The Modern World-System II

Mercantilism and the Consolidation of the European World-Economy 1600–1750

By Immanuel Wallerstein

UNIVERSITY OF CALIFORNIA PRESS

Copyright © 2011 The Regents of the University of California
All rights reserved.
ISBN: 978-0-12-785924-8

Contents

List of Illustrations, ix,
Acknowledgments, xi,
Prologue to the 2011 Edition, xiii,
INTRODUCTION: CRISIS OF THE SEVENTEENTH CENTURY?, 2,
1. THE B-PHASE, 12,
2. DUTCH HEGEMONY IN THE WORLD ECONOMY, 36,
3. STRUGGLE IN THE CORE—PHASE I! 1651–1689, 74,
4. PERIPHERIES IN AN ERA OF SLOW GROWTH, 128,
5. SEMIPHERIPHERIES AT THE CROSSROADS, 178,
6. STRUGGLE IN THE CORE—PHASE II: 1689–1763, 244,
Bibliography, 290,
Index, 350,

CHAPTER 1

THE B-PHASE

For Slicher van Bath, the fundamental distinguishing characteristic of the periods of agricultural expansion and contraction in Europe since the Carolingian era is the rise and fall in the price of cereals, vis-à-vis other merchandise and wages. It was a question of favorable or unfavorable terms of trade for cereals. He sees a contraction, meaning unfavorable terms of trade, for cereals in the period from 1600 (or 1650) to 1750. It is important to underline this definition of contraction, because the relative decline of the price of wheat in Slicher van Bath’s belief, is far more important than its absolute decline. Side by side with a shift in the terms of trade (avoiding, for the moment, all suggestion of causal sequence) is what K. Glamann calls a turning point around 1650 in “the great east–west grain trade,” apparently occurring because “southern and western Europe [seemed] to have become more self-sufficient in grain.” This self-sufficiency is attributed to an “increased production of foodstuffs in western Europe during the second half of the seventeenth century, coinciding with a general stagnation of population,” resulting presumably in oversupply. However, Glamann also notes that at this same time “Europe was glutted with pepper.”

But how can oversupply be suggested when the problem of the times was presumably too little food? Schöffer speaks of “permanent, sometimes latent, structural phenomena” existing in Europe “from the disasters of the fourteenth century until far into the eighteenth century,” primarily “the continuous tension between food production and food distribution on the one hand and the population’s food requirements on the other.” The result was “a situation where malnutrition was endemic, hunger often epidemic.” Domenico Sella sees the well-being of the early modern period as dependent “on whether food supplies kept pace with population,” yet others speak of production rising faster than population. Clearly we have an anomaly that can only be resolved with a clearer notion of the sequence of events. Let us see first what other events occurred.

Certain agronomic shifts are reported for the seventeenth century: the process of land reclamation was at least slowed down, probably stopped, possibly reversed. Unlike the sixteenth and eighteenth centuries, which “invented land” (in Chaunu’s felicitous image), the seventeenth century, especially after 1650, was a time of “consolidation,” but a consolidation “without merit.” In addition to the cessation of expansion of land area, the average yield ratio of cereals fell throughout Europe in the period between 1600 and 1699, to a greater degree for barley and oats than for wheat and rye, and fell more sharply in central, northern, and eastern Europe than in western Europe. De Maddalena calls this fall of yield ratios “a remarkable phenomenon.” Another major agronomic shift was in the choice of crops to be cultivated: first, a shift in the use of land for cereals to its use for pasturage in the cooler areas and for wine in the warmer areas; second, a shift from the cultivation of cereals to increased production of forage crops, vegetables that require intensive labor, and commercial crops (flax, hemp, hops, rapeseed, madder, and pastels);12 and third, a shift from high-priced cereals (rye arid wheat) to low-priced ones (barley, oats, and buckwheat) and a reduction in the purchase of fertilizer (both humus and marl) for the production of cereals.

Alongside the purely agronomic changes, a number of shifts in the social organization of agricultural production occurred. De Maddalena speaks of a general “degredation of the peasant class” during the seventeenth century, during which “the landowners, adducing ‘urgens et improvisa necessitas’ proceeded to confiscate farms formerly owned by peasants.” He notes also the “expropriation—it might better be termed usurpation—of a third of the communal property (hence the term ‘triage’),” which affected the peasants by reducing the area in which they had rights for pasturage and wood gathering. Slicher van Bath agrees that the rural population suffered for the most part more than the urban population, but he distinguishes between the small farmers and the cottagers on the one hand and the laborers and house servants on the other; the former pair having “had it relatively worse” than the two wage-earning categories. Meuvret finds a very obvious explanation for this:

For every cultivator-owner/tenant (laboureur) who complains of his small profit because of the price of wheat, how many laborers (manoeuvners) or artisans rejoice at the lower price they have to pay on those few occasions when they must purchase it.

