Mercantilism, Merchants, and 'Class Conflict'

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This article
is excerpted from Conceived
in Liberty
(1975), volume 1, chapter 32: “Mercantilism, Merchants,
and ‘Class Conflict.'” An MP3 audio file of this article, narrated
by Floy Lilley, is available
for download

The economic
policy dominant in the Europe of the 17th and 18th centuries,
and christened “mercantilism” by later writers, at bottom assumed
that detailed intervention in economic affairs was a proper
function of government. Government was to control, regulate,
subsidize, and penalize commerce and production. What the content
of these regulations should be depended on what groups managed
to control the state apparatus. Such control is particularly
rewarding when much is at stake, and a great deal is
at stake when government is “strong” and interventionist. In
contrast, when government powers are minimal, the question of
who runs the state becomes relatively trivial. But when government
is strong and the power struggle keen, groups in control of
the state can and do constantly shift, coalesce, or fall out
over the spoils. While the ouster of one tyrannical ruling group
might mean the virtual end of tyranny, it often means
simply its replacement by another ruling group employing other
forms of despotism.

In the
17th century the regulating groups were, broadly, feudal landlords
and privileged merchants, with a royal bureaucracy pursuing
as a superfeudal overlord the interest of the Crown. An established
church meant royal appointment and control of the churches as
well. The peasantry and the urban laborers and artisans were
never able to control the state apparatus, and were therefore
at the bottom of the state-organized pyramid and exploited by
the ruling groups. Other religious groups were, of course, separated
from or opposed to the ruling state. And religious groups in
control of the state, or sharing in that control, might well
pursue not only strictly economic “interest” but also ideological
or spiritual ones, as in the case of the Puritans’ imposing
a compulsory code of behavior on all of society.

One of the
most misleading practices of historians has been to lump together
“merchants” (or “capitalists”) as if they constituted a homogeneous
class having a homogeneous relation to state power. The merchants
either were suffered to control or did not control the government
at a particular time. In fact, there is no such common interest
of merchants as a class. The state is in a position to grant special
privileges, monopolies, and subsidies. It can only do so to particular
merchants or groups of merchants, and therefore only at the expense
of other merchants who are discriminated against. If X receives
a special privilege, Y suffers from being excluded. And also suffering
are those who would have been merchants were it not for the state’s
network of privilege.

In fact, because
of (a) the harmony of interests of different groups on the free
market (for example, merchants and farmers) and (b) the lack of
homogeneity among the interests of members of any one social class,
it is fallacious to employ such terms as “class interests” or “class
conflict” in discussing the market economy. It is only in relation
to state action that the interests of different men become
welded into “classes,” for state action must always privilege one
or more groups and discriminate against others. The homogeneity
emerges from the intervention of the government in society.
Thus, under feudalism or other forms of “land monopoly” and arbitrary
land allocation by the government, the feudal landlords, privileged
by the state, become a “class’ (or “caste” or “estate”).
And the peasants, homogeneously exploited by state privilege, also
become a class. For the former thus constitute a “ruling class”
and the latter the “ruled.”[1]
Even in the case of land privilege, of course, the extent of privilege
will vary from one landed group to another. But merchants were not
privileged as a class and therefore it is particularly misleading
to apply a class analysis to them.

A particularly
misleading form of class theory has often been adopted by American
historians: inherent conflicts between the interests of homogeneous
classes of “merchants” as against “farmers,” and of “merchant-creditors”
versus “farmer-debtors.” And yet it should be evident that these
disjunctions are extremely shaky. Anyone can go into debt and
there is no reason to assume that farmers will be debtors more
than merchants. Indeed, merchants with a generally larger scale
of operations and a more rapid turnover are often heavy debtors.
Moreover, the same merchant can shift rapidly from one point
of time to another, from being a heavy net debtor to net creditor,
and vice versa. It is impermissible to think in terms of fixed
persisting debtor classes and creditor classes tied inextricably
to certain economic occupations.

The merchants,
or capitalists, being the peculiarly mobile and dynamic groups
in society that can either flourish on the free market or try
to obtain state privileges, are, then, particularly ill-suited
to a homogeneous class analysis. Furthermore, on the free market
no one is fixed in his occupation, and this particularly applies
to entrepreneurs or merchants whose ranks can be increased or
decreased very rapidly. These men are the very opposite of the
sort of fixed status imposed on land by the system of feudalism.


The differences between the Marxian attribution of “classes” to
the market, and the confining of the concept to the “caste” or
“estate” effects of state action, have been brilliantly set forth
by Ludwig von Mises. See his Theory
and History
(New Haven: Yale University Press, 1957),
pp. 112ff; and Socialism
(New Haven: Yale University Press, 1951), pp. 328ff. Contrast
the confusion in Lenin’s attempt to defend the Marxian jumble
of estate and non-estate groups by the same concept of class.
See V. I. Lenin, “The Agrarian Programme of Russian Social-Democracy,”
(Moscow: Foreign Languages Publishing House, 1961),

N. Rothbard
(1926–1995) was dean of the Austrian School,
founder of modern libertarianism, and chief academic officer of
the Mises Institute. He was
also editor — with Lew Rockwell — of The
Rothbard-Rockwell Report
, and appointed Lew as his literary
executor. See
his books.

Best of Murray Rothbard

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