could rank herself among the great nationalities, and became possessed in herself of a great mass and variety of productive powers, we see the protective system established also in the Netherlands, and under its influence agriculture, manufactures, and commerce make a remarkable advance. This union has now been again dissolved (owing to causes which lie outside the scope and purpose of our present work), and thus the protective system in Holland has been deprived of the basis on which it rested, while in Belgium it is still maintained.

Holland is now maintained by her colonies and by her transport trade with Germany. But the next great naval war may easily deprive her of the former; and the more the German Zollverein attains to a clear perception of its interests, and to the exercise of its powers, the more clearly will it recognise the necessity of including Holland within the Zollverein.

Chapter IV

THE ENGLISH.

IN our account of the Hanseatic League we have shown how in England agriculture and sheep farming have been promoted by foreign trade; how at a subsequent period, through the immigration of foreign artificers, fleeing from persecution in their native land, and also owing to the fostering measures adopted by the British Government, the English woollen manufacturing industry had gradually attained to a flourishing condition; and how, as a direct consequence of that progress in manufacturing industry, as well as of the wise and energetic measures adopted by Queen Elizabeth, all the foreign trade which formerly had been monopolised by foreigners had been successfully diverted into the hands of the merchants at home.

Before we continue our exposition of the development of English national economy from the point where we left off in Chapter II., we venture here to make a few remarks as to the origin of British industry.

The source and origin of England's industrial and commercial greatness must be traced mainly to the breeding of sheep and to the woollen manufacture.

Before the first appearance of the Hansards on British soil the agriculture of England was unskilful and her sheep farming of little importance. There was a scarcity of winter fodder for the cattle, consequently a large proportion had to be slaughtered in autumn, and hence both stock and manure were alike deficient. Just as in all uncultivated territories—as formerly in Germany, and in the uncleared districts of America up to the present time—hog breeding furnished the principal supply of meat, and that for obvious reasons. The pigs needed little care—foraged for themselves, and found a plentiful supply of food on the waste lands and in the forests; and by keeping only a moderate number of breeding sows through the winter, one was sure in the following spring of possessing considerable herds.

But with the growth of foreign trade hog breeding diminished, sheep farming assumed larger proportions, and agriculture and the breeding of horned cattle rapidly improved.

Hume, in his 'History of England,'33 gives a very interesting account of the condition of English agriculture at the beginning of the fourteenth century:

'In the year 1327 Lord Spencer counted upon 63 estates in his possession, 28,000 sheep, 1,000 oxen, 1,200 cows, 560 horses, and 2,000 hogs: giving a proportion of 450 sheep, 35 head of cattle, 9 horses, and 32 hogs to each estate.'

From this statement we may perceive how greatly, even in these early days, the number of sheep in England exceeded that of all the other domestic animals put together. The great advantages derived by the English aristocracy from the business of sheep farming gave them an interest in industry and in improved methods of agriculture even at that early period, when noblemen in most Continental states knew no better mode of utilising the greater part of their possessions than by preserving large herds of deer, and when they knew no more honourable occupation than harassing the neighbouring cities and their trade by hostilities of various kinds.

And at this period, as has been the case in Hungary more recently, the flocks so greatly increased that many estates could boast of the possession of from 10,000 to 24,000 sheep. Under these circumstances it necessarily followed that, under the protection afforded by the measures introduced by Queen Elizabeth, the woollen manufacture, which had already progressed very considerably in the days of former English rulers, should rapidly reach a very high degree of prosperity.34

In the petition of the Hansards to the Imperial Diet, mentioned in Chapter II., which prayed for the enactment of retaliatory measures, England's export of cloth was estimated at 200,000 pieces; while in the days of James I. the total value of English cloths exported had already reached the prodigious amount of two million pounds sterling, while in the year 1354 the total money value of the wool exported had amounted only to 277,000l., and that of all other articles of export to no more than 16,400l. Down to the reign of the last-named monarch the great bulk of the cloth manufactured in England used to be exported to Belgium in the rough state and was there dyed and dressed; but owing to the measures of protection and encouragement introduced under James I. and Charles I. the art of dressing cloth in England attained so high a pitch of perfection that thenceforward the im portation of the finer descriptions of cloth nearly ceased, while only dyed and finely dressed cloths were exported.

