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Introduction to England's Treasure by Forraign Trade, or The Ballance of Our Forraign Trade Is the Rule of Our Treasure by Thomas Mun^[*]

Thomas Mun's Discourse of Trade , published in 1621 as a defense of the East India Company of which he was a director, is a minor classic in political economy of the mercantilist period. Mun's second book, England's Treasure by Forraign Trade, or The Ballance of our Forraign Trade is the Rule of our Treasure , has a wider purpose than the defense of the Company and is a major classic. The latter is economic science, applied to the controversies of the day over international trade and payments. Also written in the economically turbulent 1620s, it was not published until 1664 when it was put forth "for the Common Good" by his son, John Mun, as the second Anglo-Dutch war approached. This introduction to England's Treaure , also covering Mun's thought in A Discourse of Trade , is divided into four sections dealing with the man, the times, his defense of the East India Company, and his wider thought on mercantilism and bullionism.

The Man

Thomas Mun was born in 1571 and died in 1641. He is described in the Dictionary of National Biography (DNB ) as an "economic writer"

(1921–2, XIII, p. 1183); however, he wrote not to serve party politics but for science (Heckscher, 1935, p. 184, note 7). Son of a mercer, John Mun, he had a stepfather who was also a mercer, and a grandfather and uncle who, as moneyers of the Royal Mint, may have given him an early insight into currency matters. His career as a merchant started about 1596, before the founding of the East India Company in 1600, and he spent some time in Italy, from perhaps 1597 to 1607, where he seems to have failed and absconded because of bankruptcy. In Leghorn, he was known to have been a factor of the merchant William Galloway, who was inscribed on the lists of the Levant Company, trafficking between London and the Eastern Mediterranean, and to have dealt in importing into Italy lead, tin and cloth, while exporting alum. He maintained an account with the bankers Matteo and Lorenzo Galli of Florence (DeRoover, 1957). His Italian experience is mentioned twice in England's Treasure , once in recounting that the Grand Duke of Tuscany, Ferdinand the First, had lent him 40,000 crowns and allowed him to export it in specie to import goods from Turkey (pp. 18–19)^[1] and again to make the point that exchange manipulation cannot determine the rate of exchange, as Gerard Malynes, an intellectual adversary in London, maintained it did:

I have lived long in Italy where the greatest Banks and Bankers of Christendom do trade, yet could I never see nor hear, that they did, or were able to rule the price of Exchange by Confederacie, but still the plenty or scarcity of money in the course of trade did always overrule them and made the Exchange to run at high or low rates. (p. 51)

Mun returned to London from Italy sometime after 1609, married in 1612, and in July 1615, "as a well known merchant" (DNB , 1921–2, XIII, p. 1184) was elected a member of the committee, or a director, of the East India Company. He spent the rest of his life actively promoting the Company's interests and was said to have been "its ablest advocate" (Chaudhuri, 1965, p. 20). He refused, however, certain responsibilities within the Company — in November 1621 to go to India to inspect the Company's "factories," and in March 1624 to serve as deputy governor of the Company. He none the less played a prominent role in the Company's decisions, his name appearing frequently in the Company's minutes, opposing resettlement in Bantam in Java in the 1618–19 war in Asia, advocating instead withdrawal to north India; propounding in 1626 the theory that the Company would have to earn a return three and a half times the original cost of its goods bought in Asia to cover freight, customs, goods exported and other costs and to make a profit; persuading the Court in 1626 to change the manning and stowage of the Company's ships bound for India to another port to lessen the danger

from French ships with letters of marque; insisting in 1627 with the governor, but vainly, on the necessity of sending shipping to realize on the Company's assets in India; proposing in 1632 expansion of the investment in Coromandel factories from £15,000 to £20,000 (Chaudhuri, 1965, pp. 67, 68, 71, 102).

Mun's name also turns up among those lending money to Lionel Cranfield, a financier of the early seventeenth century, who borrowed money and received deposits from a wide circle to invest in syndicates formed to take over offices, farm taxes, and buy up properties sold off by the crown (Tawney, 1958, p. 111). The amounts and dates are not stated, but they were probably before 1613 when Cranfield became a minister in James I's government.

