The Freeman 1972 - The Ludwig von Mises Institute

1972 THE MERCANTILE IMPASSE 53pay for the wars, a portion ofwhich had been fought in theirdefense.This course of action seemedeminently fair to many Englishmen.After all, the colonists hadbeen prime beneficiaries of Britishprotection. Moreover, many Americanswere reported to be livingwell if not luxuriously. Not onlythat, but to make matters· worse,these colonists paid very little by,way of taxes. Such expenses asthey had incurred in the recentFrench and Indian War had beenreimbursed from the British treasury.Surely, there could be no reasonableobjection to mild taxationof the colonists. As a matter offact, there could and would be, butwe have not yet come to that partof the story.Victims or Beneficiaries?What is most relevant here isthe impact of mercantilism on theAmerican colonies. The questionhas been raised by some historiansas to whether the colonistswere not really the beneficiaries ofBritish mercantilism rather thanthe victims. The fact that manyAmericans prospered under thesystem is submitted as evidencethat they benefited from the system.There is also negative evidencethat Americans had roughgoing economically after the· breakfrom England. The reasoning underlyingthis argument confusesbecause of with in spite of. Thethrust of mercantilism is not suchthat it would produce prosperityin general for those on whom' it isimposed. Its ·thrust is to siphonresources from the colonies (andother countries) into the mothercountry. To restrict manufacturing,to deny the development oflocal markets, to constrict intercolonialtrade, and to make themother country the port of entryfor many goods could hardly benefitthe colonists generally.Perhaps the most fundamentalflaw of mercantilism is the viewthat a nation's wealth can be increasedby •exporting more ingoods and services than is imported.This policy was quite harmfulto colonies without providing correspondingbenefits to Britain. TheBritish succeeded in a "favorable"balance of trade with the Americanmainland colonies. The mostimmediate effect was the golddrain from the colonies to Britain.This tendency was augmented byprohibiting the export of goldfrom Britain. Moreover, many ofthe ways by which the colonistsmight have made up the differencewere denied to them by mercantilerestrictions.In consequence, the colonistssuffered a shortage of specie. Thepractical effect was that colonistspaid higher prices for goods com-