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This chapter takes a long-run view on how preindustrial political economy conceptualized, regulated and designed markets in the age of capitalism’s ascendancy. Drawing on select treatises from the scholastics to later ordoliberalism, the chapter examines how people framed and configured market economy and capitalism over the longer run. Often these entailed a physical-spatial dimension, from the layout of market stalls to the hours of market access and trading times. Features of these long-gone political economies continued to shape European economic practices to the present day. And they helped achieve long-term economic growth.
This chapter moves on to another field of empowering capitalism in the preindustrial age, looking at origins of creativity in manufacturing. It does so through a focus on economic writings and ideas. During the Renaissance, manufacturing became conceptualized as the main source of the wealth of nations. Somewhat unoriginally – given that many other authors had used the example as a case in point before – Smith’s Wealth of Nations (1776) commences with the example of a (pin) manufactory. But rather than discussing the full implications in terms of value-added and creativity, Smith chose to proceed by demonstrating that the true origin of wealth lay in the division of labour, improving the distributional efficiency of the existing market systems. But even for a preindustrial economy – Smith’s template of analysis – this wasn’t completely the case; political economy had much more in stock. Smith thus missed a great opportunity – where did the wealth of nations originate?
This chapter looks at a neglected conceptual history of capitalism’s temporalities. Knowing about the future has been one of the key ingredients of economic modernity. In modern capitalism the future is unknown but principally open, plannable and manageable. At least, that is the illusion, the conviction that humans equipped with instruments of reason, rationality and science may make reasonable forecasts about their future. Notions of an economic future had existed since the Middle Ages. The commercial revolutions in business, banking and commerce that had paved the material foundations of the Italian Renaissance cannot be imagined without some sort of future vision. But these were limited to specific actors and types of activities. Post-1600 models were different. They extended the realm of actors and number of individual open futures, desacralizing the human future from the general biblical context, within which most future visions before 1600 had firmly rested.
Laying out argument and context for the book, the chapter argues that the history of modern capitalism and economic development commenced in the Renaissance. Contrary to many modern scholarly myths, capitalism was neither invented in the Anglosphere or the Netherlands, nor was capitalism a ‘second language’ to continental newcomers. There is an oft-acclaimed modern myth going back to Adam Smith’s Wealth of Nations that claims that commerce and trade established the foundations for modern good governance, but in fact it was the other way round. Governance and economic order provided the foundations for economic development, and since the Renaissance a rich political economy literature – often subsumed under labels such as ‘mercantilism’ or ‘cameralism’ – had emerged that provided the key political-economic foundations for positive economic development. Looking at the experiences of the early modern German-speaking lands – which were radically different from the British (and Dutch) way in neither tune nor practice – I aim to rehabilitate the contributions made by continental mercantilist-cameralist political economy laying the foundations of capitalism and modern economic growth in the longue durée.
‘Commerce and manufactures gradually introduced order and good government,’ wrote Adam Smith in his Wealth of Nations, ‘and with them, the liberty and security of individuals.’ However, Philipp Rössner shows how, when looked at in the face of history, it has usually been the other way around.
This book follows the development of capitalism from the Middle Ages through the industrial revolution to modern day, casting new light on the areas where pre-modern political economies of growth and development made a difference. It shows how order and governance provided the foundation for prosperity, growth and the wealth of nations.
Written for scholars and students of economic history, this is a pioneering new study that debunks the neoliberal origin myth of how capitalism came into the world.
We return to policy and empirical or archival-based histories zooming in on a now all but forgotten type of business venture once characteristic of the preindustrial oeconomic landscape as a case in point: the very same large centralized workshop or manufactory (Manufaktur) that Smith had used in the opening chapters of the Wealth of Nations to illustrate his point about division of labour, stopping short of a full explanation of how the origin of the wealth of nations through the virtuous forces of manufacturing really came about (the difference between Smithian and cameralist development; just a nuance, but of world-historical dimensions). Since the 16th century it was consensual among European writers to see manufacturing or the crafting of things as a main source of national prosperity. Manufacturing embodied skills, value-added, curiosity, learning and creativity so much more so than other economic activities such as farming, finance or trade. Studying the history of industrial policy with a focus on Manufakturen or manufactories in the Germanies, Scotland, Sweden, Austria and France, the chapter surveys how discourses examined in Chapter 7 reflected back upon and interacted with medieval and early modern economic practices, providing the foundations for capitalism, industrialization and the wealth of nations.
This chapter studies money as a fundamental tool in the market process. Money was an agent of social power, but also a tool empowering economic life. Beginning with medieval models of money’s political, social and economic functions, dating back to Oresme’s De Moneta: texts that represent the ‘origins of political economy’, the chapter studies policies and writings on monetary management in the preindustrial world. From the Middle Ages until the 1870s, monetary theories shared common features only given up when the concept of money’s purchasing power was decoupled from its metallic value (since this happened fairly late, during the 20th century, it won’t concern us much). Currency stability and inflation management were known to preindustrial authors and rulers as tools promoting economic development.
This chapter contrasts policies with ideas offered for managing the wealth of nations. It revisits capitalism’s rise through a fresh look at the contribution made by medieval and early modern states. What states were and what they did obviously changed over time. But the available menu of strategies governing capitalism was more comprehensive than acknowledged in the modern literature, particularly for the medieval and early modern period. And states grew better at it over time. Measures promoting welfare and happiness included: an ample supply of good coin; sound monetary regulation; ordinances regulating trade and exchange on urban markets; stabilizing food supply; a fair layout of market stalls; clean air; safety on roads; and good sermons in Church. The ultimate goal was a good-spirited common weal. Invariably this included the promotion of manufacturing, creativity and originality in crafting, designing and shaping things – all tools that significantly contributed to the making of our modern ‘culture of growth’.
This epilogue offers some afterthoughts, implications and reflections upon the wider remit of the book and its case within the Grand Scheme of Things. It situates industrial policy and a European culture of manufacturing growth within bigger millennial – and occasionally biblical – origin stories of Homo faber and the making of economic growth as a fall from grace, when Cain slew his brother only to become the forefather of industry. Stories of economic statecraft and state capacity are situated within a fresh look at the transnational histories of early modern political economy. What we commonly take as the vanguard or mainstream elements of modern political economy (often emanating from the French physiocrats and Scottish Enlightenment) represent rather an exceptional offshoot from a larger common ground of political economy, known by its misnomers such as ‘mercantilism’ or, less frequently, ‘cameralism’. These are unhappy labels in any case, but probably too useful to be easily got rid of.
This chapter zooms in on money and its circulation, extending the argument in Chapter 5 by taking a dynamic perspective on materiality, velocity and coins. It provides an intellectual archaeology of an economic variable that to the present day is either enigmatic, or somewhat taken as a residual: velocity. I suggest that in historical times velocity was conceptualized more dynamically, as an independent variable with lots of economic agency. Combining archaeological and numismatic evidence with conceptual framings of velocity from Martin Luther and the humanists in the 16th to John Locke and cameralists and economists of the so-called ‘Historical School’ of the later 19th century, the chapter extends our view on the functionality of early modern markets through the lens of money. Since the end of the Middle Ages states developed an increasingly sophisticated toolkit of using the dynamics of monetary circulation in the economic process, preventing people from being parsimonious and overly thrifty. ‘Money makes the world go round’ thus attains a completely new meaning through a new methodological approach to coins and capitalism.