Progress or Regress
APRIL 01, 1966 by HANS SENNHOLZ
Not long ago, a small Pennsylvania corporation received the Presidential “E” award for its contribution to export trade and the nation’s balance of payments. In its fiscal year, 1965, the company sold more than $16 million of its products to foreign customers. Since 1960, its sales abroad returned $55 million to the United States.
It seems that some American policies are reverting to the principles and doctrines of the seventeenth century. Others are repeating the errors and follies of the dark Middle Ages. In 1628 the best known mercantilist writer, Thomas Mun, urged his countrymen always “to sell more to strangers yearly than we consume of theirs in value.” In 1667 the most famous of German mercantilist writers, Becher, advocated as a most important economic rule and axiom “that it is always better to sell goods to others than to buy goods from others, for the former brings a certain advantage and the latter inevitable damage.” In 1712, Charles King in The British Merchant declared the export of finished products “in the highest degree beneficial,” the export of natural products “so much clear gain,” and the corresponding import “so much real loss.”
Napoleon Bonaparte applied this idea on a huge scale in his Continental System. He gave public recognition, bestowed medals, and issued citations to Frenchmen who exported manufactured goods to England.
In recent years our foreign trade policies gradually have fallen under the sway of seventeenth century economic thought. Our “unfavorable” balance of payments caused the Eisenhower Administration to prohibit American ownership of gold in foreign countries. Since then, the United States government added a “voluntary” program that restricts bank and business investments abroad in order to keep money and gold in the United States. Furthermore, a punitive tax on American purchases of foreign securities aims to curb our heavy losses of gold. Those are some of the steps already taken toward comprehensive government control over all our foreign trade and transactions.
In England, comprehensive foreign exchange control dates back to the darkness of the Middle Ages. Until the reign of Charles I (1628) the office of Royal Exchanger handled all exchange operations and all trade in precious metals.’ Exportation of bullion and coin was summarily outlawed until 1663 when the prohibition was narrowed to English coins only.
In France exportation of gold and silver was outlawed from the Middle Ages until the eighteenth century. The usual penalty for taking coins out of the realm was death. In Spain and Portugal the export of bullion and coins went on undisturbed for more than 200 years as if no prohibitions existed, even though the penalty was death.
The “Spending” Multiplier
In recent months we have witnessed a marked increase in government and private spending and a strong rise in economic activity. The demand for goods and services has been stimulated by expansionary government and Federal Reserve actions. Spending, whether by governments or citizens. is considered the powerful engine of economic progress and prosperity.
Spendthrifts of all ages have advanced similar economic doctrines. In 1686, for instance, the Austrian writer, Wilhelm Schrötter, Thomas Mun’s pupil, wrote: “The more a manufacturer causes money to pass from one hand to another, the more useful it is to the country, for so many people does it maintain.” And at another place: “Through the exchange of money the sustenance of so many people is multiplied.”
Thrift was regarded as the cause of unemployment, for real income was thought to diminish if money were withdrawn from circulation. For this reason Schrötter wrote a long discussion on “How a Prince Should Limit his Thrift.” In 1695 the English writer, Cary, advocated the same principle with even greater clarity. He stated that everybody’s spending causes income to rise. If everybody increases his spending, according to Cary, everybody “might then live more plentifully.”2
On Jan. 21, 1966, the United States and British governments placed curbs on exportation of copper in order to protect their shares of dwindling world supplies of the metal. The United States Commerce Department sharply expanded its controls over exports of copper from the United States and clamped tight limits on a broad range of categories, including shipments overseas of copper ores and refined copper.
In England, this policy of “provision” dated back to the twelfth century and lasted until the nineteenth. Export prohibitions on iron, copper, and bell metal were repealed in 1694. Other restrictions that were imposed by Henry II, in 1176 and 1177, lasted until 1822. The high-water mark was reached under Edward III about the middle of the fourteenth century.
