History of Political Economy

The Early Days of English

Political Economy (1911)
By Rudolf Hilferding
Translated by Daniel Gaido

In the last few years Germany has finally been showing a somewhat
greater interest in economic theory, which at the time of the ascendancy
of the historical school had been pushed into the background. To be sure,
theoretical interest is still mediated by historical interest and often appears
as an investigation of the economic-policy and historical views of past
authors, while what is essential in their work for the development of today’s
economic science is all too easily overlooked. This will only change, and
new vistas will be opened up for research, through a presentation [of the
history of economics] from the standpoint of a purely theoretical interest,
as was done by Marx in his Theories of Surplus-Value, those Prolegom-
ena to any future history of political economy that will be able to present
itself as science.1
Even so, we owe to this renewed interest the publication of anthologies
that make the past authors on political economy available in German.
After a number of important tracts had already been published in the ear-
lier series edited by [Lujo] Brentano and [Emanuel] Leser, which was
unfortunately discontinued, Professor [Heinrich] Waentig recently started
a similar enterprise. In addition, readers have been published containing

This is a translation of Rudolf Hilferding, “Aus der Frühzeit der englischen Nationalökonomie,”
Die Neue Zeit, 29 (26, Band 1): 908–21. All material in square brackets or labeled “Trans.” has
been added by the translator.
1. This, of course, is an allusion to Immanuel Kant’s Prolegomena to Any Future Metaphys-
ics That Will Be Able to Present Itself as Science (1783). –Trans.
History of Political Economy 48:3  DOI 10.1215/00182702-3638643
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fragments from older works, whose value must of course be judged skep-
tically from a purely scientific point of view, but which all the same prove
that people are finally beginning to consider ignorance about the develop-
ment of economic theory impermissible, even in the circle of professional
economics [Fachökonomie].
A book has recently appeared in translation which is now very rare in
the original, and which, along with the writings of Stafford, Milles, Maly-
nes, and Misselden, stood at the threshold of English economic literature:
Thomas Mun’s England’s Treasure by Forraign Trade, or the Ballance of
Our Forraign Trade Is the Rule of Our Treasure.2
The editor [Rudolf Biach] has prefaced the work with a detailed and
diligently worked out economic-historical introduction, to which we can
only object that the key issues against which Mun’s writing is directed do
not sufficiently stand out from the mass of detail. Unfortunately, the editor
also considered it necessary to explain the shortcomings of the first con-
ception of the mercantilist system in “epistemological” terms. If we have
understood him correctly, he seriously believes that Mun would only have
needed the true theory of knowledge—which, in his opinion, is that of
[Ernst] Mach, [John Bernhard] Stallo, and [Pierre] Duhem—in order to
avoid underestimating the importance of internal trade. He forgets that
Mun, the great wholesaler, had such compelling practical reasons for his
views that no theory of knowledge in the world contradicting that practice
would have found favor with him and his age. But apart from that, what a
childish presumption it is to think that one can achieve results in eco-
nomic science from epistemological insights alone. Mach would be the
first to protest vigorously against this way of turning his ideas upside
down. We would really have preferred the editor to spare us this discus-
sion and to publish also Mun’s first work.3
Mun’s work was written around 1630, but it was first published in 1664
by his son, John Mun. It is the fundamental document of English mercan-
tilism. According to Adam Smith,
The title of Mun’s book, England’s Treasure in [sic] Foreign Trade,
became a fundamental maxim in the political economy, not of England
only, but of all other commercial countries. The inland or home trade,

2. Thomas Mun, Englands Schatz durch den Außenhandel. After the original (1664) trans-
lated into German by Dr. Rudolf Biach. Vienna: F. Tempski, and Leipzig: G. Freytag, 1911.
3. Mun’s first work was titled A Discourse of Trade from England unto the East-Indies,
Answering to Diverse Objections Which Are Usually Made against the Same (1621). –Trans.

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the most important of all, the trade in which an equal capital affords the
greatest revenue, and creates the greatest employment to the people of
the country, was considered as subsidiary only to foreign trade. It nei-
ther brought money into the country, it was said, nor carried any out of
it. The country, therefore, could never become either richer or poorer by
means of it, except so far as its prosperity or decay might indirectly
influence the state of foreign trade. (Wealth of Nations, IV, chap. 1)4
It is known that developed bourgeois economics, since Galiani, Ques­
nay, and Smith, adopted the sharpest polemical stance against the mer-
cantile system, and this position was, of course, not exactly favorable to an
impartial historical appreciation.
Interestingly, the English writer who first raised the flag of opposition
against the then prevailing doctrine of Ricardo from a historical stand-
point described the conditions in which Mun’s book emerged in a short
essay called “Primitive Political Economy in England,” thus making pos-
sible for the first time an historical understanding of the founder of mer-
cantilism.5 We have in mind Richard Jones, one of the most interesting
post-Ricardian writers, who, half-forgotten, has been given a new lease on
life by the third volume of Marx’s Theories of Surplus-Value.
It is now customary to regard as the most peculiar trait of the mercan-
tile system the fact that it considered money in its metallic corporeality,
i.e., gold and silver, as the only wealth. People forget too easily that this
high regard for money, the auri sacra fames [“accursed hunger for gold,”
Virgil, Aeneid 3, 57], did not come to dominate economic thinking and
did not become the cardinal rule of economic policy during the emer-
gence of the mercantile system. Rather, this opinion had come into
being in the early Middle Ages, and this is easily explained. If the mar-
ket develops on a natural-economic basis, where the largest share of
production is directed to satisfying the producers’ own needs, and where
goods have not yet assumed the character of commodities, the posses-
sion of money must confer great economic power. Since production was