Most important for the East India Company, and certainly for economic thought, Thomas Mun was put forward by the East India Company as its representative in the critical times of the 1620s, and to serve on Crown Commissions to make recommendations to the Privy Council on the privileges of the Company in exporting foreign coin. Mun submitted four memoranda to the Commission on Trade appointed in October 1622 that settled down to write its report in the spring of 1623. Their wording follows closely portions of England's Treasure , establishing that the origin of that book goes back to the early 1620s, and not, as previously thought, to the last years of the decade (Supple, 1954, pp. 91–2). Other parts have been traced to 1626 or 1627 (DeRoover, 1957). In any event, Mun proved persuasive on these governmental commissions, fighting off proposals that the East India Company be forbidden to export gold and silver coin and bullion to Asia to buy spices, silk, and calicos. In particular, he was one of twelve signatories to the June 1622 Report of the Clothing Committee of the Privy Council — his name misspelled as Thomas Man in the careless orthography of the day — that set out a host of recommendations for overcoming the decay of cloth exports, but explicitly defended the East India Company against the accusation of 'taking away of money to furnish their trade, and return only commodities again' (Thirsk and Cooper, 1972, pp. 210–16). He delayed for some years a proposal by Gerard Malynes to appoint a Royal Exchanger to monopolize all dealings in foreign bills of exchange. Even here, however, he ultimately triumphed because the experiment adopted in 1627 lasted only a short time before it was recognized to have failed.

The Times

The period is widely described as one of "crisis," without, however, entire agreement on the nature of the crisis or its duration and extent.

For many historians the crisis covered a century and a half (DeVries, 1976); for others a pair of years (Ruggerio, 1964). In the seventy years of Mun's life there were only twenty-six years of good trade (Hinton, 1975, p. 284, quoting W.R. Scott). Many years were critical because of bad harvests in the Mediterranean, in northern Europe, and especially on occasion in several consecutive years, or because Swedish blockades of Baltic ports in the Thirty Years War from 1618 to 1648 cut off the flow of grain needed in the West. At a more fundamental level, Poland, eastern Germany and Russia lost the prosperity they had enjoyed in the sixteenth century when population had grown faster in the West and Mediterranean than agricultural productivity and rising prices attracted Eastern exports. The early seventeenth-century market for eastern grain was hurt by Italian and Spanish production of rice and French production of maize, as well as by greater agricultural productivity in the West in general.

Crisis further turned on war. In addition to the Thirty Years War, there was the attempt by Spain to crush rebellion of the Dutch in the Netherlands that lasted eighty-odd years from 1572 to 1659, with a truce from 1607 to 1612; religious and dynastic wars between France and Spain, and wars of the British with now Spain, now France, now the Dutch. At times, Spain was simultaneously fighting the Turks in the Mediterranean, the French, English and Dutch. Despite the flow of silver from the New World, Spanish kings were continuously in debt and forced to declare bankruptcy in 1560, 1575, 1596, 1607, 1627, 1647 and 1653, refunding the asientos , or finance bills of exchange they had discounted, in long-term juros or bonds. Not all Spanish American silver was received in Spain; some was diverted to Lisbon or to Acapulco and the Manila galleon; British and Dutch privateers and even naval forces continuously tried to capture the fleet and occasionally succeeded — Drake in 1573, 1580 and 1586, and Admiral Piet Hein of the Dutch navy in 1628. British exports of woolens were in process of shifting from the old to the "New Draperies," lighter cloth and cheaper, to compete especially with high-quality Venetian woolens and to serve a wider market. One crisis ensued from a bungled attempt in Alderman Cockayne's project of 1614 to persuade the English Crown to forbid the export of cloth to the Dutch for finishing and dyeing there, and to undertake those processes at home. The effort failed, but the crisis in the British export trade that followed was due more to the outbreak of the Thirty Years War and the debasement of Polish and East Germany currency in the so-called Kipper- und Wipperzeit (clipping and debasing) which rendered the British pound appreciated. There was also a pepper glut after 1619 when the short war between the Dutch and the British in Asian waters came to an end and both the East India Company and the Dutch equivalent, the Verenigde Oostindisiche Compagnie (VOC),

