A description and history of economy and trade of the British Commonwealth from mercantilism to free trade and capitalism.
For whosoever commands the sea commands the trade; whosoever commands the trade of the world commands the riches of the world, and consequently the world itself. (Sir Walter Raleigh, "A Discourse of the Invention of Ships, Anchors, Compass, &c.", The Works of Sir Walter Ralegh, Kt. (1829, reprinted 1965), vol. 8, p. 325.)Mercantilism was the basic and national economic policy of the British Commonwealth also imposed on its colonies from the 1660s to the 18th centuries until the emerge of free trade as an alternative system.. Mercantilism meant that the government and merchants based in England became partners with the goal of increasing political power and private wealth, to the exclusion of other empires and even merchants based in its own colonies.
The government protected its London-based merchants—and kept others out—by trade barriers, regulations, and subsidies to domestic industries in order to maximize exports from and minimize imports to the realm. The government had to fight smuggling, especially by American merchants, some of whose activities (which included direct trade with the French, Spanish, Dutch, and Portuguese) were classified as such by the Navigation Acts. The goal of mercantilism was to run trade surpluses, so that gold and silver would pour into London. The government took its share through duties and taxes, with the remainder going to merchants in Britain. The government spent much of its revenue on a superb Commonwealth Navy, which not only protected the Commonwealth colonies but threatened the colonies of the other empires, and sometimes seized them. The colonies were captive markets for British industry, and the goal was to enrich the mother country.
The Navigation Acts were a series of Commonwealth laws that restricted colonial trade to the Home countries. They were first enacted in 1651 and throughout that time until 1663, and were repealed in 1849. They reflected the policy of mercantilism, which sought to keep all the benefits of trade inside the territories of the Commonwealth, and to minimize the loss of gold and silver to foreigners.
They prohibited the colonies from trading directly with the Netherlands (until 1683 see Anglo-Dutch Concord), Spain, France, and their colonies. The original ordinance of 1651 was renewed by the Acts of 1660, 1663, 1670, and 1673, with subsequent minor amendments.
Products such as tobacco, cotton, rice, tea and sugar were listed in the Navigation Acts to be shipped from the colonies only to Home countries or other English colonies.
The Acts formed the basis for English overseas trade for nearly 200 years. Additionally the Acts restricted the employment of non-English sailors to a quarter of the crew on returning East India Company ships.
Free trade and Capitalism
Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. (...) by increasing the general mass of productions, it diffuses general benefit, and binds together, by one common tie of interest and intercourse, the universal society of nations throughout the civilized world. (Chapter VII, On Foreign Trade of The Principles of Political Economy and Taxation (1821) (Third Edition) by David Ricardo)
The British Agricultural Revolution caused an unprecedented increase in agricultural production in Britain due to increases in labour and land productivity between the mid-17th and late 19th centuries. Agricultural output grew faster than the population over the century to 1770, and thereafter productivity remained among the highest in the world. This increase in the food supply contributed to the rapid growth of population in England and Wales.
Organization of Trade and Plantations
Between 1650 and 1662 there was intricate and complicated system of committees and councils created and reporting to the Council of State or Parliament. In most cases these bodies were of short existence. Most trade and colonial affairs were treated by the Council that referred them committees and subcommittees that reported back to the Council. Control was exercised by no single or continuous organ and according to no clearly defined or consistent plan.
The merchants of London and other important port cities of the Commonwealth were dissatisfied with the way the plantations were managed and desired a reorganization which should bring about order, improve administration, economize expenditure, elevate justice, and effect speedily and fairly a settlement of colonial disputes and organize trade. They presented several proposals to the Protector and Council. Most of these envisioned a separate and permanent council o councils to busy themselves with all plantation and trade affairs.
In 1662 the Council of State statute the creation of two new permanent bodies: Council for Foreign Plantations and Council of Trade. Each would have a permanent President and Secretary and be integrated by merchants and seamen, each would have 6 to 12 members named by the Council of State. They would also meet as a Joint Committee, three members from each Council, to deal jointly Trade and Plantation affairs. Four prominent London merchants Martin Noell, Thomas Povey, Sir Nicholas Crispe and Sir Andrew Riccard took seats in the Council of Trade.
On trade the main tasks were to implement freedom of trade within the nations (England, Scotland and later Ireland) that made up the Commonwealth, implement instructions and report on the Navigation Acts, consider coinage, trade with America and West Indies, revision of chartered companies and recommendation of new ones, encourage fishing, etc.
On Plantation, a recall and revision of all charters, consider petitions from the plantations, solve controversy between the colonies, propose measures to improve administration of the colonies, encourage settlements, etc.
|East India Company|
|East India Company|
1670 to date
|Hudson's Bay Company|
1670 to date
The English and Commonwealth chartered companies were an association formed by investors or shareholders for the purpose of trade, exploration, and colonization. They became after 1660 one of the key economic agents in foreign trade rivaling with the Dutch and French chartered companies in their grab for resources, trade and exploration.
- Company of Merchant Adventurers of London 1407
- Company of Merchant Adventurers to New Lands 1553
- Muscovy Company 1555
- Spanish Company 1577
- Eastland Company 1579
- Turkey Company 1581
- Morocco Company (or Barbary Company) 1588
- East India Company (EIC) 1600
- New River Company 1604
- Levant Company 1605
- French Company 1609
- London and Bristol Company 1610
- Somers Isles Company 1616
- Guinea Company 1618
- Massachusetts Bay Company 1629
- Providence Island Company 1629
- Courteen association 1653-1657 (merged to the EIC)
- Leeward Islands Company
- Gulf of Saint Lawrence Trade and Fishing Company (or Gulf Company)
- Hudson's Bay Company 1670
- Company of Adventurers Trading to Africa (CATA, 1665)
The Three Banks and The Pound sterling
The creation of the Three Banks started to transform the economy to a more capitalist along the Bank Laws of 1698 and the Coinage Acts of 1701 and 1723. The Three Banks are the government lenders and also the main paper banknote issuers.
- Governor and Company of Company of the Bank of England (Bank of England) 1694 (45th Commonwealth Year)
- Governor and Company of the Bank of Scotland (Bank of Scotland, Scottish Gaelic: Banca na h-Alba) 1695 (46th Commonwealth Year)
- Bank of Ireland (Irish Gaelic: Banc na hÉireann) 1723 (74th Commonwealth Year)
The later two are also commercial and credit banks.
The pound sterling (£), commonly known as the pound, is the official currency of the British Commonwealth and its territories. The Coinage Act (or Coinage Union) of 1701 established the pound sterling as the sole currency in England, Scotland and Wales. After the Irish coinage crisis of 1722, the following year Ireland was incorporated to the Coinage Union, becoming effective in 1725.