“Path to Empire”

(The Rise of Mercantilism in World Trade)

Glenn L. Alpaugh

The quest for wealth has driven Man to the farthest reaches of the world. Empires

have risen and toppled through the ages because of this unrelenting hunger for riches. Just

as the walls of Athens fell to the Spartan phalanx, and Hannibal’s Carthage to the iron

legions of Rome, so has each civilization, in its turn, fallen prey to the weapons and

strategies of shrewder or more powerful opponents. The maturing of civilization has seen a

sophistication come to the weaponry used in the struggle to attain wealth, and the power

associated with it. Although not as overt as the sword or lance, the establishment and

refinement of economic trade has proven that it can be wielded as deftly, and with as

devastating a result, as any weapon crafted in the fiery forge of Mars. Chief among the

predatory trade practices established over the centuries is that of the mercantilist

philosophy. Those agents of government and industry who mastered its concepts and

tactics waged war on a level above that of martial endeavors, but for the same prize. Both

philosophies - mastery through economic or military machinations, led their practitioners

down the perilous path to empire - a common thread woven into the living fabric of

history.

The mercantilist philosophy of trade focuses on the acquisition of wealth through

export of goods and services, while limiting imports via strict controls administered by the

government or ruling class of a nation. The ancient Roman Empire is one of the earliest

examples of such a nation. Its expanding control over its neighbors and allies

complimented an ideology focused on delivering the riches of the world to its capital

(Hooker, 1).

The collapse of Rome brought with it a corresponding contraction of mercantilism. By

the 6th century A.D., the demise of Roman power led to isolationism as the fragmented

trade of Europe tended towards the safer and smaller markets of localization, eventually

drifting into feudal economies. This primitive, small-scale trade activity emphasized

agricultural production, with an effective economic interaction of approximately 20 miles

(Mercantilism, The Nature Of Feudal Economies, 1).

Characterized by a lord – vassal relationship, feudal economies contained five primary

groups and an authority based on landholding. The money and security of this economic

state were controlled by a sovereign, while agriculture was controlled by nobles.

Merchants were in control of trade, while priests policed behavior. The labor force was

composed of serfs, who controlled nothing in the feudal economy (Mercantilism, The

Nature Of Feudal Economies, 1).

This system met its demise through the conjunction of several occurrences - a decrease

in the labor supply brought about as a result of the Black Death, the increase of trade

possibilities due to travel, and the development of a belief that property could be privately

owned, an idea standing in direct conflict to the feudal system of sovereignty

(Mercantilism, The Nature Of Feudal Economies, 1). The increasing void created by the

collapsing feudal economic system set the stage for inroads to be made by an emerging

economic force in Islam.

Living on the trade routes of the Egyptian, Persian, and Byzantium empires, Arabic

culture had developed a long history of mercantilism. This system grew in strength from

the 7th century onward, as the religion of Islam made steady inroads across the lands of

North Africa, Spain, the Middle East, and Asia, entrenching Arabic mercantilism firmly

into the economic systems of these territories. Medieval Europe also gleaned much of its

mercantilist education from the spread of Islam, learning such economic terms as tariffs

and traffic – both derived from the Arabic language (Hooker, 1).

Beginning in the 14th century, the nations of Europe pushed back against Arabic

economic inroads by expanding their own mercantilist practices, in an effort to compete.

This expansion in trade resulted in an explosion in social mobility in European culture, and

drove the exploration of distant lands, culminating in the voyages of discovery (Hooker,

1).

The expansionist policies of the European nations continued into the 16th century,

following the economic rationale of large competitive nation-states to consolidate regional

power centers of the defunct feudal era. Contributing factors included establishing colonies

outside of Europe, the growth of European commerce and industry relative to agriculture,

and the use of metallic monetary systems relative to barter transactions (LaHaye, 1). This

period witnessed the beginning of three centuries of religious and commercial wars

between the rising European nation-states, requiring a constant flow of revenues to

maintain full-time professional forces and to pay for the growing costs of civil government

(Mercantilism, 1).

It became the primary economic objective of each government to command sufficient

currency to support the military now necessary to deter attacks by other economic powers,

while aiding its own territorial expansion (LaHaye, 1). These supporting funds were paid

in large, to the nation-states by the mercantilist classes in the form of levies and taxes. In

exchange, governments would enact protectionist policies in favor of the mercantilist

classes and against foreign competition. Such policies as providing capital to new

industries, guild rule and tax exemptions, establishing monopolies over local and colonial

markets, and the granting of pensions to successful producers were commonplace in this

process of quid pro quo (LaHaye, 2). During this expansionist period, treaties were enacted

in the quest to obtain exclusive trading privileges – usually exploiting the commerce of

colonies while benefiting the mother countries (Mercantilism, 1).

The movement of New World gold to Europe caused shipping to grow crucial to the

great powers pursuing the perilous sea-lanes of empire, with dominance over the oceans

becoming a logical and vital concern. To address this issue, governments developed strong

and capable merchant marines, valuable commodities - since the vessels of these great

fleets could be used for both merchant and military purposes. Several European nations

sought additional nautical advantages, with varying methods and degrees of success.

