Mercantilist theory - Essay Example

 Mercantilist theory Mercantilist theory equates to restrictions being placed upon free trade when governments are more prepared to intervene in the international political economy or if needs be to by pass it. Mercantilist theory and practice led to the creation (or explained it at any rate) of separate trading blocs and economic nationalism within the international political economy. Economists and historians have argued that modern capitalism developed from an earlier mercantilist period when the empires built up by the European states such as France, the Netherlands, Spain and Portugal competed for global domination and tried to restrict trade to within their own empires. Each country would try to increase its power by gaining colonies, economic influence, and more consumers for its goods. Britain by virtue of its naval supremacy and earlier industrialization was able to dominate the international political economy. Where possible Britain removed mercantilist restrictions to trade, allowing workers, businesses and investments to flow more freely. The theory and practice of merchantilism was refined by the French finance minister Jean – Baptiste Colbert as well as being reflected in the British Navigation Acts (Hobsbawm, 1975, pp. 36-37). However, mercantilist theory and policies remained and still remain in the international political economy. Countries such as Germany, Russia, Japan, and the United States used protectionism to start up and enhance their industrialization preventing more efficient rivals from shutting it down. Japan would become the role model for importing superior foreign goods, copying them and them exporting cheaper versions. Meanwhile a renewed wave of imperialism at the end of the 19th century increased the competition for colonies and captive markets. Mercantilist theory was popular then and is attractive now because of its emphasis on national self -interest and gaining at the expense of others. However, the advantages of domestic popularity and employment protection need to be considered in relation to consequences within the international political economy. The United States is as keen to pursue free trade liberal policies as the British used to be, because they gain the most from those policies. Smaller nations on the other hand are dependent on the richer nations and might prefer to restrict trade to protect their industries and jobs but often have that choice taken away from them (Hobsbawm, 1987, p. 54). England and later Britain were always keen on maintaining a balance of power (Roberts, 1996, p.257). Britain and France fought wars against each other several times during the 18th century although the British usually had to have European allies to have a chance of winning those conflicts. The French Revolution led to further wars in Europe but with a greater ideological conflict. Napoleon at one point controlled much of Europe. His legacy included giving many Europeans a common legal system and a brief period of unified rule and common economic area. That France failed to dominate Europe indefinitely was down to British naval and financial might that bankrolled her Prussian, Russian and Austrian allies. However, it was the rivalry between France and Prussia later Germany that would prove disastrous for Europe as a whole (Roberts, 1996, p.316). Britain for long periods had a very strong position in terms of its diplomatic choices and tactics. Britain was the first country to industrialise, its ready access to usable natural resources and the availability of capital, and abundant trading links were well protected by the Royal Navy (Ferguson, 2003 p.23). The combination of these factors allowed British governments to bargain with or react to the actions other nation states from a position of ever increasing strength. Yet before the Glorious Revolution removed James II from the British throne it seemed that the huge standing army and the mercantilism of France would make it the most powerful country in the world (Hobsbawm, 1962 p. 38). With James II went the pro-French foreign policy that England had followed since Elizabeth I's conflicts with Spain. Since its 16th century peak Spanish power had declined dramatically, whilst France had become increasingly powerful, particularly under the ambitious rule of Louis XIV. England had not tried to stop the rise of France, yet successful wars against the Dutch Republic and Spain showed England's potential as a great power. That potential would be even greater once political stability was achieved in all three of the British kingdoms. Charles II and James II had been content to play second fiddle to French interests in return for French subsidies. French subsidies had been used to reduce the monarchy's reliance upon taxation raised by Parliament, especially in the case of Charles II (Ashley, 2002 p. 320). Britain in general and England in particular had the potential to be a great power. London was one of the most prosperous cities on earth as well as a great port. London was also at the hub of a quickly expanding trade and maritime network, which greatly increased the national wealth, and therefore the international influence of Britain. Increased wealth and extensive trading links would prove invaluable for the economic and foreign policies of British governments for generations to come. In the context of the late 17th century these were attributes that proved vital for British chances of victory in the wars against France. The Royal Nay was essential for the maintenance of national security, the protection of trade links and merchant shipping, the means to protect English colonies in North America as well as being the chief means of sending armies to Europe and beyond. These attributes were put to good use as Britain as Britain was eventually on the winning sides in the Nine Years War and the War of the Spanish Succession and emerged with significant gains. Britain had greater resources than could have been expected especially when effective alliances were in operation (Breuilly, 1998 p. 10). For the Anglo-Dutch alliance the Nine Years War did not have the most auspicious of starts. At sea the combined Anglo-Dutch navies were not able to obtain control of the oceans. Although they were able to transport British troops to the continent, the allies struggled at sea, as Jean Bart led the French navy to great effect (Kennedy, 1976 p. 78). French raiders mostly managed to avoid the main Anglo-Dutch fleets to wreak havoc upon allied merchant shipping. Worse was to come when the French navy decisively defeated the combined fleets off Beachy Head. It would take a further two years for the Royal Navy to regain control of the sea (Churchill, 1957 p.9). The experiences and hard fought lessons from the Nine Years War contributed towards the Royal Navy becoming a more effective and powerful force in subsequent conflicts (Kennedy, 1976 p. 81). Britain would by the start of the 1760s dominate both Canada and India, making household names out of Wolfe and Clive in the process. British naval power and expanding commercial interests were behind the growth of its empire as well as its wealth. The Royal Navy, the Bank of England, and an increasingly efficient taxation system provided the impetus for an impressive expansion of British imperial power, most notably from the 1690s. The wars started by William of Orange had visibly transformed British power and the international perception of that power, and had prevented France from becoming the most dominant country in the world (Schama, 2001 p.340). 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