4. The edition of The Wealth of Nations from which Hilferding here quotes is not specified
in the original. I have on hand the 1910 edition of The Wealth of Nations published by J. M.
Dent & Sons, London, and in that edition the passage can be found on p. 380 of vol. 1. –Trans.
5. Richard Jones, “Primitive Political Economy in England” (from the Edinburgh Review
for April 1847), in Literary Remains of the Late Rev. Richard Jones, edited by the Rev. William
Whewell, London, 1859, pp. 291–338. Without naming the author, Biach cites this essay in his
introduction under the title “Early English Political Economy,” Edinburgh Review, April 1847.
There is no doubt that this is the same tract.

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craft-like [handwerksmäßig], the accumulation of monetary wealth was

still impossible through production, and it was all the more important to
hold onto money, once acquired, through all sorts of coercive means. Pre-
cisely in a natural-economic environment, where wealth still consisted
essentially of land and the laborers working on it, metallic money
appeared necessary, as the sole form of wealth that was always readily
available and that was irreplaceable by any other, and above all as the only
form of wealth that gave economic power outside of the self-contained
circle of production for the satisfaction of one’s own demands. Only with
money could the lords’ great demand for luxury goods be satisfied, espe-
cially after that demand focused on the rare and costly goods brought into
the country by foreign trade. And only with money—and this is the cru-
cial thing—could the ruler wage war in distant places and enforce the
state’s purposes. Therefore, with the development of a stronger central
government, we immediately see the gradual deployment of an economic
policy system aimed at increasing the import of money into the country,
retaining the already existing money within it, and providing the state
with the means of controlling the money hoard [Geldschatz].
We should not lose sight of the fact that this economic policy was pur-
sued on the basis of a subsistence economy [Bedarfdeckungswirtschaft].
Most goods were not commodities but were produced at home—for
instance, in the peasant household—to meet the producers’ own needs or
those of the landlord, without the goods becoming commodities. But also
the circulation of commodities between farmers and craftsmen, as well as
within the city itself, i.e., the most important part of the internal market,
remained unaffected by that policy. This sphere was taken care of by
guild legislation, which, with its various measures, provided for a certain
correspondence between supply and demand, for the protection of con-
sumers against cheating, etc. But craft production and the “craft-like”
trade6 corresponding to it, with their narrow limits, could never appear as
sources of enrichment, of monetary accumulation. Here, in the heyday of
handicrafts, there was a certain balance, a certain condition of equilib-
rium given by that kind of social production. Only foreign trade could
bring in wealth, particularly wealth in metallic form. The inflow of gold
and silver apparently arose from circulation, not from production; it was
profit upon alienation according to the later mercantilist terminology. It
did not come from domestic circulation, which was a circulation among

6. On this, see further Werner Sombart 1902, Der moderne Kapitalismus, “Der Handel als
Handwerk,” pp. 165ff.

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the craftsmen of the cities and apparently only served to change the loca-
tion of goods, turning them from useless objects for one person into
objects of utility for another. Insofar as this circulation was mediated in
the early Middle Ages by trade, this trade was itself “craft-like,” taking
place on the smallest scale and appearing to be no more a source of wealth
than craft production. The amount of gold and silver in the country could
only increase, therefore, by way of foreign trade, by selling more abroad
than what was purchased there; and medieval economic policy focused on
forcing that trade, through an elaborate system of measures, to bring gold
into the country and to prevent it from taking gold out of the country. We
are therefore dealing with two different groups of measures: one endeav-
oring to bring gold into the country, the other trying to prevent its removal.
What differentiated this policy from the later policy of mercantilism
was the fact that it was not content to influence, through general measures
of production policy and trade policy, the entire foreign trade in such man-
ner that it would eventually yield a “positive” balance of trade, an excess
of exports over imports, but rather tried to regulate and monitor each indi-
vidual commercial transaction through a complicated system of individ-
ual measures. State representatives had to be present at each individual
transaction involving the main export articles to ensure that it brought
gold into the country. Each separate transaction that could bring gold into
the country or take gold out of the country was subjected to government
control. Jones calls this system of individual monitoring of commercial
transactions the balance-of-bargain system, the system of balance of the
individual transactions, in order to distinguish it from the balance-of-
trade system, the system of balance of total trade later advocated by the
mercantilists.
The aims of this policy were initially served by the staple: leading
export goods were only allowed to be sold abroad through certain staple
towns [Stapelplätzen: entrepôts]. Those goods were mainly wool, hides,
leather, lead, and tin, wool being the most important. In all the staple towns
a corporation was formed, consisting of the major, the constable, and the
staple members. Their task was twofold: first, they had to levy the export
duty on wool; second, they had to ensure that a part of the proceeds of each
individual transaction was paid for in foreign coin or bullion, and that this
money was brought to England. Those regulations on staples were first
introduced in England in 1313 [by King Edward II]. The major and con-
stables were authorized to choose a city in Brabant, Flanders, or Artois [to
set up a staple], and the export of wool to other towns was penalized.

