A History of States and Economic Policies in Early Modern Europe

Silvia A. Conca Messina

• Publisher: Routledge
• Year: 2019
• Topic: Business
• eBook ISBN:
  9780429648885
• Subtopic: Business General
• Index: Business

Why was early modern Europe the starting point of the economic expansion which led to the Industrial Revolution? What was the state's role in this momentous transformation? A History of States and Economic Policies in Early Modern Europe takes a comparative approach to answer these questions, demonstrating that wars, public finance and state intervention in the economy were the key elements underlying European economic dynamics of the era.

Structured in two parts, the book begins by examining the central issues of the state–economy relationship, including military revolution, the fiscal state and public finance, mercantilism, the formation of commercial empires and the economic war between Britain and France in the 1700s. The second part presents a detailed comparison between the different economic policies of the most important European states, looking at their unique demographic, economic, military and institutional contexts. Taken as a whole, this work provides a valuable analysis of early modern economic history and a picture of Europe's global position on the eve of the Industrial Revolution.

This book will be useful to students and researchers of economic history, early modern history and European history.

Part I
War, finance and mercantilism

1 Great Divergence, fiscal-military state and economic policy

Between 1500 and 1800, the European economy underwent a profound transformation. The population increased 2.5 times and the number of people living in cities of at least 10,000 residents rose from 4.5 million to over 17 million. Great changes also affected the employment structure in Western Europe. In the four most densely populated areas of the continent – the British Isles, France, Germany and Italy – which together accounted for about two-thirds of the population of Western Europe, with a total population of 40 million in 1500 and 77.4 million in 1800, the number of non-agricultural workers rose from 11.79 million to 33.4 million. Although the total population of these areas did not even double in 300 years, the numbers employed in the secondary and tertiary sectors almost trebled; therefore, it can be said that the composition of the economic sectors underwent a very important structural change during the early modern age.¹ Obviously, this meant greater agricultural productivity, the development of new markets and economic sectors, new models of consumption and habits, specialisation and the tendency to innovate, thus providing greater possibilities of growth.²

Agricultural production and productivity increased following a “Boserupian” model.³ Demographic and urban growth provided broader and more dynamic markets, stimulating production and specialisation, favouring the spread of best practices and driving the creation of infrastructures (canals, river navigation and irrigation systems). One of the most important transformations of the land in the early modern period was due to reclamation, made possible by the increases in population, demand and prices, the support or direct activity of the public authorities, the acquisition of the necessary technical skills and the availability of capital. The reclaimed marshlands were potentially very fertile land and often required capitalistic organisation. Urban markets stimulated vegetable farming, the wine trade, movements of live animals, the spread of innovations (new crop rotations, new commercial products) and the transformation of management systems, the introduction of new food crops like maize and potatoes and the expansion of industrial crops. In general, there is no doubt that the spread of new crops, animals and technologies during the early modern period changed the European economies.

Technological (including product) innovation and its spread were pervasive in Europe, moving from one country to another in spite of recurrent population crises, negative cultural, technological, energy and institutional feedback and the narrow scientific base of “useful knowledge”.⁴ Although innovations were introduced slowly and progress was not linear, long-term technological progress in Europe was persistent and continual, compared with Asia.⁵ The technological frontier was mobile and competitive, tending to shift towards the northwest. All manufacturing sectors tended to move in this direction, from textiles and shipyards to mining, metallurgy, glass, precision instruments and so on. The emigration of specialised workers and entrepreneurs, an increase in market integration, an eclectic assimilation of external novelties, and the strong competition between states – peaceful or military, competitive or mercantilist – created institutional conditions and markets favouring the rise of new centres of growth. The cities were also a competitive and open market for ideas, and this favoured a “culture of growth” that set Europe apart from all other areas of the world.⁶ As this book will show, competition between states and the ambition of the authorities to obtain foreign experts within a framework of mercantilist policies were decisive factors (although not the only factors) in the technological mobility which was a specifically European feature.

The volume of international trade also grew continually during the three centuries following the discovery of America and the first voyage rounding the Cape of Good Hope. Although the immediate impact should not be overstated, this was the beginning of increasing integration among the world’s markets. Atlantic traffic grew at an annual rate of 2.2% (double that of the Cape route); between 1600 and 1800, tonnage grew five times in the United Provinces, 9 in France and 31 in Great Britain. Overall, between 1500 and 1800, the European fleets increased in size at least seven to eight times.⁷ These are just a few indicators of European growth, although some historians have estimated that per capita income did not change between 1500 and 1800, meaning that it grew at more or less the same rate as the population.⁸ The outcome of economic growth was the Industrial Revolution, which began in England, a country that had obtained many of its innovations from the continent during the previous two centuries and practised mercantilism in very similar ways to its European rivals.⁹ The Industrial Revolution was not a sudden and unexpected event, but the outcome of the pre-existing cultural, social, technological, economic and political-institutional developments that had taken place in Europe during the previous three centuries.¹⁰

It was the national state that enabled market regulation, the use of internal resources, support for nascent industries, exploration, the growth of shipping and protection for merchants. Production, trade and the spread of technical skills were embedded for centuries in legal structures, cultures and institutions modelled by the state. As Patrick O’Brien has written, without state intervention or state services, private and public investment, production, innovation and trade would have remained below the level required for per capita income to grow.¹¹ Without a selective economic policy, European expansion, the first phase of industrialisation and the Great Divergence would probably not have happened. This chapter discusses the historical context in which European trade began to expand and compares the European states with China, Asia’s greatest commercial empire, endorsing the view that the greatest difference between Europe and Asia in the early modern period probably lay in the role and importance of the state.¹² Immense differences between Europe and Asia are highlighted when comparing taxation, public finance, administration, the political-military context and the competition between the European states, not to mention their economic policies and social structures, and the role of their colonial empires.