In order fully to appreciate the importance of these results of the English commercial policy, it must be here observed that, prior to the great development of the linen, cotton, silk, and iron manufactures in recent times, the manufacture of cloth constituted by far the largest proportion of the medium of exchange in the trade with all European nations, particularly with the northern kingdoms, as well as in the commercial intercourse with the Levant and the East and West Indies. To what a great extent this was the case we may infer from the undoubted fact that as far back as the days of James I. the export of woollen manufactures represented nine-tenths of all the English exports put together.35

This branch of manufacture enabled England to, drive the Hanseatic League out of the markets of Russia, Sweden, Norway, and Denmark, and to acquire for herself the best part of the profits attaching to the trade with the Levant and the East and West Indies. It was this industry that stimulated that of coal mining, which again gave rise to an extensive coasting trade and the fisheries, both which, as constituting the basis of naval power, rendered possible the passing of the famous Navigation Laws which really laid the foundation of England's maritime supremacy. It was round the woollen industry of England that all other branches of manufacture grew up as round a common parent stem; and it thus constitutes the foundation of England's greatness in industry, commerce, and naval power.

At the same time the other branches of English manufacture were in no way neglected.

Already under the reign of Elizabeth the importation of metal and leather goods, and of a great many other manufactured articles, had been prohibited, while the immigration of German miners and metal workers was encouraged. Formerly ships had been bought of the Hansards or were ordered to be built in the Baltic ports. But she contrived, by restrictions on the one hand and encouragements on the other, to promote shipbuilding at home.

The timber required for the purpose was brought to England from the Baltic ports, whereby again a great impetus was given to the British export trade to those regions.

The herring fishery had been learned from the Dutch, whale fishing from the dwellers on the shores of the Bay of Biscay; and both these fisheries were now stimulated by means of bounties.James I. more particularly took a lively interest in the encourage ment of shipbuilding and of fisheries. Though we may smile at his unceasing exhortations to his people to eat fish, yet we must do him the justice to say that he very clearly perceived on what the future greatness of England depended. The immigration into England, moreover, of the Protestant artificers who had been driven from Belgium and France by Philip II. and Louis XIV. gave to England an incalculable increase of industrial skill and manufacturing capital. To these men England owes her manufactures of fine woollen cloth, her progress in the arts of making hats, linen, glass, paper, silk, clocks and watches, as well as a part of her metal manufacture; branches of industry which she knew how speedily to increase by means of prohibition and high duties.

The island kingdom borrowed from every country of the Continent its skill in special branches of industry, and planted them on English soil, under the protection of her customs system. Venice had to yield (amongst other trades in articles of luxury) the art of glass manufacture, while Persia had to give up the art of carpet weaving and dyeing.

Once possessed of any one branch of industry, England bestowed upon it sedulous care and attention, for centuries treating it as a young tree which requires support and care. Whoever is not yet convinced that by means of diligence, skill, and economy, every branch of industry must become profitable in time—that in any nation already advanced in agriculture and civilisation, by means of moderate protection, its infant manufactures, however defective and dear their productions at first may be, can by practice, experience, and internal competition readily attain ability to equal in every respect the older productions of their foreign competitors; whoever is ignorant that the success of one particular branch of industry depends on that of several other branches, or to what a high degree a nation can develop its productive powers, if she takes care that each successive generation shall continue the work of industry where former generations have left it; let him first study the history of English industry before he ventures to frame theoretical systems, or to give counsel to practical statesmen to whose hands is given the power of promoting the weal or the woe of nations.

Under George I. English statesmen had long ago clearly perceived the grounds on which the greatness of the nation depends. At the opening of Parliament in 1721, the King is made to say by the Ministry, that'it is evident that nothing so much contributes to promote the public well-being as the exportation of manufactured goods and the importation of foreign raw material.'36

This for centuries had been the ruling maxim of English commercial policy, as formerly it had been that of the commercial policy of the Venetian Republic. It is in force at this day (1841) just as it was in the days of Elizabeth. The fruits it has borne lie revealed to the eyes of the whole world. The theorists have since contended that England has attained to wealth and power not by means of, but in spite of, her commercial policy. As well might they argue that trees have grown to vigour and fruitfulness, not by means of, but in spite of, the props and fences with which they had been supported when they were first planted.

