Foreign Trade and the National Economy: Mercantilist and Classical Perspectives

328 Pages·1987·32.701 MB·English

by  Leonard Gomes (auth.)

FOREIGN TRADE AND THE NATIONAL ECONOMY
By the same author
INTERNATIONAL ECONOMIC PROBLEMS
Foreign Trade
and the
National Economy
Mercantilist and Classical Perspectives
Leonard Gomes
Senior Lecturer in Economics
Middlesex Polytechnic, London
M
MACMILLAN
PRESS
© Leonard Gomes 1987
Softcover reprint of the hardcover 18t edition 1987
All rights reserved. No reproduction, copy or transmission
of this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied
or transmitted save with written permission or in accordance
with the provisions of the Copyright Act 1956 (as amended).
Any person who does any unauthorised act in relation to
this publication may be liable to criminal prosecution and
civil claims for damages.
First published 1987
Published by
THE MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 2XS
and London
Companies and representatives
throughout the world
British Library Cataloguing in Publication Data
Gomes, Leonard
Foreign trade and the national economy:
mercantilist and classical perspectives.
1. Commerce
I. Title
382 HFI008
ISBN 978-1-349-08994-9 ISBN 978-1-349-08992-5 (eBook)
DOI 10.1007/978-1-349-08992-5
Contents
Preface VB
PART I REGULATED TRADE: MERCANTILISM
1 The Age of Mercantilism 3
1.1 Interpreting the Mercantilist Literature 5
1.2 Historical Background 12
2 Mercantilist Thought on Foreign Trade 38
2.1 The Balance-of-trade Doctrine 38
2.2 Trade, Employment and Growth 67
2.3 Trade, Power and Plenty 78
3 The Decline of Mercantilist Trade Doctrines 94
PART II CLASSICAL POLITICAL ECONOMY AND
FOREIGN TRADE
4 Classical Trade Theory 129
5 The Economists, the Corn Laws and Commercial Policy 171
5.1 The Economists and the Corn-Law Debate 171
5.2 Commercial Policy 192
5.3 The Export of Technology 211
6 Gold, Money and Trade 220
7 Free Trade and the National Economists 254
Notes and References 278
Index 314
Preface
This book is about international trade theory and policy seen in
historical perspective. It covers the period from the mercantilists down
to the classical economists and their critics. It deals in a comprehensive
manner with doctrines relating to international economic relations
during a period which saw the emergence and establishment of political
economy as a distinct branch of the social sciences. These early writers
were concerned with urgent and often complex matters relating to
policy; and it was this intellectual involvement that produced the
technical apparatus of reasoning about the international economy
which in turn generated further controversy among economists - a
process that continues today.
The book aims to convey the flavour of these early debates by way of
tracing the development of analytical concepts and modes of reasoning.
The historical context in doctrinal analysis means that one makes use
of recent research in economic history and the history of ideas. It also
means that one should take note, as far as possible, of the diversity of
views expressed on any particular topic. This is done in the text - the
aim being to give a stimulating and intellectually rewarding survey of
doctrinal history.
Part I is concerned with the trade doctrines of the mercantilists. The
historical background against which these ideas emerged is described.
This leads to an account of the balance-of-trade and related doctrines.,
e.g. employment, growth and power. The focus is on the English
mercantilists, but a summary is also given of the writings of other
European mercantilists, including sections on French and Dutch
mercantilist policies. This part ends with a survey of the important
topic regarding the decline of mercantilist thought on foreign trade.
Part II deals with the classical economists. Chapter 4 traces the
development of the theory of comparative advantage at the hands of
Ricardo, Torrens and Mill. The revival of Ricardian scholarship
(Sraffa, Hollander) has led to a reinterpretation of Ricardo's foreign
trade model based on his theory of profits - the policy implications of
which are discussed in Chapter 5. There follows a critical assessment of
the classical economists' discussions on free trade, the terms of trade
and infant-industry argument for protection. Also included is the
fascinating debate on the export of machinery - anticipating modern
fears about loss of technological leadership. Chapter 6 is concerned
vii
Vlll Preface
with the origins of the gold standard - theoretical ideas and policy
decisions. The discussion revolves around the Bullionist and Currency
Banking Schools controversy. The final chapter is devoted mainly to
the writings of Friedrich List - sadly neglected in the English litera
ture - who anticipated much of the later criticisms of the classical
theory of international trade.
The book should appeal to students on undergraduate courses in
history of economic thought, economic history and history of interna
tional relations. It should provide intellectual and historical breadth to
a theoretical course in international economics. It also presents useful
supplementary reading material for a variety of interdisciplinary
courses, e.g. in connection with projects, extended essays, etc., in the
topic-areas covered by the text. The book is fully annotated and
contains ample references for further reading.
LEONARD GOMES
Part I
Regulated Trade:
Mercantilism
1 The Age of Mercantilism
INTRODUCTION
'Bringing of forty ships filled with cedar logs. Shipbuilding of cedar
wood, one ... ship, 100 cubits long .... Making the doors of the royal
palace of cedarwood."
Thus an entry from the annals of Pharaoh Sneferu, ruler of Egypt
around 2650 B.C. This is our earliest written record of international
trade. It relates to the import by Egypt of cedarwood from Lebanon for
building purposes and the making of palace doors. International trade
is as old as civilised man. From archaeological evidence and fragments
of written records we know that there was a lively trade among the
early peoples of the Near East which also extended to China and India.
The earliest articles of trade were in stone, malachite and the black
volcanic glass called 'obsidian', useful for knives and other cutting
instruments. The Assyrians imported cotton from India and silver from
Cilicia. The Mycenaeans obtained amber from the far Baltic region.
The invention and use of bronze for tools and weapons provided a
powerful stimulus to international trade in ancient times. The trade
routes both by sea and donkey caravan spun a commercial network
that involved practically all the great civilisations of the Old World, e.g.
the Silk Road from China to Antioch. Among the Hittites, Egyptians
and Mycenaean Greeks trade was officially controlled - an early form
of state trading, whereas in ancient Iraq and Assyria foreign trade was
largely in the hands of private entrepreneurs.
A succession of empires arose and fell, but trade continued regardless
being based, as always, on differential resource endowments, tastes and
the lure of profits. War and sometimes religion brought peoples of
different lands into contact, but the most pervasive and enduring
influence was that of international commerce.
Intelligent people in ancient times must have reflected on the nature
and implications of foreign trade, but of what they thought little or
nothing has survived. As regards what we consider to be economic
analysis of international trade and finance this only emerges in the
sixteenth century among the group of writers called 'mercantilists'.
The thinkers of Greece and Rome touched on economic matters and
the medieval Schoolmen had much to say about questions of value and
distribution. But they contributed little to the discussion of internatio-
3