England enacted the Navigation Laws of 1650 and 1651, which “prohibited foreign

vessels from engaging in coastal trade in England and required that all goods imported

from the continent of Europe be carried on either an English vessel or a vessel registered in

the country of origin of the goods,” (LaHaye, 2). In addition, all colonial trade with the

English mother country was restricted to transport via English or colonial vessels. In a

move to further control the flow of commerce, England targeted Holland – the dominant

commercial sea power of the time - with activation of the Staple Act of 1663. This

maritime law was an extension of the Navigation Act, and required all colonial exports to

be landed in England before re-exportation to Europe (LaHaye, 2). Notable English

supporters of these mercantilist policies included Henry VIII, Elizabeth I, and Oliver

Cromwell.

From 1661 to 1663, French minister of finance Jean-Baptiste Colbert (under Louis

XIV) embraced the mercantilist philosophy of economic regulation completely, providing

bounties to French shipbuilders and increasing port duties on foreign ships in an effort to

leverage an advantage in trade (LaHaye, 2). Later, in his capacity as chief minister of

France, Colbert insisted that purchase of raw materials be confined exclusively to French

or French colonial sources, and bolstered the merchant marine of his nation to nearly three

hundred vessels. The fervor with which the French minister used his regulations to chain

the economic system of his country to national power has lent a comparison of his policies

with those of latter-day fascism (Rempel, 2).

The empire of Spain maintained tight control of its trade policies, both in Europe and

in its New World territories. Desiring more than a monopoly over trade with its colonies,

Spain also sought to deny England the colonial expansion it was attempting to obtain in the

new lands to the West. The Spanish Empire feared that any successful English colonies

could be used as bases for penetration of its own colonial territory. This suspicion carried

over from the English position that, although providing a minimal participation in

exploration, its occupation of new lands provided legitimate claim to title. This belief

conflicted with the contention of Spain, that discovery equated to claim to title (Rempel,

3).

Spain used three mercantilist devices to protect its New World interests - a prohibition

on foreign ships entering its colonial ports - suppression of manufacturing in specific

colonies to allow for a more open import market (from its other colonies) - and the

channeling of all Spanish colonial trade through a single port. As with the other world

powers of the time, the health of Spain’s colonies was subordinate to the accumulation of

wealth for the mother country (Rempel, 5).

In Germany during this time, primary concern of the mercantilists was the use of

internal regulation to increase economic power. Such internal controls foreshadowed the

economic nationalism of a future planned society in the Fatherland. The fervent drive to

increase national revenue provided the German mercantilists with the label of cameralists,

which alluded to Kammer - the German royal treasury (Rempel, 2).

The 18th and 19th centuries saw a consolidation of colonial mercantilist policies,

followed by a weakening of resolve and inability to maintain them in some instances. The

economic expansion of the British Empire stretched across the world. England controlled

trade from the American colonies to the East India Company, which had transitioned from

a privately owned monopoly to a governing body in India controlled by English

Parliament; this as a result of the Regulating Act of 1773 (Manas, 1).

The extreme mercantilist regulation of the Spanish colonies had become so hamstrung

by an administration imposed by the mother country, that an inability to enforce its own

policies caused Spain to gradually relax its iron grip on a system acknowledged by its

creators to be outmoded. This easing of restrictions took place in spite of the fact that

Spain was the leading colonial power through the first decade of the 19th century (Rempel,

5).

Mismanagement and abuse of colonial territories resulted in a series of political and

military defeats for the European powers during the late 18th to mid-19th centuries. The

British colonies in America, chafing at the mercantilist controls forced upon them by a

seemingly uncaring Crown and Parliament, fomented a general uprising that grew to a

revolution in 1776. The year was auspicious in the fact that, not only was formal

independence declared by the English colonies of America through the eloquently crafted

Declaration of Independence, but so too was enlightenment attained in the form of “The

Wealth of Nations.” This treatise by Adam Smith espoused the economic benefits of free

trade over conventionally accepted and predatory mercantilist philosophies, while directly

correlating those economic benefits to the potential for social and moral improvement of

humankind (Smith, 1). Smith’s work is considered by many to mark the end of the

mercantilist era, while others see tenets of mercantilism still being practiced in

contemporary economic policies around the world.

To the East, after two and a half centuries of plundering and scandalous mercantilist

mismanagement by the East India Company, Indian troops rebelled in the Sepoy Mutiny of

1857. This led to the dissolution of the East India Company in 1858, and caused India to be

directly administered by the British Crown (Manas, 2).

In 1864, the failure of Napoleon III of France to successfully establish a Mexican

empire through the appointment of Ferdinand Maximilian as its emperor, continued the

decline of French economic influence in the Americas (Maximilian, 1). So too, did the

glory of Spain fade from the New World, as its territories were systematically annexed by

former colonies now standing as independent nations – hungry to establish their

dominance in a new, industrialized world. Successive military setbacks cost the weakening

Spanish Empire its interests in South America, Cuba, and the Philippine Islands.