In general, Slicher van Bath argues that the unfavorable financial position of the peasant owners and tenants (fermiers-proprietaires) went along with a reduction in tenancies (fermages) and especially in the number of small tenant-farmers (petits fermiers). The two reductions were paralleled by the fact that in general the si/e of the agricultural unit (exploitation agricole) became larger. Nonetheless, despite larger units and more costly labor there was less improvement in agricultural equipment in the seventeenth century than in the sixteenth, although there were more innovations in the tools used in dairy farming, such as the improvement in the churn.

Industry, like agriculture, is said to have lost its “force of acceleration” in the seventeenth century, although somewhat later. It is not clear what this meant in terms of total European production. Sella argues that the fluctuations were relatively small because when population expanded in the sixteenth century, real wages declined, and thus things were “basically unchanged”; when there was a rise in per capita incomes after 1650, however, the increased individual demand “may have been offset [globally] in part by sagging population figures.” The uncertainty of such an analysis is stated bluntly by Hobsbawm: “What happened to production? We simply do not know.”

What we do seem to know is that there was a shift in the location of industry. For Slicher van Bath, it is “well known that during periods of agricultural contraction—end of the Middle Ages and of the seventeenth century—rural industry appears on the scene, especially the textile industry.” This occurred, it is argued, because of the cheapness and attractiveness to industry of underemployed rural labor. Since such industry was based on a low ratio of fixed capital, at least until the mid-eighteenth century, Romano argues that “consequently, it was extremely easy to liquidate a business, taking out one’s capital”; this may have been true of the textile industry, but the argument is difficult to apply to the other two of the three major industries of the time (according to Romano’s own list)—mineral extraction and shipbuilding. This shift of textile production to the rural areas was combined with the installation of the only significant new industries—brewing, distilling, and paste manufacture, which were all bared on the transformation of cereals.

Apparently, the counterpart of declining cereal prices were rising real wages. “In the second half of the seventeenth century, … as food prices tended to fall … wage-rates held their own or failed to drop to quite the same extent.” This is of course the inverse of what happened in the long sixteenth century. Presumably, this resulted in part from the relative “stickiness” in wages, but even more because “all over Europe there was a marked labor shortage from 1625–1750.” If this is so, how do we reconcile it with the fact that the seventeenth century has been thought to be a period of relatively high unemployment of underemployment? As Glamann notes:

The wage-earning labourer may have enjoyed some increase in real wages. This presupposes, however, that he was in employment, which cannot be assumed in an age such as this which is characterised by disturbed economic conditions. Many of the economic writers of the seventeenth century, at any rate, based themselves on the assumption that large-scale under-employment prevailed in their communities.

Any discussion of prices (whether of cereals or wage labor) is especially bedeviled in this period by the relation of nominal prices to prices in bullion. It is generally agreed, as Mousnier notes, that “the decline is greater than it seems for many countries, if instead of looking only at nominal prices calculated in money of account, one calculates the price in its corresponding weight in precious metals.” Therefore, if we look at metallic prices, as Vilar says, there is “one sure fact: internationally, prices, in terms of silver, collapsed around 1660 and hit a first low point in 1680 and doubtless a second about 1720–1721.” The decline in metallic prices must be set beside a decline in the quantity of bullion in circulation.

Geoffrey Parker summarizes the overall situation:

On balance it seems safe to assume that Europe’s net stock of precious metals augmented moderately between 1500 and 1580; that it increased rapidly between 1580 and 1620; and that it. probably declined from the 1620s, when silver mining in Europe collapsed and the remittances of American silver fell sharply, until the arrival of the Brazil gold after 1700.

There is no doubt that the growth in the volume of money available in Europe was extremely important. Europe’s trade in 1700 could clearly not have been carried on with the slender monetary resources of 1500. A crucial question, however, remains: was it enough? Was the net increase in Europe’s monetary stock, substantial as it was, equal to the rapidly rising demand for means of payment? There are several indications that it was not, particularly after 1600.

Not only was there a shortage of monetary stock, but there was a corresponding shortage of credit such that for at least the half-century running from 1630 to 1680, as Spooner notes, the total available quantity of “silver, copper, gold, credit [taken together] barely suffice, resulting in an uneasy and mediocre monetary life that was both reflection and consequence of a general slowdown of material life in the world.” This explains the wave of counterfeit money, the “pervasive plague of the seventeenth century.” What did this shift of prices mean for the global quantity of trade? As in the case of European industrial production, virtually no global data are available.