The idea of the Industrial Revolution as the outcome of pre-existent European economic, cultural and institutional processes has long been prevalent among historians, but has been challenged in the past 20 years by a group of American researchers known as the California School. They maintain that different areas of Asia possessed similar – if not higher – levels of wealth to Europe. They see the Great Divergence, i.e. the Western economic development that produced a wealth gap with Asia, as occurring only after 1800, while previous centuries saw well-developed markets and institutions in both regions, although these did differ in some respects.¹³ In the Far East, especially Japan, China and India, there were societies in the early modern period with higher levels of production and trade than Europe, with widespread and equally specialised industries, based on cheap labour and considerable professional skill. In short, Western superiority is a myth and is perhaps a temporary situation in world history.¹⁴

According to Kenneth Pomeranz, the major exponent of this “school”, a comparison of Europe with some areas of China before the 1800s shows “surprising resemblances” in life expectancy, consumption, goods markets and factors of production, family strategies, environmental constraints and agricultural productivity. The view is that discontinuity and economic disparity began with coal (an energy source equivalent to millions of acres of woodland) and “ghost acreage”, the additional agricultural land provided by the Americas (which offered raw materials and plantation produce from an area corresponding to about two-thirds of England’s farmland). The “lucky” combination of these two factors allowed a development model in Northwestern Europe based on the intensive exploitation of resources and low labour intensity, unlike China. This means that the destiny of the two most advanced regions of the two continents – the Yangtze and England – was decided by “casual” and “contingent” factors: the proximity of the Americas to Western Europe, especially to the country with extensive coalfields.¹⁵ Other researchers have claimed that Europe’s economy in the early modern period was small, secondary and provincial, and that its marginal importance means that focus on the “rise of Europe” is the result of a Eurocentric bias. The world’s greatest economy was China, home to around a third of the world’s population in the 18th century, with some highly developed provinces. Europeans’ participation in world trade was only made possible because they had gold and silver from the Americas; without these precious metals, they would have been excluded.¹⁶ China’s leading role in the world economy is shown by the fact that up to three-quarters of the New World silver entered the country, which in turn exported goods like tea, gold and most importantly silk, pottery and other manufactured goods. This is why the centre of the world economy was Asia – and in Asia some areas of China.¹⁷

The California School has posed a challenge because it has shown that there were as many “capitalistic” trade areas in the Ottoman, Mughal, Safavid and Chinese empires as in the West’s influential cities. The size of China’s population presumably made it the world’s leading economy in terms of aggregate economic activity, and its role in the world economy was probably greater than has been suggested in previous literature. Moreover, the gap between the various economic indicators of the more or less advanced regions of the two continents was narrow compared with present-day figures, given the features of agriculture, industry and transport systems, of technology and of energy constraints.

However, it is undeniable that Europe took the initiative and had gained control over two-thirds of the world’s land mass by 1800 following a long period of expansion; Europe’s scientific method and technology were superior, and it had already created a world trade system. These are just some elements explaining European domination of world trade until the start of the 20th century, and why it was that the Industrial Revolution happened in Europe and not in other parts of the world.

The reason why China did not dominate the world economy was that all intercontinental trade was controlled by the Europeans. The theory that China was the centre of the world economy due to its enormous imports of silver bullion is perplexing and implausible. Firstly, even the most optimistic estimates are that no more than 30% of American silver entered China during the period 1500–1820: this was a substantial amount but not impressive when compared with the population of the Chinese empire.¹⁸ Then again, intercontinental trade with China probably accounted for no more than 1% of the country’s GDP.¹⁹ Europeans held onto a much greater quantity of American silver and in the 18th century concentrated on accumulating New World gold, which was to play an extremely important role in the monetisation of the economy. The European trading companies took silver to China because it was in short supply there, and they made enormous arbitrage profits when they exchanged it with gold. Most importantly, most of the earnings from trade wen...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Contents
• Tables
• PART I War, finance and mercantilism
• 1 Great Divergence, fiscal-military state and economic policy
• 2 From trading cities to territorial states
• 3 The “military revolution”
• 4 The rise of the fiscal state
• 5 Different paths to public finance and fiscal systems
• 6 European states and the crisis of the 17th century
• 7 Responses to the crisis: Re-centring the European economy
• 8 Mercantilism
• 9 Naval power and global trade
• 10 The economic war between France and Britain in the 18th century
• PART II Economic policies
• 11 The Italian states (16th–17th centuries)
• 12 State, economic policy and the Portuguese empire
• 13 Spain: Empire, crisis and reforms
• 14 The Dutch Republic: a “merchant state”
• 15 France: State, Colbertism and economic performance
• 16 England and the United Kingdom: the mercantile system
• 17 The economic policy of Sweden
• 18 Russia from Peter the Great to Catherine
• 19 State and economy in Frederick II’s Brandenburg-Prussia
• 20 The Habsburg Monarchy
• Conclusion
• Bibliography
• Index