With Great Britain in decline and non-European states such as China wallowing in

economic weakness, overseas trade and investment by a youthful and growing United

States led the new nation to give more thought to its strategic position in the world as it,

too, gazed down the path of empire. The need for deliberate analysis became even more

apparent with the 1890 publishing of “The Influence of Sea Power on History 1660 –

1783,” a brilliant work by US Navy Rear Admiral Alfred Thayer Mahan. Mahan’s treatise

is greatly acknowledged as “the most important work of strategic thought ever written by

an American,” and provides an intellectual basis for thought on the American acquisition

of more bases and territories in the Pacific (Mead, 1).

As the United States matured into an economic and military power, influential forces

began steering the energetic nation into an imperialist movement. The most influential of

these forces were men of wealth and political power – such American giants as John Hay,

Elihu Root, Theodore Roosevelt, Henry Cabot lodge and the previously mentioned Rear

Admiral Alfred Mahu (Mead, 1).

John Hay served as the confidential assistant of President Abraham Lincoln,

ambassador to Britain, and secretary of state. His "Open Door" policy toward China, with

British support, ended the attempted division of the Chinese empire by other powers such

as Russia, Germany, and Japan – a fate suffered by Africa at the hands of European powers

(Mead, 1).

Elihu Root succeeded Hays as secretary of state. He was a corporate law specialist

from New York, and the acknowledged leader of the American Bar. Root helped establish

the Carnegie Endowment and the Council on Foreign Relations. Serving as Secretary of

War from 1898 to 1904, he “reorganized the administrative system of the War Department,

established new procedures for promotion, founded the War College, enlarged West Point,

opened schools for special branches of the service, created a general staff, strengthened

control over the National Guard,” all indicative of a desire to increase the power of the US

in the event that future conflicts would arise as American international interests expanded

(Haberman, 1).

Theodore Roosevelt served with distinction in the Spanish American War, was elected

Governor of New York in 1898, and at the age of 43, served as the American nation’s

youngest president. His belief in the manifest destiny of the United States was apparent in

the Roosevelt Corollary, which stated that “even if a country had a legal contract

agreement with a smaller, uncivilized country of the Western Hemisphere, the US could

step in and interrupt that contract if the US thought the deal was not in the best interest of

the smaller countries,” (Lubragge, 1). The newfound economic wealth of the United States

allowed Roosevelt to construct the physical manifestation of his “Big Stick” diplomacy -

the Great White Fleet. This impressive and formidable naval force consisted of sixteen

American battleships of the Atlantic Fleet that traveled the world on a goodwill tour –

although the amount of goodwill generated by the appearance of such an intimidating

flotilla in another country’s harbor is highly suspect.

Henry Cabot Lodge kept America out of the League of Nations by blocking Senate

ratification of the Treaty of Versailles. He did so based on a belief that the covenant of the

league threatened American sovereignty. Such actions led him to be regarded as an

isolationist. He eventually rose to be a national leader of the American imperialist

movement (Mead, 1).

In the first decades of the 20th century, English economic interests had transitioned

from a mercantilist philosophy to one of free trade. Supplanting the aging British lion in

economic supremacy was the powerful and energetic American eagle. Joining the other

global powers in the race down the path to empire, the US found itself in a position of

dominance as many European nations followed the example of England in abandoning the

economic philosophy of mercantilism. Not all followed suit, however. The nations of

Russia, Germany, and Japan followed the example of industrial America, seeking colonies,

protectorates, and territories to expand the domain of their economic controls. In the 20th

century, these nations collided on the path to empire, as two great wars enveloped the

world. The outcome of the final conflict brought an end to mercantilism as a grand scheme

of economic dominance. With the world economy in disarray, the era of free trade was

ushered in as one-time enemy nations aided each other to rebuild. The coming of the

United Nations, and such economic aid institutions as the International Monetary Fund and

World Bank, helped to ensure the burial of the dead predatory trade philosophy. The

General Agreement on Trade and Tariff (GATT) was another economic tool created to

ensure that the new free trade multilateralism would remain as the dominant world

economic philosophy (Williams, 2).

As the preeminent economic power of the world, the United States has supplanted

Britain - economically, politically, and militarily. This, in essence, fulfills the destiny

sought by Theodore Roosevelt and the other leaders of the American imperialist

movement. American power has filled the vacuum created by the decline of Britain (Mead,

3).

It would be a very easy thing indeed, for the United States to slip back onto the

predatory path that drove the economy of the world for so many centuries. Once again, the

questions of national strategy and American interests are debated, as the potential

implementation of restrictive trade policies are re-evaluated for effectiveness in the

manipulation of world economies (Mead, 3). As other nations court the fringe of

mercantilism by adjusting imports and exports in efforts to punish trading partners for

political slights and offenses, the United States seeks to steer clear of this perilous path. To

tread its length once more would be to invite victory to the isolationists and imperialists,

those who believe in the right to impose their ideal of civilization or religious propriety on

other nations of the world. Through war or trade, the path to empire is perilous. It must be

traveled with a caution that comes of knowing the destination past travelers have found,

while seeking the enlightened route of what might be attained.

Works Cited

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