brought heavy cargoes to Europe. Some part of the crisis of 1621 may have been due to the arrest and trial in Star Chamber in 1618–19 of eighteen prominent foreign merchants — most of them Dutch — on the charge of exporting the very large sum of £7 million in coin. This is thought to have been part of an effort to halt the payment of interest to Dutch lenders, which in turn may have contributed to the Dutch withholding new loans and thus accentuating the exchange crisis (Barbour, 1966, pp. 53, 123).

The monetary troubles contributing to crisis were short-run — the flood of copper from Sweden used to ransom the fortress of Alvborg from the Danes as called for by the 1613 Treaty of Knared, copper used by Spain to blacken her coinage when silver became scarce, and by the private mint masters of Poland and Germany to adulterate their coins. Of crucial importance was the long-run decline in the flow of silver from the New World as production slowed down in Peru and Mexico in consequence of the exhaustion of the supply of labor, although Morineau has recently raised a question whether the conventional estimates, based on Seville records, gave Hamilton a wrong impression because of smuggling, and whether, when all records are reconciled, silver imports into Europe did not actually rise from the sixteenth to the seventeenth century (Morineau, 1985; for a chart of the Hamilton and Morineau data see Braudel, 1982, p. 174). Undervaluation of silver relative to gold in Britain at 15 to 1 contributed to a drain of silver, the money in daily use, against gold that circulated less effectively. The shortage of silver for hand-to-hand exchanges was especially acute in 1616–22 (Supple, 1957, p. 244 n.; 1959, pp. 178ff.). The currency debasement throughout Europe led to the establishment of deposit banks to receive and test coin and issue standardized receipts against it used as bank money — the Bank of Amsterdam (1609), of Middelburg (1616), of Hamburg (1619), of Delft (1621) and of Rotterdam (1635).

There is some question whether it is appropriate to regard the silver and gold produced in Spanish America and that hoarded in Asia, and to a lesser extent in Scandinavia, Poland and Russia, as money. In modern economics, prior to free floating in 1973, gold produced in South Africa was a commodity which became transformed into money when it arrived in Europe to be distributed through the gold market. In comparable fashion the Spanish bullion in the sixteenth and seventeenth centuries, some gold but mostly silver, was a commodity on leaving Spanish America, money as it arrived in Europe, and then a commodity again when it was swallowed up in Eastern Europe and Asia.

A certain amount of gold was acquired in the first half-century after Columbus, but the big flow took place in silver, began about 1560 and lasted until about 1600 or 1620 when, according to the orthodox

account, it started to decline. The great majority of it escaped capture by English and Dutch privateers, flooded into Spain, and went out again. Spain spent the silver and borrowed against future receipts to provide Peru and Mexico with the supplies needed by the populations there, and to finance its wars in Europe. The New World exchanged silver as a commodity against consumer goods supplied by Spain and especially by the rest of Europe. Some circulated in Europe as money, but most was spent in the East, in the Baltic, the Levant, and the East Indies — for grain and timber as far as the Baltic was concerned, and East for luxuries from the Levant and Asia. Much of the specie received by Poland, Russia and Turkey was in turn passed along to Asia for luxuries, though some was hoarded. The New World and Spain were what we would call low absorbers, spending their income fully. Asia was a high absorber, selling luxuries and hoarding the commodity, silver, it received for them. Between stood Europe, exchanging necessities sent to the mining communities in the New World against luxuries received from Asia.

