The Emergence of the Westphalian System 25KEy DEvElopmEnTS afTEr WESTphalia■ Concept and practice of sovereignty
develops.
■ Cap i tal ist economic system emerges
(stable expectations facilitate long-
term investment).■ Centralized control of institutions
to facilitate the creation and
maintenance of military; military
power grows.i n focuS
Third, the Treaties of Westphalia established a core group of states that dominated
the world until the beginning of the nineteenth century: Austria, Rus sia, Prus sia,
Eng land, France, and the United Provinces (the area now comprising the Netherlands).
Those in the west— Eng land, France, and the United Provinces— underwent an eco-
nomic revival under the aegis of liberal capitalism, whereas those in the east— Prussia
and Russia— reverted to feudal practices. In the west, private enterprise was encour-
aged. States improved their infrastructure to facilitate commerce, and great trading
companies and banks emerged. In contrast, in the east, serfs remained on the land,
and economic development was stifled. Yet in both regions, states led by a monarch
with absolute power (called “absolutist” states) dominated, with Louis XIV ruling in
France (1643–1715), Peter the Great in Rus sia (1682–1725), and Frederick II in Prus sia
(1740 – 86 ).
The most impor tant social theorist of the time was the Scottish economist Adam
Smith (1723–90). In An Inquiry into the Nature and Causes of the Wealth of Nations,
Smith argued that the notion of a market should apply to all social orders. Individuals—
laborers, owners, investors, consumers— should be permitted to pursue their own inter-
ests, unfettered by all but the most modest state regulations. According to Smith, each
individual acts rationally to maximize her or his own interests. With groups of indi-
viduals pursuing their interests, economic efficiency is enhanced, and more goods
and ser vices are produced and consumed. At the aggregate level, the wealth of the state
and that of the international system are similarly enhanced. What makes the system
work is the so- called invisible hand of the market: when individuals pursue their ratio-
nal self- interests, the system (the market) operates in a way that benefits every one.^4
Smith’s explication of how competing units enable market capitalism to ensure eco-
nomic vitality has had a profound effect on states’ economic policies and po liti cal
choices, which we will explore in Chapter 9. But other ideas of the period would also
dramatically alter governance in the nineteenth, twentieth, and twenty- first centuries.ESSIR7_CH02_020_069_11P.indd 25 6/14/16 10:01 AM