Nor does English history supply less conclusive evidence of the intimate connection subsisting between a nation's general political policy and political economy. Clearly the rise and growth of manufactures in England, with the increase of population resulting from it, tended to create an active demand for salt fish and for coals, which led to a great increase of the mercantile marine devoted to fisheries and the coasting trade. Both the fisheries and the coasting trade were previously in the hands of the Dutch. Stimulated by high customs duties and by bounties, the English now directed their own energies to the fishery trade, and by the Navigation Laws they secured chiefly to British sailors not only the transport of sea-borne coal, but the whole of the carrying trade by sea. The consequent increase in England's mercantile marine led to a proportionate augmentation of her naval power, which enabled the English to bid defiance to the Dutch fleet. Shortly after the passing of the Navigation Laws, a naval war broke out between England and Holland, whereby the trade of the Dutch with countries beyond the English Channel suffered almost total suspension, while their shipping in the North Sea and the Baltic was almost annihilated by English privateers. Hume estimates the number of Dutch vessels which thus fell into the hands of English cruisers at 1,600, while Davenant, in his 'Report on the Public Revenue,' assures us that in the course of the twentyeight years next following the passing of the English Navigation Laws, the English shipping trade had increased to double its previous extent.37

Amongst the more important results of the Navigation Laws, the following deserve special mention, viz.:

• 1. The expansion of the English trade with all the northern kingdoms, with Germany and Belgium (export of manufactures and import of raw material), from which, according to Anderson's account, up to the year 1603 the English had been almost entirely shut out by the Dutch.
• 2. An immense extension of the contraband trade with Spain and Portugal, and their West Indian colonies.
• 3. A great increase of England's herring and whale fisheries, which the Dutch had previously almost entirely monopolised.
• 4. The conquest of the most important English colony in the West Indies—Jamaica—in 1655; and with that, the command of the West Indian sugar trade.
• 5. The conclusion of the Methuen Treaty (1703) with Portugal, of which we have fully treated in the chapters devoted to Spain and Portugal in this work. By the operation of this treaty the Dutch and the Germans were entirely excluded from the important trade with Portugal and her colonies: Portugal sank into complete political dependence upon England, while England acquired the means, through the gold and silver earned in her trade with Portugal, of extending enormously her own commercial intercourse with China and the East Indies, and thereby subsequently of laying the foundation for her great Indian empire, and dispossessing the Dutch from their most important trading stations.

The two results last enumerated stand in intimate connection one with the other. And the skill is especially noteworthy with which England contrived to make these two countries—Portugal and India—the instruments of her own future greatness. Spain and Portugal had in the main little to dispose of besides the precious metals, while the requirements of the East, with the exception of cloths, consisted chiefly of the precious metals. So far everything suited most admirably. But the East had principally only cotton and silk manufactures to offer in exchange, and that did not fit in with the principle of the English Ministry before referred to, namely, to export manufactured articles and import raw materials. How, then, did they act under the circumstances? Did they rest content with the profits accruing from the trade in cloths with Portugal and in cotton and silk manufactures with India? By no means. The English Ministers saw farther than that.

Had they sanctioned the free importation into England of Indian cotton and silk goods, the English cotton and silk manufactories must of necessity soon come to a stand. India had not only the advantage of cheaper labour and raw material, but also the experience, the skill, and the practice of centuries. The effect of these advantages could not fail to tell under a system of free competition.

But England was unwilling to found settlements in Asia in order to become subservient to Asia in manufacturing industry. She strove for commercial supremacy, and felt that of two countries maintaining free trade between one another, that one would be supreme which sold manufactured goods, while that one would be subservient which could only sell agricultural produce. In her North American colonies England had already acted on those principles in disallowing the manufacture in those colonies of even a single horseshoe nail, and, still more, that no horseshoe nails made there should be imported into England. How could it be expected of her that she would give up her own market for manufactures, the basis of her future greatness, to a people so numerous, so thrifty, so experienced and perfect in the old systems of manufacture as the Hindoos?

Accordingly, England prohibited the import of the goods dealt in by her own factories, the Indian cotton and silk fabrics.38 The prohibition was complete and peremptory. Not so much as a thread of them would England permit to be used. She would have none of these beautiful and cheap fabrics, but preferred to consume her own inferior and more costly stuffs. She was, however, quite willing to supply the Continental nations with the far finer fabrics of India at lower prices, and willingly yielded to them all the benefit of that cheapness; she herself would have none of it.