A construct by Frédéric Mauro of what he calls intercontinental trade relations divides the world into five continents: Europe, Africa, Temperate America, Tropical America, and Asia. In our terms, these are not entirely appropriate geographic categories because Africa and Asia are external to the world-economy while the Americas are peripheral to it and because Mauro places in one category both the core and peripheral areas of Europe and thereby loses crucial data. Nonetheless, it is useful to look at his estimates in Table 1; the layout has been altered by me in the interest of clarity. Assuming the correctness of the comparisons in the table we note that trade to and from Europe and worldwide trade moved in parallel directions, and in the seventeenth century, both indicate an interim of stability as opposed to earlier and later periods of expansion.

Turning to the one remaining significant variable, population, we find that estimates of demographers tend to vary within narrow limits. The seventeenth century was characterized by Reinhard and Armengaud as “stagnation, if not … slight decline (recul)” but not a “catastrophic [crisis] of the kind that occurred in the fourteenth century”; and Fr. Roger Mols says that “despite the terrible crises which wracked it, the seventeenth seems also to have experienced a slight gain in population.” Slight decline, slight gain—in short, a leveling off.

What emerges from this survey of general European economic patterns for f600 to 1750 (period B) in comparison with the period from f450 or 1500 to 1650 (period A) and indeed with the period following 1750 is a picture of an economic plateau, a time of respite, concern, reshuffling; but was it a “crisis” in the sense that there was a “crisis of feudalism” from 1300 to 1450? It seems not, for although “its chief symptoms were the same,” the 1650–1750 “depression was of a far milder sort than the serious economic decline of the late Middle Ages.” If this is true, this is precisely what must be explained, and the explanation we offer is that the contraction between 1600 and 1750, unlike that between 1300 and 1450, was not a “crisis” because the hump had already been passed, the corner turned, and the crisis of feudalism essentially resolved. The contraction of the seventeenth century was one that occurred within functioning, ongoing capitalist world-economy. It was the first of many worldwide contractions or depressions that this system would experience; but the system was already sufficiently ensconced in the interests of politically dominant strata within the world-economy, and the energies of these strata turned grosso modo and collectively not to undoing the system, but instead to discovering the means by which they could make it work to their profit, even, or perhaps especially, in a period of economic contraction.

The capitalist strata were in the seventeenth century a mixed bag, hardly yet a coherent class-formation and certainly not yet constituting a class that was totally conscious of itself and certain of its right to rule, to reign as well as to gain; but they were very capable of making a profit against great odds. As Jeannin says of the Danzig merchants, after explaining some of the very complex calculations they had to make circa 1600: their “mode of reckoning shows that the merchants understood the profit-mechanisms. They traded in such a way that one can actually ascribe to them an understanding of the concept of the ‘terms of trade’ in its most concrete meaning.” A consideration of the profits that could be derived from the shifting terms of trade leads us to the central explanation for the economic behavior of this period. As Vilar suggests, it is less on the ups and downs of prices that we should focus than on the “disparity in the movements” of prices.

These disparities involve both time sequences and geographical locations, arid their significance is not merely in the profits that could be made, but in their effect on the system as a whole. Topolski says that the contraction was not a “general economic crisis in the sense of a stagnation, lull, or recession caused by a weakening of economic activity”; it was rather a period marked by an “increasing disequilibrium” within the system as a whole. Increasing disequilibrium is not something to be placed in contrast to contraction; in a period of contraction disequilibrium is in fact one of the key mechanisms of capitalism, one of the factors permitting concentration and increased accumulation of capital. Vilar’s explanation is a good one: “In every general conjuncture, different countries react differently, whence the inequalities of development which, in the end, make history.”

Let us turn to what Sella calls the “dramatic shifts in the geographical distribution of economic activity,” but not in the conventional mode of scholarly despair whereby we must “avoid generalizations.” Rather let us bear in mind Fernand Braudel’s adjunction to precision; “for there is no single conjuncture: we must visualize a series of overlapping histories, developing simultaneously.” The main geographical distinctions are a matter of general agreement, albeit there is much scholarly nit-picking about details. Hobsbawm’s discussion of “general crisis” notes “the relative immunity of the States which had undergone ‘bourgeois revolution’,” by which he means the United Provinces and England. In another discussion, however, he divides “the European economy” into four zones, three of which are said to have declined economically in some sense (there is no attempt to rank them vis-à-vis each other). The zones are “the old ‘developed’ economies of the Middle Ages—Mediterranean and South-West German”; the “overseas colonies”; the “Baltic hinterland”; and the “new ‘developed’ areas.” In this fourth zone, which has a “more complex” economic situation, we find not only Holland and England, but France as well.

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