In France, export restrictions were first imposed during the thirteenth and fourteenth centuries. They aimed at keeping essential materials, particularly foodstuffs, within the country. At the beginning of the nineteenth century, Napoleon still conducted a “policy of provision” with regard to foodstuffs. The first French law that permitted their exportation was enacted in 1819.3
Early “Poor Laws”
Even our war on poverty declared by the present administration is not new at all. During the period of the Stuarts and of the Tudors, the English government endeavored to aid the low income classes of society. The avowed aim of an act of Parliament in 1603 was to raise the wages of textile workers. Minimum wage rates were fixed, and manufacturers were fined one shilling for every penny of wages paid below the prescribed rates. Especially in the years 1629 to 1640, a wide “policy of welfare” was pursued.
In order to prevent unemployment, businessmen were compelled to continue their operations even when suffering losses. They had to keep wages high, and were imprisoned in case of disobedience. For the benefit of the poor, food prices were intensively controlled. Grain was to be sold under cost price.
Already in 1563, the Elizabethan Statute of Artificers tried to regulate labor conditions in all details, and it remained on the books until 1814. In order to assure “just” wages to the working population, wage rates were fixed anew each year by the Justices of the Peace according “to the plenty or scarcity of the time.” The Justices in turn had to consider the cost of living by referring to “the prices of all kind of victuals, fuel, raiment and apparel, both linen and woolen, and also house rent.” Wage fixing in sixteenth-century London was similar in many respects to wage fixing in London today.
Regulation of Business
If you believe that government regulations of commerce and industry are new and progressive, you should study the twelfth century English industrial regulations. At least since 1197, the English state had tried to regulate the technique of manufacture. For the cloth industry, for instance, the English government prescribed the various dimensions of cloth, technique of production, dyeing, stretching, finishing, the tools of trade, the packaging and labeling, and so on. Similar regulations, more or less complete, were imposed on all other industries.
In France, Louis XIV, the Sun King, appointed intendants and inspectors who were charged with the regulation of industry. From the handling of raw materials to all subsequent stages of production, these servants of the king controlled the production process.
The system of control obviously necessitated a variety of penalties. Frequently, “defective” goods were confiscated or cut to pieces, money fines were imposed, or the right to practice the craft or conduct the business was withdrawn. According to a decree of 1670, the name of the offending merchant was to be posted, and the offender himself could be placed in a pillory for public derision.
In spite of countless regulations and limitations that aimed to achieve uniform standards, corruption and personal favoritism blunted the controls. The government could make individual exceptions to any prescription. Personal influence was as important as it is today.
For instance, the medical profession today labors under the professional discipline of several regulatory agencies. Under the ancien regime, training and examination of physicians also was a serious government matter. Under the watchful eyes of the government, ancient quackery was to be perpetuated. In some cases, persons with no training whatsoever were practicing the business of healing and offering salves and medicaments because they curried favor with the inspectors, or succeeded in winning over the lackeys, valets, mistresses, and adventuresses of the Court. Royal charters, permits from princes, and acquired titles of physicians of the king or queen, of surgeons of the navy, and the like, sanctioned all kinds of quackery.
The methods of favoritism, currying favors, obtaining franchises, licenses, or government orders have not changed materially since the seventeenth century. Diamonds and minks, personal connections and right contacts, government positions and offices, seem to retain their significance for professional success and financial reward.
How modern and progressive are our prevailing doctrines and official policies? A historian who attempts to dissect the so-called modern version of political economy may be surprised to discover its true age. Despite claims of originality, many of the modern are of ancient origin. Some stem from the armory of Marxism and Fabian socialism as they were developed during the nineteenth century. Others date back to the age of Mercantilism that prevailed in Western Europe from the sixteenth to the eighteenth century. And still others have survived from the darkness of the Middle Ages. Much that passes for progress today is but a regression into the follies of the past.
1 Cf. Eli F. Heckscher, Mercantilism, Vol. II, p. 246.
2 An Essay on the State of England, in relation to its Trade, London, 1695, p. 148 ff; cited in Heckscher, Vol II, p. 209.
3 Ibid, p. 92.