The high spending and low productivity of Spain and its colonies in the field of necessities have been explained. According to a contemporary Spanish source, Spain was ruined by the flood of precious metals:

the possession of such wealth altered everything. Agriculture laid down the plough, clothed herself in silk and softened her work-calloused hands. Trade put on a noble air and exchanging the work-bench for the saddle, went out to parade up and down the streets. The arts disdained mechanical tools. Goods became proud, and when silver and gold fell in esteem, they raised their prices. (Quoted by Vilar, 1976, pp. 168–9)

Thomas Mun, disapproving of luxury consumption, echoes these sentiments in England's Treasure :

But this great plenty which we enjoy, makes us a people only vicious and excessive, wasteful of the means we have, but also improvident and careless of much other wealth that shamefully we lose . . . we leave our wonted exercises and studies, following our pleasures, and of late years besotting ourselves with pipe and pot, in a beastly manner, sucking smoke and drinking healths . . . As plenty and power doe make a nation vicious and improvident, so penury and want doe make a people wise and industrious." (pp. 72–4)

A more detailed account draws distinctions within the New World. Peru was a purely Spanish community with an avid desire for consumer goods of Spanish, European, Mexican and even Chinese origin, the last imported via Manila and Acapulco in exchange for silver, while the mixed Spanish and Indian community in Mexico exported consumer goods to Peru as well as silver to Spain and Manila (Parry, 1967, pp. 208–10).

The Spanish silver in Europe went initially to those countries that supplied the Spanish army in Flanders and the goods needed for the Iberian empires and domestic consumption (Parker, 1972). As it had not stayed in Spain and Portugal, so most of it did not stay in Holland, Italy, France and England. Three streams took it east, to the Baltic, Levant and East Indies.

Economic historians have explored the specie movements to the Baltic and Levant, noting that some of it was passed further along to Asia in payment for luxuries, some spent again in the West for luxuries and travel, and some hoarded (Maczak, 1976). A controversy turns on whether the bilateral trade of the West through the Sound to the Baltic, settled in specie, was offset by other overland trade with a reverse movement of specie, and on whether the import surplus of one country such as England was balanced multilaterally by an export surplus of others, such as Holland, France or Italy. There was some eastward movement of Western luxuries, such as Leipzig jewelry, silks and spices from the Levant by way of Venice, and similar readily transportable objects of high value and low weight that could move by land. But the main trade overland was in oxen and hides that moved in the same direction as grain and timber (Jeannin, 1982). It seems clear that the gross import surpluses by sea that had to be requited in specie were necessarily balanced bilaterally since all major traders in the West had import surpluses (Wilson, 1949; Heckscher, 1950), and that they were not matched by export surpluses overland. Trade within Europe was multilateral, as Thomas Mun insists, but outside the Continent the opportunity for multilateral balancing through bills of exchange was limited, and specie was necessary to close the accounts.

A question remains: what did the East do with the specie it acquired in exchange for its grain, timber, oxen and luxuries? The answer seems to be that it hoarded it. The distribution of income in Eastern Europe was highly skewed, with rich nobles and largely foreign merchants, and poor peasants. The monarchs of the backward economies of the Baltic hoarded rather than circulated the silver that did not pass on to Asia (Aström, 1962, p. 84). In addition, the Baltic countries, including Russia, insisted on collecting their customs duties in specie. Some hoarding went on in the upland bazaars of India, where the variability of the monsoon made it useful for the risk-averse peasant to accumulate a bridal dowry in silver or gold. Something of the same fashion existed in Norway where in noble or burgher weddings the bride might be magnificently arrayed in a crown and many gold chains around her throat, shoulders and elbows, and many gold chains hanging down toward the ground (Larsen, 1948, p. 264). Poor burghers and peasants in Poland would try to lock away a valuable ornament, a spoon or a coin

(Bogucka, 1975, pp. 145–8). The same mentality existed to a degree in France where no councilor, treasurer, bishop or abbot was without a complete set of tableware in precious metal, and there was no artisan who did not have basin, ewer and cup, at least a salt cellar, belts, rings, or necklace (Meuvret, 1970, p. 146). Mercantilists in Holland and England, while conscious of the function of silver and gold plate serving as a reserve, were interested in specie for circulation, not to gratify a Midas complex. Thomas Mun was disdainful of money as wealth. He was interested in the state having some treasure, but not too much, and he was anxious that it be imported, not drawn from circulation (Heckscher, 1935, p. 212). Harvey's research on the circulation of blood was not published until 1628, but the comparison of blood with money had been made earlier (ibid., p. 217).