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However, the foreign money coming into England in that way could
pose risks. The minting of coins was a matter for the king. It was not yet
generally recognized that its value is determined by its metal content.
[William] Stafford [1554–1612] was the first to defend that view emphati-
cally. At that time people were still thoroughly “chartalistic.” [The view
associated with Georg Friedrich] Knapp’s State Theory of Money enjoyed
widespread recognition, and it was believed that the king’s mint could lend
value to the coins beyond their metal content.7 But foreign money first had
to be re-minted at the Royal Mint. This was intended to prevent its re-
export as well as a deviation of the value of foreign money from that which
the king had declared to be its true value in exchange for English coin.
To this end, it was determined that foreign coins could not be used for
any purpose other than their conversion into English money at the mint or
with the king’s exchanger, according to the valuation set by the king. A
king’s exchanger was appointed, who had representatives in the most
important places, with almost unlimited authority over all the monetary
transactions of the country. A foreigner who arrived in England had to
proceed to such a royal exchanger by the shortest route and exchange his
money for English money. If those provisions were violated, the money

7. In the sixteenth century, the Chartalists had already been forced onto the defensive.
“Knight: Forsooth, and such a dullerd am I in deede, that I cannot perceave what hinderance it
should be to the realme to have this mettall more then that (for our Coyne), seeing the coyne is
but a token to goe from man to man, & when it is stricken with the Princes seale to be currant,
what maketh it the matter what mettall it be made of, yea, though it were but Leather or paper.”
(William Stafford’s Compendious, or Briefe Examination of Certayne Ordinary Complaints of
Diuers of Our Countrymen in These Our Dayes, 1581, with an introduction by Frederick D. Mat-
thew, edited by Frederick J. Furnivall, London: The New Shakespeare Society, 1876, p. 55). The
“Doctor” manages to make the knight understand such things only after considerable effort.
Stafford’s demonstration pursues the analysis of money until he supplies proof of its com-
modity character, but he did not yet discover the common denominator of goods and money in
labor. “Knight: What makes these mettalles to bee of more value then other? Doctor: No doubt
their excellencie above other mettalles, both in pleasure and use; partly the rarity of them”
[Stafford, Briefe Examination, p. 58].
This work was first published in 1581 and was later attributed to Shakespeare, because in its
title “gentleman W.S.” was mentioned as the author. Most likely, however, Stafford was the
publisher and the real author was John Hales. [Other scholars attribute it to Sir Thomas Smith.]
The essay was written in 1549 or 1550. It sheds light on social conditions in England at the time
of primitive accumulation. The author is mainly concerned with explaining the causes of the
rise in prices (which he primarily attributes to debasement of the coin and the excessive influx
of precious metals since the discovery of America) and develops in connection with this the
foundations of monetary theory. In this essay we already find the most important mercantilist
principles concerning foreign trade and the promotion of domestic production, especially the
cloth industry. But the author still essentially accepts medieval economic policy, in contrast to
Mun’s second work.

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was confiscated and its owner was severely punished. Foreign money was
then re-minted at the mint. At the same time, the royal exchangers were
given a monopoly over trade in commercial bills of exchange, so that an
exchange ratio between foreign and domestic currency different from the
one set by the king could not develop through bill transactions.
An export ban, enforced with the severest penalties, provided for the
preservation of gold within the country. In order to ensure this, merchants
who left England had to furnish proof that they had spent all the money
they received for their imported goods in purchasing English goods for
export purposes. These were the famous Statutes of Employment. To
enforce them, foreign merchants were forced to stay with certain towns-
men appointed by the city authorities, called hosts, who had to ensure that
the imported goods were sold within eight months and that the proceeds
were invested in British export goods. As compensation, the “hosts”
received a certain amount of each purchase and sale by their guests. This
monitoring of gold exports was extended to pilgrims who went to Rome.
They needed permission from royal officials to take gold with them. When,
with the spread of trade, pilgrims began to take bills of exchange to the
Italian markets in lieu of cash, the foreign merchants who issued such bills
had to commit themselves to export English goods for the same amount.
This system of individual controls over each commodity and currency
transaction was gradually overcome by the expansion of trade. First, the
staple law was breached. Clearly the provision that specific goods could
only be sold at a single city, such as Calais, strongly restricted outlets; it
could only inhibit the expansion of production and reduce prices. Such
provision was only tolerable as long as trade appeared as something rela-
tively superfluous in a society based on natural economy.8 For England,
the restriction of exports was bearable as long as it was a question of the
export of agricultural raw materials, especially wool, of which England
had a certain monopoly, because the more advanced industries, especially
in Flanders, could not do without English wool for cloth production. How-
ever, all this changed when England itself shifted to the export of manu-
factured products, particularly cloth.9 It now had to compete with the

