is excerpted from An
Austrian Perspective on the History of Economic Thought, vol. 1,
Economic Thought Before Adam Smith. An MP3 audio file of
this article, read by Jeff Riggenbach, is available
of mercantilism needed no high-flown "theory" to get launched.
It came naturally to the ruling castes of the burgeoning nation-states.
The king, seconded by the nobility, favored high government expenditures,
military conquests, and high taxes to build up their common and
individual power and wealth. The king naturally favored alliances
with nobles and with cartelizing and monopoly guilds and companies,
for these built up his political power through alliances and his
revenue through sales and fees from the beneficiaries.
the cartelizing companies need much of a theory to come out in favor
of themselves acquiring monopoly privilege. Subsidy to export, keeping
out of imports, needed no theory either: nor did increasing the
supply of money and credit to the kings, nobles, or favored business
groups. Neither did the famous urge of mercantilists to build up
the supply of bullion in the country: that supply in effect meant
increased bullion flowing into the coffers of kings, nobles, and
monopoly export companies. And who does not want the supply of money
in their pockets to rise?
later; theory came either to sell to the deluded masses the necessity
and benevolence of the new system, or to sell to the king the particular
scheme being promoted by the pamphleteer or his confreres. Mercantilist
"theory" was a set of rationales designed to uphold or
expand particular vested economic interests.
historians have lauded the mercantilists for their proto-Keynesian
concern for "full employment," thus showing allegedly
surprising modern tendencies. It should be stressed, however, that
the mercantilist concern for full employment was scarcely humanitarian.
On the contrary, their desire was to stamp out idleness, and to
force the idle, the vagrant, and the "sturdy beggars"
to work. In short, for the mercantilists, "full employment"
frankly implied its logical corollary: forced labor. Thus, in 1545,
the "sturdy beggars" of Paris were forced to work for
long hours, and two years later, "to take away all opportunity
for idleness from the healthy," all women able but unwilling
to work were whipped and driven out of Paris, while all men in the
same category were sent to the galleys as slave labor.
The class basis
of this mercantilist horror of idleness should be instantly noted.
The nobility and the clergy, for example, were scarcely concerned
with their own idleness; it was only that of the lower classes
that must be ended by any means necessary. The same is true of the
privileged merchants of the third estate. The thinly veiled excuse
was the necessity of increasing "the productivity of the nation,"
but these classes constituted the ruling elite, and such
forced ending of idleness, whether on public works or in private
production, was a boon to the rulers. It not only increased production
for the latter’s benefit; it also lowered wage rates by adding to
the supply of labor by coercion.
at the meeting of the states general, the parliamentary body of
France, in 1576, all three estates united in their call for forced
labor. The clergy urged that "no idle person … be allowed
or tolerated." The third estate wanted "sturdy beggars"
to be put to work, whipped or exiled. The nobles urged that "sturdy
beggars and idlers" be forced to work and whipped if they refused
The same Estates-General
made their special pleading all too painfully clear in the matter
of protective tariffs. The estates called for the prohibition of
imports of all manufactured goods and the export of all raw materials.
The purpose of both measures was to throw a wall of monopoly protection
around domestic manufactures and to force producers of raw materials
to sell their goods to those domestic businesses at an artificially
that such measures were necessary to "keep bullion" or
money "at home" would seem patently absurd to any objective
person. For if French consumers are to be prevented from buying
imports in order to safeguard "their bullion," what might
happen otherwise? Was there really any danger of Frenchmen sending
all their bullion abroad and keeping none for themselves? Clearly,
such an event would be absurd, but even if it happened – the
worst-case scenario – there is an evident hard maximum limit
to any outflow of bullion from home. For where are the consumers
bent on further importation going to get more bullion? Clearly,
only by exporting other products abroad.
the "keeping money at home" argument is patently fraudulent,
whether in 17th-century France or in the 20th-century United States.
The Estates-General were interested in protecting certain French
money at home" argument was also a convenient stick to beat
foreign businessmen or financiers who could outcompete natives.
Thus the prospect of German bankers and Italian financiers flourishing
in France gave rise to paroxysms of fury at the "ill-gotten
gains" of foreigners, taking money out of the country, fury
that was of course fed by the typically mercantilist egregious "Montaigne
fallacy" that one man’s (or one nation’s) gain on the market
was ipso facto another man’s (or nation’s) loss. These disgruntled
Frenchmen often suggested that foreign financiers be expelled from
the country, but the kings were typically too bogged down in debt
to afford such counsel.
N. Rothbard (1926–1995) was dean of the Austrian
School, founder of modern libertarianism, and academic
vice president of the Mises
Institute. He was also editor — with Lew Rockwell —
Rothbard-Rockwell Report, and appointed Lew as his