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II

HISTORICAL

PERSPECTIVES

A truly international economy first emerged during the “long sixteenth century,”
the period from approximately 1480 to 1650. In its earliest form, the modern
international economy was organized on the basis of mercantilism, a doctrine
asserting that power and wealth were closely interrelated and were legitimate goals
of national policy. Thus, wealth was necessary for power, and power could be
used to obtain wealth. Power is a relative concept because one country can gain it
only at the expense of another; thus, mercantilist nations perceived themselves to
be locked in a zero-sum conflict in the international economy.
During this period countries pursued a variety of policies intended to expand
production and wealth at home while denying similar capabilities to others. Six
policies were of nearly universal importance. First, countries sought to prevent
gold and silver, common mercantilist measures of wealth, from being exported.
At the beginning of the sixteenth century, Spain declared the export of gold or
silver punishable by death. Similarly, France declared the export of coined gold
and silver illegal in 1506, 1540, 1548, and 1574, thereby demonstrating the
difficulties of enforcing such laws. Second, regulations (typically, high tariffs)
were adopted to limit imports to necessary raw materials. Importing raw materials
was desirable because it lowered prices at home and thereby reduced costs for
manufacturers. By limiting imports of manufactured and luxury items, on the
other hand, countries sought to stimulate production at home while reducing it
abroad. Third, exports of manufactured goods were encouraged for similar reasons.
Fourth, just as they sought to encourage imports of raw materials, countries aimed
to limit the export of these goods so as to both lower prices at home and limit the
ability of others to develop a manufacturing capability of their own. Fifth, exports
of technology—including both machinery and skilled artisans—were restricted in
order to inhibit potential foreign competitors. Finally, many countries adopted
navigation laws mandating that a certain percentage of their foreign trade had to
be carried in native ships. This last trade regulation was intended to stimulate the
domestic shipping and shipbuilding industries—both of which were necessary
resources for successful war making.
By the early nineteenth century, mercantilist trade restrictions were coming
under widespread attack, particularly in Great Britain. Drawing on the Liberal