8. This view of the subaltern role of trade appears very clearly, as is well known, in the doc-
trines of the Canonists, especially in Thomas Aquinas.
9. “In the later Middle Ages wool was the one important article of export from England,—
an article of which that country practically enjoyed the monopoly in the north-west of Europe,
so that its control formed a powerful weapon in diplomacy, and its taxation furnished an easy
means of increasing the royal revenue. But England was not content thus to furnish Europe with

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more advanced Western European industries and could no longer allow

artificial restrictions on the election of sales markets. In fact, the staple
right was first breached by the privileges secured by the Merchant Adven-
turers. They were originally an association for the purpose of exporting
cloth, a purpose they soon achieved, because it soon became apparent that
they could sell their goods everywhere. They even reached agreements
with foreign cities that ensured for them the security of trade previously
only available in the staple cities. With this breaching of staple law, the
control of individual transactions and the monitoring of monetary deal-
ings became clearly impossible. And when Henry VIII [1509–47] began
the extensive debasement of coin on the continental model, it became
completely impossible.
The economic debate over the benefits of this whole monitoring system
began at the time of Elizabeth [1558–1603] and Charles II [1660–85]. It
ended with the triumph of mercantilism. According to Richard Jones,
The reign of Elizabeth, and the period which intervened between that
date and the accession of Charles II, may be described as one long
interregnum, in which the partisans of the whole system, and the oppo-
nents of its revival, began that war of discussion which ended in the
establishment of the balance-of-trade system; of which the essential
characteristic was, that retaining the object of the whole system the
constant accession of fresh masses of bullion through foreign trade, it
entirely abandoned and repudiated all the expedients and the machin-
ery by which the earliest framers of the balance-of-bargain system had
attempted to secure the same object. The writer by whom the change
was finally established, was Thomas Mun, an eminent merchant of
London (Jones, loc. cit., p. 321).10
The age of Elizabeth was a time of utmost social tension, and it was
therefore naturally also a time of lively economic debate, which freed
itself from the rigid shackles of medieval policy and its suitable expres-
sion, the canonical teachings. The old economic system, with its detailed
rules, began to break down; the value of money declined due to the influx

the raw material: its government made continuous and strenuous efforts to gain for it the manu-
facture also; and its measures succeeded. Cloth became ‘the basis of our wealth;’ and at the end
of the seventeenth century, woollen goods were ‘two-thirds of England’s exports.’” W. J. Ash-
ley, An Introduction to English Economic History and Theory, London, Longmans, Green, and
Co., 1893, part II: The End of the Middle Ages, p. 191.
10. That is, Jones, “Primitive Political Economy in England.” –Trans.

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of precious metals and the discovery of America and as a consequence of

the debasement of coin; a general increase in prices alarmed the popula-
tion; the old country towns steadily declined due to the changed distribu-
tion of industrial production; the agricultural revolution was ruthlessly
pursued by landlords; the enclosures of common lands and the conversion
of arable land into pasture cleared the land of its inhabitants and pushed
the peasants into the proletariat, at the same time as the Reformation
destroyed the work of ecclesiastical poor relief and charity. The nation
suddenly faced the most serious social problems.
This is the foundation upon which the new economic literature arose.
[Thomas] Milles raised his voice for the privileges of the old staple trade
and called for restoration of the old monitoring provisions that had brought
wealth into the country. [He argued that] new trade routes had destroyed
the old ones and brought no benefit. [Gerard de] Malynes [1586–1623],
author of the Lex Mercatoria, denounced “the Canker of Englands Com-
mon Wealth,” the discount brokers, as the source of all evil. [Edward]
Misselden [1608–1634] replied with the presentation of the most impor-
tant laws of the exchange rate. Stafford’s work appeared even earlier. Its
value, Jones says correctly, consists especially in the masterful exposition
of the consequences of debasement of the coin. Against the illusion that
the king’s seal gives money its value, he explained that “the substance and
quantity is esteemed in coyne, and not the name.”11
After these predecessors, appeared [Thomas] Mun. In his first work,
published under his initials T.M. and re-issued in 1621 [A Discourse of
Trade from England unto the East-Indies], he still defends, like Stafford,
the point of view of the old economic policy. Only in his second work
[England’s Treasure by Forraign Trade], written around 1630 but not pub-
lished until 1664, twenty-three years after the author’s death, did he
become the founder of mercantilism, rejecting all measures aimed at
monitoring individual transactions and advocating an economic policy
that sought to regulate the total foreign trade of the country through gen-
eral policy measures.
Born in 1571, Mun was an English merchant and, from 1615, one of the
twenty-four directors of the East India Company. Trade with the East
Indies first became significant during the reign of Elizabeth and at the

11. William Stafford, Brief Concept of English Policy, in Thomas Park, Supplement to the
Harleian Miscellany: Consisting of Miscellaneous Pieces not Included in the Former Edi-
tion, selected and prepared by Thomas Park (London: Printed for White and Cochrane,
1812), vol. 11, p. 144. –Trans.