Europe was acutely conscious of the loss of specie to the East. An English merchant of the time said "Many streams run thither [to India], as all rivers to the sea, and there stay" (quoted by Thomas, 1926, p. 8). Persistent attempts were made to send goods to India instead of coin, and sometimes gold instead of silver, but factors on the spot resisted. English cloth of wool was unsuitable and expensive. Some arms and ammunition could be provided, some metals, ivory, coral, quicksilver and the like, obtained outside Europe. Mainly the East wanted silver. It has been suggested that one element in the equation was a backward-bending supply curve of labor: satisfied with a target income, and hoarded valuables that protected it against a bad monsoon, increased earnings went into leisure and insurance rather than consumption (Rich, 1967, p. xxiii, quoted by Wallerstein, 1980, p. 47, n. 69). Or income distribution was sharply skewed against the producers of cloth and spice, with precious metals a form of conspicuous consumption for wealthy landlords and compradores . There was country trade among the economies of the East, but European goods were not wanted, and the profit for the East India Company and the VOC lay in silver — Venetian ducats before the seventeenth century, Spanish reals for the early days of the chartered companies, then Dutch rixdollars.

When the silver arrived in India it did not go immediately into hoards: some was reminted into rupees, some passed upcountry in purchasing calico and muslin to be hoarded, and some, like the specie received in the Baltic, passed along in country trade. The same occurred in Batavia. To keep its coins in circulation, Batavia, like Spain, raised the prices of undervalued coins (Glamann, 1958, pp. 53–5 and 65–6). Arbitrage took place among various parts of Asia, especially India, Japan and Indonesia trading silver for gold with China. The silver/gold ratio was at times 5:1 in China, and 10:1 or 11:1 not far away in Japan or India (Vilar, 1976, p. 95; Spooner, 1972, p. 77). Chaudhuri suggests that the

role of silver in the commercial life of India may be more like that of the Eastern European countries (1978, p. 182). The real sinkhole seems to have been China, with its hunger for silver (Spooner, 1972, p. 77). The highest absorber at the producing end was Peru: the lowest at the receiving end, China.

With a large flow of specie into Europe and out again — in rough balance over long periods of time (Wilson, 1967, p. 511) — the monetary position of Western Europe, and even more of the separate countries, was a matter of some anxiety. There had been a bullion famine in the fifteenth century as German silver mines became depleted, a famine that inspired the voyage of Columbus in search of gold (Day, 1978; Vilar, 1976, ch. 7). "In economies without fully developed credit institutions, central banks and fiat moneys . . . concern about a country's coinage supply was hardly irrational" (Munro, 1979, p. 176). Supple says it bordered on neurosis but was understandable in the light of the drain (1957, p. 246). Controversies had risen over foreign exchange in 1576, 1586, 1600 and 1621. The last particularly raised the question whether the East India Company contributed to the scarcity of money by sending silver to the East in exchange for luxuries. Various measures in 1611 and 1619 forbade the export of gold and silver coin, melting it down, paying prices in excess of the mint, and the like (Supple, 1959, pp. 181–4). Proposals for manipulation of the exchange rate, usually through a Royal Exchanger, abounded. In these circumstances, Thomas Mun came to the defense of the East India Company.

A Discourse of Trade

Mun's defense of the East India Company, and especially of its practice of shipping coin to the East, is divided into parts, answering what he calls four objections to the Company's trade. The first objection is that necessary money is exchanged for unnecessary luxury goods such as spices, dyes, silks and calicos. The second regards the ships of the Company, much larger and more expensive than those used in coastal or Continental commerce, as wasteful, and using up scarce timber. Related to this is a third line of attack on the Company based upon its employment for long periods and at great risk of mariners who consume large amounts of food and are frequently lost at sea, leaving behind widows and children to be cared for. The last criticism returns to the question of money raised in the first, complaining that the Company's export of silver leaves the Mint less than fully employed.