Was England a fool in so acting? Most assuredly, according to the theories of Adam Smith and J. B. Say, the Theory of Values. For, according to them, England should have bought what she required where she could buy them cheapest and best: it was an act of folly to manufacture for herself goods at a greater cost than she could buy them at elsewhere, and at the same time give away that advantage to the Continent.

The case is quite the contrary, according to our theory, which we term the Theory of the Powers of Production, and which the English Ministry, without having examined the foundation on which it rests, yet practically adopted when enforcing their maxim of importing produceand exporting fabrics.

The English Ministers cared not for the acquisition of low-priced and perishable articles of manufacture, but for that of a more costly but enduring manufacturing power.

They have attained their object in a brilliant degree. At this day England produces seventy million pounds' worth of cotton and silk goods, and supplies all Europe, the entire world, India itself included, with British manufactures. Her home production exceeds by fifty or a hundred times the value of her former trade in Indian manufactured goods.

What would it have profited her had she been buying for a century the cheap goods of Indian manufacture?

And what have they gained who purchased those goods so cheaply of her? The English have gained power, incalculable power, while the others have gained the reverse of power.

That in the face of results like these, historically attested upon unimpeachable evidence, Adam Smith should have expressed so warped a judgment upon the Navigation Laws, can only be accounted for upon the same principle on which we shall in another chapter explain this celebrated author's fallacious conclusions respecting commercial restrictions. These facts stood in the way of his pet notion of unrestricted free trade. It was therefore necessary for him to obviate the objection that could be adduced against his principle from the effects of the Navigation Laws, by drawing a distinction between their political objects and their economical objects. He maintained that, although the Navigation Laws had been politically necessary and beneficial, yet that they were economically prejudicial and injurious. How little this distinction can be justified by the nature of things or by experience, we trust to make apparent in the course of this treatise.

J. B. Say, though he might have known better from the experience of North America, here too, as in every instance where the principles of free trade and protection clash, goes still farther than his predecessor. Say reckons up what the cost of a sailor to the French nation is, owing to the fishery bounties, in order to show how wasteful and unremunerative these bounties are.

The subject of restrictions upon navigation constitutes a formidable stumbling-block in the path of the advocates of unrestricted free trade, which they are only too glad to pass over in silence, especially if they are members of the mercantile community in seaport towns.

The truth of the matter is this. Restrictions on navigation are governed by the same law as restrictions upon any other kind of trade. Freedom of navigation and the carrying trade conducted by foreigners are serviceable and welcome to communities in the early stages of their civilisation, so long as their agriculture and manufactures still remain undeveloped. Owing to want of capital and of experienced seamen, they are willing to abandon navigation and foreign trade to other nations. Later on, however, when they have developed their producing power to a certain point and acquired skill in shipbuilding and navigation, then they will desire to extend their foreign trade, to carry it on in their own ships, and become a naval power themselves. Gradually their own mercantile marine grows to such a degree that they feel themselves in a position to exclude the foreigner and to conduct their trade to the most distant places by means of their own vessels. Then the time has come when, by means of restrictions on navigation, a nation can successfully exclude the more wealthy, more experienced, and more powerful foreigner from participation in the profits of that business. When the highest degree of progress in navigation and maritime power has been reached, a new era will set in, no doubt; and such was that stage of advancement which Dr. Priestley had in his mind when he wrote 'that the time may come when it may be as politic to repeal this Act as it was to make it.'39

Then it is that, by means of treaties of navigation based upon equality of rights, a nation can, on the one hand, secure undoubted advantages as against less civilised nations, who will thus be debarred from introducing restrictions on navigation in their own special behalf; while, on the other hand, it will thereby preserve its own seafaring population from sloth, and spur them on to keep pace with other countries in shipbuilding and in the art of navigation. While engaged in her struggle for supremacy, Venice was doubtless greatly indebted to her policy of restrictions on navigation; but as soon as she had acquired supremacy in trade, manufactures, and navigation, it was folly to retain them. For owing to them she was left behind in the race, both as respects shipbuilding, navigation, and seamanship of her sailors, with other maritime and commercial nations which were advancing in her footsteps. Thus England by her policy increased her naval power, and by means of her naval power enlarged the range of her manufacturing and commercial powers, and again, by the latter, there accrued to her fresh accessions of maritime strength and of colonial possessions. Adam Smith, when he maintains that the Navigation Laws have not been beneficial to England in commercial respects, admits that, in any case, these laws have increased her power. And power is more important than wealth. That is indeed the fact. Power is more important than wealth. And why? Simply because national power is a dynamic force by which new productive resources are opened out, and because the forces of production are the tree on which wealth grows, and because the tree which bears the fruit is of greater value than the fruit itself. Power is of more importance than wealth because a nation, by means of power, is enabled not only to open up new productive sources, but to maintain itself in possession of former and of recently acquired wealth, and because the reverse of power—namely, feebleness—leads to the relinquishment of all that we possess, not of acquired wealth alone, but of our powers of production, of our civilisation, of our freedom, nay, even of our national independence, into the hands of those who surpass us in might, as is abundantly attested by the history of the Italian republics, of the Hanseatic League, of the Belgians, the Dutch, the Spaniards, and the Portuguese.