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same time suffered serious hostility from outsiders. In India, where the
natives had as yet no great need for English goods, merchants had to begin
their operations by purchasing rather than selling; they therefore had to
export money, and this seemed dangerous. Mun defended the company as
their spokesman in a petition to Parliament. The petition was published in
1641 and its content largely passed over into the present work [England’s
Treasure by Forraign Trade].
At the head of his remarks Mun placed these words: “The ordinary
means therefore to encrease our wealth and treasure is by Forraign Trade,
wherein wee must ever observe this rule; to sell more to strangers yearly
than wee consume of theirs in value.”12 From this followed at once the
task of economic policy: the country’s domestic trade was not a source of
wealth but mere “internal trade.” State interference with those transac-
tions was therefore superfluous and harmful, because it inhibited trade.
Mun therefore demanded the removal of all provisions inhibiting trade.
Trade should rightfully be free, so that even strangers would be allowed to
import and export freely. A ban on exports of food and war supplies could
only be justified for political reasons. Restrictions are inherently danger-
ous because they incite foreign countries to retaliate. The ban on money
export is harmful. One could begin to trade in India only by exporting
money, at least until the local population grew more used to English
goods. But that money would ultimately come back to England in
increased amounts. Mun argued forcefully against Malynes’s claim con-
cerning the harmfulness of foreign trade, which allegedly caused the
export of money and impoverished the country. If his own theory of the
exchange rate is still sketchy and unremarkable, it does show the absurdity
of the allegation that a country could be impoverished by foreign trade:
It is not the power of Exchange that doth enforce treasure where the
rich Prince will have it, but it is the money proceeding of wares in For-
raigne trade that doth enforce the exchange, and rules the price thereof
high or low, according to the plenty or scarcity of the said money.13
Mun also proved that artificial interference in the monetary exchange
with foreign countries was harmful, and sharply criticized the debasement
of coins. “For that is not the denomination of our pounds shillings and
pence, which is respected, but the intrinsique value of our Coins.”14 Quite

12. Thomas Mun, England’s Treasure by Forraign Trade, or the Ballance of Our Forraign
Trade Is the Rule of Our Treasure (London: Printed by J. O. for Thomas Clark, 1664), p. 5. –Trans.
13. Mun, England’s Treasure, p. 55. –Trans.
14. Mun, England’s Treasure, p. 29. –Trans.

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remarkable is his insight into the importance that banks could have for the
support of trade. Mun’s views are important because they show how the
recognition that gold is a commodity, so much stressed by classical eco-
nomics, had already imposed itself on the mercantilist point of view.
The Italians and some other Nations have such remedies against this
want, that it can neither decay nor hinder their trade, for they transfer
bills of debt, and have Banks both publick and private, wherein they do
assign their credits from one to another daily for very great sums with
ease and satisfaction by writings only, whilst in the mean time the Mass
of Treasure which gave foundation to these credits is employed in For-
raign Trade as a Merchandize, and by the said means they have little
other use of money in those countreys more than for their ordinary
expences. It is not therefore the keeping of our mony in the Kingdom,
but the necessity and use of our wares in forraign Countries, and our
want of their commodities that causeth the vent and consumption on all
sides, which makes a quick and ample Trade.15
And Mun forgets in this regard even the basic dogma of mercantilism,
saying:
The Proverb saith: “They that have Wares cannot want mony.” Neither
is it said that Mony is the Life of Trade, as if it could not subsist without
the same; for we know that there was great trading by way of commuta-
tion or barter when there was little mony stirring in the world.16
Mun already developed all the important maxims of mercantilism
regarding trade policy: favor your own shipping in order to avoid having
to pay freight to foreign countries; free the transit traffic from all taxes;
allow the duty-free importation of raw materials and the elimination of
export duties on English products manufactured with foreign materials;
do not burden local export goods with high export taxes, because that
would make them too expensive abroad. By contrast, domestic consump-
tion of foreign goods should be taxed as highly as possible. One should,
however, look at the “whole body of the trade,” not at individual transac-
tions as the detrimental Statutes of Employments had done.17
Mun’s position as a British merchant, and in particular as member of
the East India Company, induced him to look with less than friendly eyes