Mun's answer to the first objection rests in part on a defense of consumer sovereignty — that if people want to spend income on drugs,

spices, raw silk and calicos they should be allowed to — although in his later argument, both in A Discourse and in England's Treasure , he criticizes his countrymen for not working as hard as the Dutch, which runs against letting people behave as they choose. He argues further that the East India Company obtains these luxuries in direct trade more cheaply than the previous practice of having them transported overland to Turkey where they were purchased by the Levant Company, or importing them from Dutch, French or Venetian sources. The third part of his reply to the first objection is the principal argument that appears again in his answer to the objection about the Mint. He explains that the East India Company has exported far less foreign silver — it was not licensed to export British coin — than permitted — £548,090 in Spanish reals and some dollars to 1620, as against a permitted amount of £720,000 — and exported £292,286 of British, and some foreign, goods. Moreover, he claims that £100,000 of foreign coin exported annually will produce £500,000 of imports gross, of which England would consume £120,000 annually and re-export £380,000. This last sum is more than three and a half times the original silver exported (pp. 27, 8) and can regain the specie or pay for imports. Thus the East India Company is said to pay out (foreign) specie gross, but earn it net through re-export of the luxury goods bought in the East. He does not make anything of the argument that the United Provinces of the Netherlands, and especially Holland — a more advanced economy than that of England — did not restrict the export of specie and seemed always to have an abundance. In fact, the East India Company bought much of its Spanish silver in Amsterdam.

The second objection that the large ships built for the Indian trade use up British resources and are otherwise useless need not occupy us long. An argument along the lines of opportunity costs is made on the basis of resources — not a cogent one, since the timber and naval stores could be put to use building fishing boats which he calls for in his answer to the fourth objection. For the rest, he argues that the East Indiamen train sailors, and induce a supply of shipbuilders and suppliers that are available to use for the naval defense of the British Isles. Like that of Adam Smith, who upheld the Navigation Acts on the ground that defense is "of much more importance than opulence," the argument is non-economic. It does bear on the question whether mercantilism was more concerned with power than plenty, but Mun devotes only a few pages to the issue and gives it little weight.

The same can be said for the objection that the East India Company wastes sailors and their rations and leaves their wives and children impoverished. The men would have eaten food had they remained at home, much of the grain is imported, rather than home-grown, those

that die are replaced, ships are lost in war with the Dutch as well as through perils of the sea, and the Company takes care of the unhappy widows and children resulting from casualties. The fifth part of the third objection is oddly connected with the rest, apparently arguing that for all the losses of men and ships, there has been no saving in the cost of goods imported from the East. This objection is disposed of with tables that compare the cost of imports of spices and indigo from the Levant and Lisbon with those directly from India. The latter route produces a substantial saving. Thus the country gained both employment and wealth.

The fourth objection, that the East India Company takes silver that would otherwise be brought to the Mint and keep it employed, is met in various ways. Both rich and poor continuously complain they do not have enough money. The Mint has been idle some years the Company has exported little silver and busy some years it has exported more. The Company never exported as much silver as it had been licensed to. Moreover, if the East India Company did not trade with India the trade would be taken over by the VOC, which would send the same amount of silver there and sell the same goods to Britain at higher prices. This, of course, is the substitution of a general-equilibrium argument for one of partial equilibrium, following through on the consequences of action to halt shipments by the East India Company, instead of assuming that everything else would remain the same.

The third and last part of the answer to the fourth objection is more general than the earlier and narrower defense of the Company, and sets out a mercantilist concept of trade. Britain could live without trade, but to do well it must trade its superfluities against necessary wares available in other countries and in treasure. This is a theory of trade close to that of Adam Smith in which exports are a vent for surplus. The troubles of the country lie not in the East India Company's dealings but in depreciation abroad (raising the price of foreign coins) and selling England commodities against coin rather than other commodities. He blames goldsmiths for culling and exporting heavy English coin, against the law, and then the authorities for failing to enforce the Statute of Employment, which required foreign exporters to use the proceeds of exports to England to buy English goods, rather than bills of exchange drawn on the Continent (p. 54).

