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Texas A&M University Economics Series
Politicized Economies: Monarchy, Monopoly, and Mercantilism
Politicized Economies illuminates the high tide of mercantilism in England and the entrenchment of controls in the French and Spanish economies between 1540 and 1640. Ekelund and Tollison subject mercantilist foreign trade to neoclassical-neoinstitutional analysis, examining the general economic organization of the mercantile companies and focusing on the economic inner workings of the East India Company. The authors probe for the origins of the modern corporation in the early joint stock companies of England and analyze the effects of regulatory forms on the business organizations that emerged to engage in foreign trade.
- GenresEconomics
320 pages, Hardcover
First published April 1, 1997
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August 14, 2017
Iggers' Historiography in the Twentieth Century focuses on new arcs in historical thinking, which perhaps a bit misleading, insofar as it implies by omission that advances in older branches of history have become less relevant. Economic history, in my take on Iggers' survey, was one of the oldest approaches, and one that has been superseded by more diverse and culturally-focused research. But that elides the active wing of historians working in economic history today, who are applying new and vastly more explanatory economic angles than the pioneers Iggers described.
At least, that's the impression Ekelund and Tollison want to give. They're almost certainly the most arrogant writers I've ever read, especially in an academic context. The introduction especially is full of pretty explicit digs at other schools of thought on economic history. It's quite sharp, and often fun to read. It kept me going through what was otherwise a summary of intradisciplinary positions that seemed to presume a much, much greater degree of foreknowledge than I had.
I started this book while halfway through The Middle Ground, after realizing that I was missing a lot of the subtext and background because I didn't grasp the economic goals of the colonial powers. I had hoped Ekelund and Tollison would provide a general overview of what mercantilism was, how it was thought to work, how it worked in practice, etc. This is very much not the case; all of the general descriptive ideas I took away were read between the lines here, picked up from context. The goal, instead, is to explain mercantile behavior using recent economic theory, at the expense of past theories, which they view as undersupported, propagandist, and place too much weight on individual writing and ideas, or other recent theories, which they think are muddled and undersupported and pseudoscientific.
This is particularly interesting to me because this is a question I articulated when I was first starting college: can history be meaningfully changed by an act of creative or analytical thought, or is that just a gloss on an underlying material arc. I'd gotten the impression since that this was kind of a spurious question, a naive framing of history that was at least trite and oversimplified, if not an old, tired canard of over-optimistic historians wishing they were scientists. I think it is perhaps an old, tired aspiration, but I'm not sure that makes it a settled question. Ekelund and Tollison are unabashed in their advocacy for a scientific approach, they don't think anyone has given a satisfactory one in this context before, and they're pretty sure everyone else isn't really committed to understanding history at all since they don't offer the right sort of explanatory hypotheses.
The main thesis of the book is pretty straightforward: both the rise and fall of mercantile economies were organized by independent actions of self-interested actors in the state and business sectors. This as opposed to the previous go-to explanation, which blamed inept and ignorant economic theorists for the inefficiencies of the mercantile system and credited progressive economic theorists like Adam Smith for pushing governments toward the enlightened laissez-faire approach. They give alternative explanations that show how major changes in the economies of England, France, and Spain evolved in terms of the regulatory frameworks in those countries throughout the mercantile period, explanations that hinge on a market for monopoly rights provided by the monarchy and sought after by businesses.
They make sense, they're satisfying, and they don't rely on vague hand-waving about intentions and such. They're philosophically satisfying to Ekelund and Tollison, and to me, since that's the side of the ideology/material debate I also like to slide down. But while they cite some evidence, it's largely done to discredit the competing explanations as plausible causative factors. For all the shitting on other authors they do for having too little evidence, there's no real attempt to falsify their own hypotheses here. In a sense I guess that's fine; it would clutter up what is otherwise a pretty straightforward read. Certainly doesn't inspire all that much confidence that their approach is more scientific, than dogmatically ideological, though. They are offering testable hypotheses, whereas other competing theories might not, and maybe that work was done and published elsewhere, or evaluated by later writers, idk.
I'm still not at all clear about what the conventional explanation of mercantilism involves. "Irrational specie accumulation" means no more to me now than it did 238 pages ago. But their explanation is versatile enough to fill in some of the gaps, which they didn't really cover specifically--namely, international trade, one of the chief aspects of mercantilism as far as I'd read elsewhere, receives nary a mention here. And it provides the necessary context to understand some of the things in Middle Ground I didn't really even make note of when I read them.
So the basic idea is that as nation states coalesced power into their monarchies rather than a more diffuse hierarchy of dukes and other aristocrats, the state needed funding. Taxation was tried repeatedly but often failed, because so many transactions were bartered or off the record and taxing the whole economy was expensive and inefficient. Instead, monarchs could use their monopoly on force, and particularly, enforcing property rights, to protect companies from competition and increase their profits. It achieves the same end--getting money from the market to the government--but with more market distortion, compounded inequality, and the brunt of the burden on consumers. But it was easier to enforce, since the monarchies and businesses shared a common interest in maintaining the relationship, which could easily be given to someone else if payments failed, etc.