15. Mun, England’s Treasure, p. 17. –Trans.

16. Mun, England’s Treasure, p. 16–17. –Trans.
17. Mun, England’s Treasure, p. 46. –Trans.

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at the Dutch. Generally speaking, the martial spirit that wants to drive
competitors from the field by the use of force is characteristic of the repre-
sentatives of merchant capital and colonial exploitation. Mun says about
the Dutch:
In truth (as they well observe) there are no people in Christendome who
do more undermine, hurt, and eclipse us daily in our Navigation and
Trades, both abroad and at home; and this not only in the rich Fishing
in his Majesty’s Seas (whereof we have already written) but also in our
Inland trades between City and City, in the Manufacture of Silk, Wools,
and the like, made here in this Kingdom, wherein they never give
employment or education in their Arts to the English, but ever (accord-
ing to the custome of the Jewes, where they abide in Turkey, and divers
places of Christendome) they live wholly to themselves in their own
Tribes. So that we may truly say of the Dutch, that although they are
amongst us, yet certainly they are not of us, no not they who are born
and bred here in our own Countrey, for stil they will be Dutch, not hav-
ing so much as one drop of English bloud in their hearts. More might be
written of these Nethelanders pride and ambitious endeavours, whereby
they hope in time to grow mighty, if they be not prevented.18
It is clear that even this racial anti-Semitism projected onto the Dutch is
a pure product of competition. Mun, however, wants to carry it over into
practical life, and “Buy from Christians only” is narrowed down to “Buy
from Englishmen only.” Mun considered Holland’s wealth to be based on
fishing, carried out in English waters. He demanded that fishing in Eng-
lish waters should be reserved for Englishmen, and he longed for a policy
that would no longer support the Dutch against Spain but would decidedly
oppose their claims in India as well as in Europe. In his opinion, England
was destined for supremacy. His hatred of Dutch fishing rights even led
him, the representative of trade, to pessimism, which stands in stark con-
trast with the bravado that pervades his work.
But first, I will deliver my opinion concerning our Clothing, which
although it is the greatest Wealth and best Employment of the Poor of
this kingdome, yet neverthelesse we may peradventure employ our
selves with better Safety, Plenty, and Profit in using more Tillage and
Fishing, than to trust so wholly to the making of Cloth; for in times of
War, or by other occasions, if some forraign Princes should prohibit the

18. Mun, England’s Treasure, p. 81. –Trans.

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use thereof in their dominions, it might suddenly cause much poverty

and dangerous uproars, especially by our poor people, when they should
be deprived of their ordinary maintenance, which cannot so easily fail
them when their labours should be divided into the said diversity of
employments, whereby also many thousands would be the better enabled
to do the Kingdom good service in occasion of war, especially by Sea.19
We see that agrarian prophecy-mongering about the dangerous results
of the industrial state accompanies it from its birth; and even though those
prophecies remained unfulfilled, neither its content nor its certainty has
changed.20
We have discussed the genesis of Mun’s book in such detail because it
sheds clear light on the character of mercantilism. This system, which was
attacked as reactionary by the Physiocrats and Adam Smith with such zeal
and historical right, was in its origins quite revolutionary, turning against
the barriers of medieval economic policy with the same vehemence with
which, when its time was over, it was itself attacked by the classical econo-
mists. The mercantilists were the representatives of merchant and usurious

19. Mun, England’s Treasure, p. 73. –Trans.

20. Stafford is quite different. He lets his “Doctor” confront very firmly the “Knight,” who
argued that cloth makers should leave their profession and turn to agriculture, because almost
all insurgencies stemmed from temporarily unemployed clothiers. The “Doctor” differentiates
between three classes of traders. The first class sells goods that are produced abroad, and in that
way diminish the money supply of England. Although they are tolerable, one would do better
without them. The second class, shoemakers, tailors, butchers, bakers, victual traders, etc., earn
their income within the country and spend it there, “which, like as they convey no money out of
the countrey, so they bringe none in: but where as they get it they spend it. Of the thyrd sort bee
these clothiers, cappers, worstedmakers, Pewterers, Tanners, which bee all that wee have of any
arte which I can nowe recken, that brings into the realme any treasure. Therefore these artes are
to bee chearished, whereas they be used.” (William Stafford’s Compendious, or Briefe Exami-
nation of Certayne Ordinary Complaints of Diuers of Our Countrymen in These Our Dayes,
A.D. 1581, with an introduction by Frederick D. Matthew, edited by Frederick J. Furnivall,
London: The New Shakespeare Society, 1876, p. 88.) And Stafford, who does not advocate, as
does the director of the East India Company, going to war with the other trading nations, also
knows the means [to be employed] against the dangers of the industrial state, namely, a good
foreign policy. “Knight: Yea, master Doctor, we stand not in like case as Fraunce or Flaunders
that yee speake of; if they have not vente one way, they may have it another way allwaies, for the
firme land is rounde about them in maner. If they bee at warre with one Neyghbour, they will
bee friendes with another, to whose Countreyes they may sende theyr commodities to sell”
[Stafford, Briefe Examination, p. 72]. To which the Doctor answers: “So may wee bee, if wee
were so wyse, to keepe one Friende or other alwayes in hande. Who will bee so mad, being a
Private man, but hee will be sure to doe so? Let wyse men consider what Friendes this Realme
hath had in time past. And if they bee nowe lost or intercepted another way since, let us pur-
chase other for them; or els geve as litle occasion of breache with our Neyghbours as may bee”
(loc. cit., p. 91ff. [Stafford, Briefe Examination, p. 72]).