But how came it that, unmindful of this law of alternating action and reaction between political power, the forces of production and wealth, Adam Smith could venture to contend that the Methuen Treaty and the Act of Navigation had not been beneficial to England from a commercial point of view? We have shown how England by the policy which she pursued acquired power, and by her political power gained productive power, and by her productive power gained wealth. Let us now see further how, as a result of this policy, power has been added to power, and productive forces to productive forces.

England has got into her possession the keys of every sea, and placed a sentry over every nation: over the Germans, Heligoland; over the French, Guernsey and Jersey; over the inhabitants of North America, Nova Scotia and the Bermudas; over Central America, the island of Jamaica; over all countries bordering on the Mediterranean, Gibraltar, Malta, and the Ionian Islands. She possesses every important strategical position on both the routes to India with the exception of the Isthmus of Suez, which she is striving to acquire; she dominates the Mediterranean by means of Gibraltar, the Red Sea by Aden, and the Persian Gulf by Bushire and Karrack. She needs only the further acquisition of the Dardanelles, the Sound, and the Isthmuses of Suez and Panama, in order to be able to open and close at her pleasure every sea and every maritime highway. Her navy alone surpasses the combined maritime forces of all other countries, if not in number of vessels, at any rate in fighting strength.

Her manufacturing capacity excels in importance that of all other nations. And although her cloth manufactures have increased more than tenfold (to forty-four and a half millions) since the days of James I., we find the yield of another branch of industry, which was established only in the course of the last century, namely, the manufacture of cotton, amounting to a much larger sum, fifty-two and a half millions.40

Not content with that, England is now attempting to raise her linen manufacture, which has been long in a backward state as compared with that of other countries, to a similar position, possibly to a higher one than that of the two above-named branches of industry: it now amounts to fifteen and a half millions sterling. In the fourteenth century, England was still so poor in iron that she thought it necessary to prohibit the exportation of this indispensable metal; she now, in the nineteenth century, manufactures more iron and steel wares than all the other nations on earth (namely, thirty-one millions' worth), while she produces thirty-four millions in value of coal and other minerals. These two sums exceed by over sevenfold the value of the entire gold and silver production of all other nations, which amount to about two hundred and twenty million francs, or nine millions sterling.

At this day she produces more silk goods than all the Italian republics produced in the Middle Ages together, namely, thirteen and a half million pounds. Industries which at the time of Henry VIII. and Elizabeth scarcely deserved classification, now yield enormous sums; as, for instance, the glass, china, and stoneware manufactures, representing eleven millions; the copper and brass manufactures, four and a half millions; the manufactures of paper, books, colours, and furniture, fourteen millions.

England produces, moreover, sixteen millions' worth of leather goods, besides ten millions' worth of unenumerated articles. The manufacture of beer and spirituous liquors in England alone greatly exceeds in value the aggregate of national production in the days of James I., namely, forty-seven millions sterling.

The entire manufacturing production of the United Kingdom at the present time, is estimated to amount to two hundred and fifty-nine and a half millions sterling.

As a consequence, and mainly as a consequence, of this gigantic manufacturing production, the productive power of agriculture has been enabled to yield a total value exceeding twice that sum (five hundred and thirty-nine millions sterling).

It is true that for this increase in her power, and in her productive capacity, England is not indebted solely to her commercial restrictions, her Navigation Laws, or her commercial treaties, but in a large measure also to her conquests in science and in the arts.

But how comes it, that in these days one million of English operatives can perform the work of hundreds of millions?It comes from the great demand for manufactured goods which by her wise and energetic policy she has known how to create in foreign lands, and especially in her colonies; from the wise and powerful protection extended to her home industries; from the great rewards which by means of her patent laws she has offered to every new discovery; and from the extraordinary facilities for her inland transport afforded by public roads, canals, and railways.

