Also titled "The Ballance of our Forraign Trade is the Rule of our Treasure"

An essay by Thomas Mun, a 17th Century English merchant. It is a perfect example of mercantilism - the mercantilists being regarded as the first group of economic thinkers whose writings belong within the discipline (rather than approaching economics from philosophy or theology).

"My Son, In a former Discourse I have endeavoured after my manner briefly to teach thee two things: The first is Piety, how to fear God aright, according to his Works, and Word: The second is Policy, how to love and serve thy Country... "

Mun begins his treatise by assessing the ideal qualities of a merchant. He views the role of merchants as critical to expanding the wealth of a nation, as he sees economic growth as being driven by trade. He moves on to discuss the economic policies a king should employ to pursue this goal.

Mun can fairly be regarded as a protectionist in the field of trade policy. He advises kings (or to be specific, the English King) to raise tariffs on imports and remove export duties, and thereby reduce imports and maximise exports, improving the nations balance of trade.

Before the spread of credit cards and paper currency, trade was settled in Gold and Silver. This meant the money supply was not controlled by a Central Bank, but rose and fell with the trade surplus and deficit. Nor could governments easily raise funds during wartime by printing currency: no one would trust bills of exchange from a government which might not exist come the morning, and systems of borrowing we're fairly primitive in most of Europe during this period (and especially in England prior to the Civil War and Glorious Revolution).

This was why it was important for a King to accumulate Treasure, so the Kingdom is well equipped to fight a war. But this wealth is of little use sitting in a chest in a castle:

"Neither are all the advances of princes strictly tied to be massed up in treasure, for they have other no less necessary and profitable wayes to make them rich and powerful, by issuing out continually a great part of their yearly Incomes to their subjects from whom it was first taken; as namely, by employing them to make Ships of War, with all the provisions thereunto belonging, to build and repair Forts, to buy and store up Corn in the Granaries of each Province for a years use (at least) aforehand, to serve in occasion of Dearth, which cannot be neglected by a State but in great danger, to erect Banks with their money for the encrease of their subjects trade, to maintain in their pay, Collonels, Capitins, Souldiers, Commanders, Mariners, and others, both by sea and Land, with good discipline,to fill their Store-houses (in sundry strong places) and to abound in Gun Powder, Brimstone, Saltpeter, Shot, Ordnance, Musquets, Swords, Pikes, Armours, Horses, and in many other such like Provisions fitting War; all which will make them to be feared abroad, and loved at home"

Which leads us to the aim of growth for Mun: creating a stronger state. Economic Strength is the source of Military Strength. At a time when most of Europe was in a state of war, with nationalism in its infancy, protectionism was integral to state formation and nation-building. For this first group of economists, that was the ultimate aim of the subject. Not to raise living standards, but to stockpile armaments.

Mercantilism can also be seen as having been a demand side theory back when the quantity of gold and silver in a country determined its money supply. Improving your balance of trade was the only means of bolstering the level of demand, unless you have a lot of mines churning out precious metals.

Mun was assuming Britain’s economy was gifted with infinite surplus resources - in Land, Labour and Capital - in much the same way as Keynesian economics. The primary constraint to growth for both Mun and Keynes was insufficient demand: and so whilst Keynes recommended expansionary fiscal and monetary policies to end the Great Depression, Mun wanted to erect tariff barriers to bring more treasure into the country. This would increase employment so more peasants would put more land to the plough, output would rise across the land, and the nation would grow stronger.

As you can see, economics still wasn't quite separated from politics, but then again nor is it today. It may have been that Mun was simply trying to make his ideas more appealing to the rulers of the day.

Adam Smith was very critical of Mercantilists, but he was writing more than a hundred years after Mun, at the dawn of the Industrial Revolution. The economic conditions of the day were very different - Britain's economy was far stronger, indeed, Britain was a unified nation-state when Adam Smith was writing. And whilst the best way to encourage economic growth in the late 1700s might have been to allow free imports, as British manufacturing was the most competitive in the world at that time, unlike in the early 1600s when Mun was writing, and tariffs were needed to protect the economy from the aggressive Dutch.

By allowing imports in the late 1700s and 1800s when Britain dominated the world economy Britain gave the rest of the world a means to earn enough currency to by British goods. Had England abandoned protectionism in the early 1600s, currency would have flowed out of the country, the government would have not been able to collect tax revenues (The highly efficient tax system that existed in Smith's time was not developed until after the English Civil war), and the state would have been too weak to resist invasion.

So we should not see it as being a case of which thinker was right and which was wrong. They were both writing for their own times, and their theories cannot be divorced from the circumstances of their day.

So overall, Mun's "England’s Treasure by Forraign Trade" is a great early work on economics, very revealing of the patterns of thought of the time, and is far more exiting than most other writings on the subject.


Whilst reading Mun's work I could not help but think of The Silmarillion, and Tolkien's description of how the Elves of Beleriand and the Men of Westernesse prepared to do battle with Morgoth and Sauron.

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