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capital which was about to seize industrial production, and which at the
same time opened up one of the most important sources of primitive accu-
mulation with its colonial policy. Mun himself still has in mind primarily
the interests of commercial capital. But important consequences already
arise for production policy. For his followers, the interest in industrial pro-
duction comes increasingly to the fore until finally, in Colbert’s system
[Jean-Baptiste Colbert was France’s Minister of Finances from 1665 to
1683, under the rule of King Louis XIV], the state was placed entirely at
the service of fostering and developing the national industry.
The hoarding of money as the only [form of] wealth was taken over by
the mercantilists from medieval ideas. But for them it was the basis for a
completely different economic policy. Medieval trade, to the extent that it
was domestic trade, was totally craft-like. But foreign trade was also neg-
ligible, both as regards the number and the volume of goods involved. It
was a trade in certain specialties, and due to both its nature and state
privileges it was essentially a monopoly trade.21 The chief object of British
trade was first wool and then cloth, and the desire was always present to
obtain in exchange for these commodities, which were superfluous in the
domestic market and essential abroad, as much gold as possible. But the
monopoly was now broken. Commercial capital stepped out into the world
market, where it met the competition of foreign capital. It came into areas
where people had no need for English goods, where English merchants
could therefore buy only with money and could sell no goods. Trade could
no longer be thought of as one-sidedly as in the Middle Ages: just to sell
and, if possible, not to buy anything. Mun discovered that selling was only
possible with a simultaneous purchase; and concerned as he was about
obtaining an excess of sales [over purchases], he recognized that the wish
not to buy anything from abroad would lead to the destruction of trade.22

21. The “high transportation costs. . . acted as a natural ‘protective tariff’ in favor of domes-
tic products in a particular area. Taking . . . into account this advantage that the local producers
had vis-à-vis the foreign ones, and if we consider further the practically insurmountable diffi-
culties of reducing their production costs, we reach the conclusion that commodity production
remote from the location was possible in general only under the condition of a kind of monop-
oly, which means that it was almost always specialties, whose technique remained secret, that
could obtain foreign markets” (Sombart, Der moderne Kapitalismus, vol. 1, p. 157).
22. “Lastly, all kind of Bounty and Pomp is not to be avoided, for if we should become so
frugal, that we would use few or no Forraign wares, how shall we then vent our own commodi-
ties? What will become of our Ships, Mariners, Munitions, our poor Artificers, and many oth-
ers? doe we hope that other Countreys will afford us money for All our wares, without buying
or bartering for Some of theirs? this would prove a vain expectation; it is more safe and sure to
run a middle course by spending moderately, which will purchase treasure plentifully” (Mun, p.
176 [Mun, England’s Treasure, p. 81]).

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And so he came to a totally different view of money. The Middle Ages

confronted money above all as hoarders; money should be withdrawn as
much as possible from circulation to be stored up as treasure. Mun already
sees in money a “commodity in foreign trade.” He welcomed the banks,
which spared money from domestic circulation, in order to make it avail-
able to foreign trade. The medieval controls of monetary transactions had
to be given up. At the same time, the ban on charging interests appeared
absurd as soon as trade, and therefore the money needed for it, was pro-
claimed as a source of wealth. Mun rejects, therefore, the prohibition of
interest. In contrast to those who argued that increasing usury leads to a
decrease in trade, Mun says that both of them rise or fall simultaneously.
At the same time, the economic function of the state itself changed
completely. The medieval state was beneficiary and partner in every
transaction. It drew a good portion of its revenue from customs duties and
taxes; the fiscal interest was paramount in its interventions [in the econ-
omy].23 Commercial capital also naturally appealed to the state, because
only the state could secure the trade routes that made possible colonial
acquisitions and their protection. But the state was gradually transformed
into the servant of trade. Commerce, and not the fiscal interest, was now
decisive. The monitoring of and profiting from individual commercial
transactions was replaced by a national capitalist economic policy.
But money still remained the only [form of] wealth, and rightly so from
the standpoint of commercial capital. Because only when the merchant
has more money in his pocket at the end than at the beginning of the pro-
cess does the turnover M—C—M [Marx’s formula for the transformation
of money into commodities, and the change of commodities back again
into money] make sense for him as a capitalist. It is again the specifically
capitalist view that is dictated here as a general law of public policy. While
people in the Middle Ages thought they could gain a little money from

23. “An indication of the new importance of the woollen manufacture is given by the statis-
tics of export and customs. We have seen that the export of woollen cloths in 1354 was reckoned
as under 5,000 pieces; at the accession of Henry VIII it was about 80,000, and it rose from that
number during his reign to more than 120,000 pieces. These figures are for undyed cloths alone;
which, however, even during the reign of Henry VIII were more than 95 percent of the whole.
The Hanse merchants paid toll, in 1307, on six cloths only; there was then practically no expor-
tation. In 1422 they paid toll on 4,464 pieces. During the next forty years the number increased
only to 6,159; but by 1500 it had leapt up to 21,389. Cloth was gradually taking the place of wool
as the most important source of customs revenue. In 1421 the wool custom and wool subsidy
furnished 74 percent, of the total customs revenue; under Henry VIII it had fallen to 33 percent,
while the customs on general merchandise had risen to 36 percent, and those on cloth alone to
24 percent.” (W. J. Ashley, An Introduction to English Economic History and Theory, London:
Longmans, Green, and Co., 1893, part II: The End of the Middle Ages, pp. 225–26.)