England has shown the world how powerful is the effect of facilities of transport in increasing the powers of production, and thereby increasing the wealth, the population, and the political power of a nation. She has shown us what a free, industrious, and well-governed community can do in this respect within the brief space of half a century, even in the midst of foreign wars. That which the Italian republics had previously accomplished in these respects was mere child's play. It is estimated that as much as a hundred and eighteen millions sterling have been expended in England upon these mighty instruments of the nation's productive power.

England, however, only commenced and carried out these works when her manufacturing power began to grow strong. Since then, it has become evident to all observers that that nation only whose manufacturing power begins to develop itself upon an extensive scale is able to accomplish such works; that only in a nation which develops concurrently its internal manufacturing and agricultural resources will such costly engines of trade repay their cost; and that in such a nation only will they properly fulfil their purpose.

It must be admitted, too, that the enormous producing capacity and the great wealth of England are not the effect solely of national power and individual love of gain. The people's innate love of liberty and of justice, the energy, the religious and moral character of the people, have a share in it. The constitution of the country, its institutions, the wisdom and power of the Government and of the aristocracy, have a share in it. The geographical position, the fortunes of the country, nay, even good luck, have a share in it.

It is not easy to say whether the material forces exert a greater influence over the moral forces, or whether the moral outweigh the material in their operation; whether the social forces act upon the individual forces the more powerfully, or whether the latter upon the former. This much is certain, however, namely, that between the two there subsists an interchanging sequence of action and reaction, with the result that the increase of one set of forces promotes the increase of the other, and that the enfeeblement of the one ever involves the enfeeblement of the other.

Those who seek for the fundamental causes of England's rise and progress in the blending of Anglo-Saxon with the Norman blood, should first cast a glance at the condition of the country before the reign of Edward III. Where were then the diligence and the habits of thrift of the nation?Those again who would look for them in the constitutional liberties enjoyed by the people will do well to consider how Henry VIII. and Elizabeth treated their Parliaments. Wherein did England's constitutional freedom consist under the Tudors? At that period the cities of Germany and Italy enjoyed a much greater amount of individual freedom than the English did.

Only one jewel out of the treasure-house of freedom was preserved by the Anglo-Saxon-Norman race—before other peoples of Germanic origin; and that was the germ from which all the English ideas of freedom and justice have sprung—the right of trial by jury.

While in Italy the Pandects were being unearthed, and the exhumed remains (no doubt of departed greatness and wisdom in their day) were spreading the pestilence of the Codes amongst Continental nations, we find the English Barons declaring they would not hear of any change in the law of the land. What a store of intellectual force did they not thereby secure for the generations to come! How much did this intellectual force subsequently influence the forces of material production!

How greatly did the early banishment of the Latin language from social and literary circles, from the State departments, and the courts of law in England, influence the development of the nation, its legislation, law administration, literature, and industry! What has been the effect upon Germany of the long retention of the Latin in conjunction with foreign Codes, and what has been its effect in Hungary to the present day? What an effect have the invention of gunpowder, the art of printing, the Reformation, the discovery of the new routes to India and of America, had on the growth of English liberties, of English civilisation, and of English industry? Compare with this their effect upon Germany and France. In Germany—discord in the Empire, in the provinces, even within the walls of cities; miserable controversies, barbarism in literature, in the administration of the State and of the law; civil war, persecutions, expatriation, foreign invasion, depopulation, desolation; the ruin of cities, the decay of industry, agriculture, and trade, of freedom and civic institutions; supremacy of the great nobles; decay of the imperial power, and of nationality; severance of the fairest provinces from the Empire. In France—subjugation of the cities and of the nobles in the interest of despotism; alliance with the priesthood against intellectual freedom, but at the same time national unity and power; conquest with its gain and its curse, but, as against that, downfall of freedom and of industry. In England—the rise of cities, progress in agriculture, commerce, and manufactures; subjection of the aristocracy to the law of the land, and hence a preponderating participation by the nobility in the work of legislation, in the administration of the State and of the law, as also in the advantages of industry; development of resources at home, and of political power abroad; internal peace; influence over all less advanced communities; limitation of the powers of the Crown, but gain by the Crown in royal revenues, in splendour and stability. Altogether, a higher degree of w