Monopolies focused particularly on luxury goods. Since the government was itself a major buyer of basic goods, raising their price through monopoly would be counterproductive. Luxury goods are also produced in cities, where regulation is easier to enforce. And of course, luxury goods use basic goods as inputs, so selling monopoly rents on both is again a bit counterproductive.
Their argument is that the differing legacies of government power in England and France determined the differing fates of their economies. England had powerful local guilds, not national ones, and a contentious relationship between parliament and the king, both of which created uncertainty about monopoly rights and opportunities to circumvent them, increasing the costs of the mercantile system and gradually destabilizing it until it became the laissez-faire system that Smith and his cohort would later describe and advocate. France, on the other hand, had a strong national system and no meaningful counterpart to the king's legal authority until very late in its history (or so they argue), which prevented its economy from becoming the enlightened sort until much later. I didn't understand the Spanish case as well, but I gathered that it was to do with the fact that transhumant herding provided Spain's main luxury product.
There's a lot more to talk about and think about here, and I hope to read more history in this vein. Ekelund and Tollison close on a quote from Hecksher that asserts basically all of human history can be explained through rational economic action, and I'm curious how far that idea has been applied in non-"capitalist" societies. Not to mention how this book's theses even still hold up in the discipline today.
As for what I'll take back to the White book: first of all, nations can only enforce monopolies within their own borders; if international trade were opened up, then monopolies that benefit the monarch would be undermined by competition from international firms. It's pretty clear now why the colonial government is interested in selling monopoly trading rights, and maintaining those rights in the field by quashing independent, unlicensed traders.
There is actually a relevant section in the book about forts in colonial areas, which previous theorists had seen as a public good, something trading companies provided to benefit everyone since they were non-rival. But E and T again explain that this is probably backwards: trading companies sold cannon as a high value good to native communities, undermining their investment if they intended forts to give them a strategic advantage over rampaging savages. Instead, E and T suggest that forts allowed firms to enforce their monopolies in otherwise under-regulated landscapes--something I'll definitely keep in mind as I read about forts in the pays d'en haut.
It also explains a lot of the specific details of the cloth trade. White gives the impression that cloth for fur was the primary trade going on in New France, and that France was at a constant disadvantage in this trade because British products were cheaper and higher quality. E and T provide an elegant two-part explanation for this. The first is simply that monopolies were less efficiently enforced in England, so prices were driven down and innovation more worthwhile.
But there's also an extended anecdote about how the French cloth trade was depressed in particular. The French monarchy depended on monopoly rents from a number of luxury fabric industries, who faced competition from imported and domestically produced cotton garments. Rather than creating another government monopoly on cotton "calico" fabrics, they banned their production and import entirely, because their diversity of colors and patterns allowed non-price competition, which undermined the monopoly's hold. This in turn meant that French textile industries were stunted and luxury-oriented compared to English producers, explaining why the Indians in the pays d'en haut were constantly tempted to undermine the French alliance by trading with the British.
At least, that's the impression Ekelund and Tollison want to give. They're almost certainly the most arrogant writers I've ever read, especially in an academic context. The introduction especially is full of pretty explicit digs at other schools of thought on economic history. It's quite sharp, and often fun to read. It kept me going through what was otherwise a summary of intradisciplinary positions that seemed to presume a much, much greater degree of foreknowledge than I had.
I started this book while halfway through The Middle Ground, after realizing that I was missing a lot of the subtext and background because I didn't grasp the economic goals of the colonial powers. I had hoped Ekelund and Tollison would provide a general overview of what mercantilism was, how it was thought to work, how it worked in practice, etc. This is very much not the case; all of the general descriptive ideas I took away were read between the lines here, picked up from context. The goal, instead, is to explain mercantile behavior using recent economic theory, at the expense of past theories, which they view as undersupported, propagandist, and place too much weight on individual writing and ideas, or other recent theories, which they think are muddled and undersupported and pseudoscientific.
This is particularly interesting to me because this is a question I articulated when I was first starting college: can history be meaningfully changed by an act of creative or analytical thought, or is that just a gloss on an underlying material arc. I'd gotten the impression since that this was kind of a spurious question, a naive framing of history that was at least trite and oversimplified, if not an old, tired canard of over-optimistic historians wishing they were scientists. I think it is perhaps an old, tired aspiration, but I'm not sure that makes it a settled question. Ekelund and Tollison are unabashed in their advocacy for a scientific approach, they don't think anyone has given a satisfactory one in this context before, and they're pretty sure everyone else isn't really committed to understanding history at all since they don't offer the right sort of explanatory hypotheses.
The main thesis of the book is pretty straightforward: both the rise and fall of mercantile economies were organized by independent actions of self-interested actors in the state and business sectors. This as opposed to the previous go-to explanation, which blamed inept and ignorant economic theorists for the inefficiencies of the mercantile system and credited progressive economic theorists like Adam Smith for pushing governments toward the enlightened laissez-faire approach. They give alternative explanations that show how major changes in the economies of England, France, and Spain evolved in terms of the regulatory frameworks in those countries throughout the mercantile period, explanations that hinge on a market for monopoly rights provided by the monarchy and sought after by businesses.