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each transaction and store it up as treasure, money is here regarded in its

constant process of circulation, where it only goes out in order to come
back in, each time in increased amounts. But the appraisal of gold itself,
as particularly standing out from other commodities, at the same time
preserves its capitalist-bourgeois sense. [According to Marx,]
Just as in the sixteenth and seventeenth centuries, when modern bour-
geois society was in its infancy, nations and princes were driven by a
general desire for money to embark on crusades to distant lands in
quest of the golden grail, so the first interpreters of the modern world,
the originators of the Monetary System—the Mercantile System is
merely a variant of it—declared that gold and silver, i.e., money, alone
constitutes wealth. They quite correctly stated that the vocation of
bourgeois society was the making of money, and hence, from the stand-
point of simple commodity production, the formation of permanent
hoards which neither moths nor rust could destroy. It is no refutation of
the Monetary System to point out that a ton of iron whose price is £3
has the same value as £3 in gold. The point at issue is not the magnitude
of the exchange-value, but its adequate form. With regard to the special
attention paid by the Monetary and Mercantile systems to international
trade and to individual branches of national labour that lead directly to
international trade, which are regarded by them as the only real source
of wealth or of money, one has to remember that in those times national
production was for the most part still carried on within the framework
of feudal forms and served as the immediate source of subsistence for
the producers themselves. Most products did not become commodities;
they were accordingly neither converted into money nor entered at all
into the general process of the social metabolism; hence they did not
appear as materialisation of universal abstract labour and did not
indeed constitute bourgeois wealth. Money as the end and object of
circulation represents exchange-value or abstract wealth, not any physi-
cal element of wealth, as the determining purpose and driving motive
of production. It was consistent with the rudimentary stage of bour-
geois production that those misunderstood prophets should have clung
to the solid, palpable and glittering form of exchange-value, to
exchange-value in the form of the universal commodity as distinct from
all particular commodities. The sphere of commodity circulation was
the strictly bourgeois economic sphere at that time. They therefore ana-
lysed the whole complex process of bourgeois production from the
standpoint of that basic sphere and confused money with capital. The
unceasing fight of modern economists against the Monetary and Mer-

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Hilferding / English Political Economy (1911) 487

cantile systems is mainly provoked by the fact that the secret of bour-
geois production, i.e., that it is dominated by exchange-value, is
divulged in a naively brutal way by these systems. Although drawing
the wrong conclusions from it, Ricardo observes somewhere that, even
during a famine, corn is imported because the corn-merchant thereby
makes money, and not because the nation is starving. Political economy
errs in its critique of the Monetary and Mercantile systems when it
assails them as mere illusions, as utterly wrong theories, and fails to
notice that they contain in a primitive form its own basic presupposi-
tions. These systems, moreover, remain not only historically valid but
retain their full validity within certain spheres of the modern economy.
At every stage of the bourgeois process of production when wealth
assumes the elementary form of commodities, exchange-value assumes
the elementary form of money, and in all phases of the productive pro-
cess wealth for an instant reverts again to the universal elementary
form of commodities. The functions of gold and silver as money, in
contradistinction to their functions as means of circulation and in con-
trast with all other commodities, are not abolished even in the most
advanced bourgeois economy, but merely restricted; the Monetary and
Mercantile systems accordingly remain valid.24
The mercantilists proclaimed trade as the source of bourgeois wealth,
and money as its only true form. In this way they posed the question of the
nature of money and began the analysis of the relationship between com-
modity and money, whose common denominator [William] Petty, himself
a mercantilist, recognized in labor. The Physiocrats replied to the mercan-
tilists that it is not trade, but the productive power of the earth that is the
source of wealth, until finally Adam Smith proclaimed labor as produc-
tive. Through the investigation of money, political economy gained the
basic scientific insights that led it to the discovery of the labor theory of
value, on whose basis the classics then demonstrated the law-governed
character of economic life. From this discovery they deduced the demand
for economic freedom, which superseded the economic policy of mercan-
tilism, until the rule of the capitalist monopolies in recent times again
resulted in an economic policy that is similar in many external features to
the old mercantilism.25

24. Marx, Zur Kritik der Politischen Ökonomie, p. 161. [Karl Marx, A Contribution to the
Critique of Political Economy, in Collected Works, by Karl Marx and Friedrich Engels (New
York: International Publishers, 1975, 29:275–420), 388–89.]
25. Rudolf Hilferding, “Der Funktionswechsel des Schutzzolles: Tendenz der modernen
Handelspolitik,” Die neue Zeit, vol. 21, no. 35, Band 2 (1903): 274–81. –Trans.

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