They make sense, they're satisfying, and they don't rely on vague hand-waving about intentions and such. They're philosophically satisfying to Ekelund and Tollison, and to me, since that's the side of the ideology/material debate I also like to slide down. But while they cite some evidence, it's largely done to discredit the competing explanations as plausible causative factors. For all the shitting on other authors they do for having too little evidence, there's no real attempt to falsify their own hypotheses here. In a sense I guess that's fine; it would clutter up what is otherwise a pretty straightforward read. Certainly doesn't inspire all that much confidence that their approach is more scientific, than dogmatically ideological, though. They are offering testable hypotheses, whereas other competing theories might not, and maybe that work was done and published elsewhere, or evaluated by later writers, idk.
I'm still not at all clear about what the conventional explanation of mercantilism involves. "Irrational specie accumulation" means no more to me now than it did 238 pages ago. But their explanation is versatile enough to fill in some of the gaps, which they didn't really cover specifically--namely, international trade, one of the chief aspects of mercantilism as far as I'd read elsewhere, receives nary a mention here. And it provides the necessary context to understand some of the things in Middle Ground I didn't really even make note of when I read them.
So the basic idea is that as nation states coalesced power into their monarchies rather than a more diffuse hierarchy of dukes and other aristocrats, the state needed funding. Taxation was tried repeatedly but often failed, because so many transactions were bartered or off the record and taxing the whole economy was expensive and inefficient. Instead, monarchs could use their monopoly on force, and particularly, enforcing property rights, to protect companies from competition and increase their profits. It achieves the same end--getting money from the market to the government--but with more market distortion, compounded inequality, and the brunt of the burden on consumers. But it was easier to enforce, since the monarchies and businesses shared a common interest in maintaining the relationship, which could easily be given to someone else if payments failed, etc.
Monopolies focused particularly on luxury goods. Since the government was itself a major buyer of basic goods, raising their price through monopoly would be counterproductive. Luxury goods are also produced in cities, where regulation is easier to enforce. And of course, luxury goods use basic goods as inputs, so selling monopoly rents on both is again a bit counterproductive.
Their argument is that the differing legacies of government power in England and France determined the differing fates of their economies. England had powerful local guilds, not national ones, and a contentious relationship between parliament and the king, both of which created uncertainty about monopoly rights and opportunities to circumvent them, increasing the costs of the mercantile system and gradually destabilizing it until it became the laissez-faire system that Smith and his cohort would later describe and advocate. France, on the other hand, had a strong national system and no meaningful counterpart to the king's legal authority until very late in its history (or so they argue), which prevented its economy from becoming the enlightened sort until much later. I didn't understand the Spanish case as well, but I gathered that it was to do with the fact that transhumant herding provided Spain's main luxury product.
There's a lot more to talk about and think about here, and I hope to read more history in this vein. Ekelund and Tollison close on a quote from Hecksher that asserts basically all of human history can be explained through rational economic action, and I'm curious how far that idea has been applied in non-"capitalist" societies. Not to mention how this book's theses even still hold up in the discipline today.
As for what I'll take back to the White book: first of all, nations can only enforce monopolies within their own borders; if international trade were opened up, then monopolies that benefit the monarch would be undermined by competition from international firms. It's pretty clear now why the colonial government is interested in selling monopoly trading rights, and maintaining those rights in the field by quashing independent, unlicensed traders.
There is actually a relevant section in the book about forts in colonial areas, which previous theorists had seen as a public good, something trading companies provided to benefit everyone since they were non-rival. But E and T again explain that this is probably backwards: trading companies sold cannon as a high value good to native communities, undermining their investment if they intended forts to give them a strategic advantage over rampaging savages. Instead, E and T suggest that forts allowed firms to enforce their monopolies in otherwise under-regulated landscapes--something I'll definitely keep in mind as I read about forts in the pays d'en haut.
It also explains a lot of the specific details of the cloth trade. White gives the impression that cloth for fur was the primary trade going on in New France, and that France was at a constant disadvantage in this trade because British products were cheaper and higher quality. E and T provide an elegant two-part explanation for this. The first is simply that monopolies were less efficiently enforced in England, so prices were driven down and innovation more worthwhile.
But there's also an extended anecdote about how the French cloth trade was depressed in particular. The French monarchy depended on monopoly rents from a number of luxury fabric industries, who faced competition from imported and domestically produced cotton garments. Rather than creating another government monopoly on cotton "calico" fabrics, they banned their production and import entirely, because their diversity of colors and patterns allowed non-price competition, which undermined the monopoly's hold. This in turn meant that French textile industries were stunted and luxury-oriented compared to English producers, explaining why the Indians in the pays d'en haut were constantly tempted to undermine the French alliance by trading with the British.
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