The final suggestion is that the loss of specie may be due to inexperienced British merchants who buy more abroad than they sell, lacking sufficient knowledge of the vocation of merchant. This criticism is directly linked to the opening chapter of England's Treasure , listing twelve qualities needed in a good merchant. An export surplus will make a country rich, an import surplus render it poor. Gross imports

can be large if a substantial portion of them is re-exported, as the East India Company is wont to do. What is needed is restraint in consumption of imports so as to enable them to be resold abroad for treasure. The country will grow rich if Englishmen increase productivity in the production of the "natural Commodities of the Realme," do not neglect fishing (this is a reference to the strength of the Dutch in the herring fisheries) and avoid excesses of consumption of food and rayment.

England's Treasure

The emphasis in A Discourse of Trade is on the East India Company and its innocence of responsibility for Britain being drained of its money. The aim of England's Treasure by Forraign Trade is far wider, to make the point that trade should be balanced not bilaterally with each country but overall, that spending specie to acquire valuable goods is a means of getting more specie, that it is a mistake to seek to regulate the level of the exchange rate through manipulation, as Gerard Malynes wanted Britain to do, and that while it is wise to accumulate a treasure it should be a moderate one and in real goods, such as ships and stores, as well as in specie. Mun understood that the balance of trade differed from the balance of payments (on current account) because of payments like those for freight and shipping. He was interested in how to reckon the balance of payments, as were also many early mercantilists. He was, as Viner says, a mercantilist but an anti-bullionist (1937, p. 5) or perhaps more accurately a moderate bullionist.

His greatest contribution is in insisting on the multilateral nature of trade. The East India Company bought some of the silver it shipped to India in Cadiz and Lisbon, but most in Amsterdam. Most again was foreign coin. If the exchange on Amsterdam was low, because of an adverse English balance of trade with the Dutch, florins could be acquired in roundabout fashion, buying bills on Spain, Italy or elsewhere, and with those moneys, assuming that their countries had a surplus of Dutch bills on Amsterdam, with Spanish currency, buying first Florentine, then Venetian, then Frankfurt or Antwerp bills, until at last there is a claim on moneys in Amsterdam (England's Treasure , pp. 47, 8).

The specie exported to buy goods for re-export against specie brought back to England was likened to seed-corn, ostensibly thrown on the ground, that produced more corn in good season (England's Treasure , p. 21), a simile that pleased both Adam Smith (1937, p. 400) and was noted by Alfred Marshall (1890, Appendix B, footnote quoted in Marshall, 1961, II, p. 752). Charles Wilson characterizes the theory as

"using a sprat to catch a mackerel," and notes that it would not apply to the use of specie in the importing of timber from Norway, since heavy timber did not lend itself to re-export (1949, pp. 154–5). Thomas Mun's insistence on the re-exporting of imports to offset the original use of specie in importing marks a way station on the road from barter to well-developed multilateral trade based on bills of exchange. The Hanseatic League traded by bartering, or its close equivalent, selling goods to a country for local money that was then fully spent in acquiring new goods. The use of specie to pay for import surpluses was an intermediate step. A further advance was multilateral balancing through the use of bills of exchange as originally practiced by the Italian bankers. This was spreading rapidly within Europe and Mun was its prophet. Bills of exchange on Amsterdam were traded in 1585 in Antwerp, Cologne, Danzig, Hamburg, Lisbon, Lubeck, Middelburg, Rouen and Seville. By 1634 six more cities had been added, including Frankfurt, London and Paris; by 1707 nine more (Sperling, 1962, p. 451). Silver and gold were still required outside Europe and inside by persistent deficit countries like Spain. But within the West sophistication was increasing, and with it a declining need for settling bilateral balances in specie. While the world of Thomas Mun was not like that of Alfred Marshall, as Eli Heckscher (1950) claimed and Charles Wilson (1957) denied, it increasingly became so after 1700 (Price, 1961, p. 273) when money was again scarce.

Mun has been called the last of the early mercantilists (DeRoover, 1949, p. 157), and one can see his thought changing. In A Discourse of Trade he considers that the loss of specie to foreigners who sell goods in England for exported coin is easily remedied by application of the Statute of Employment, requiring that foreigners use the monies earned by their imports into England in buying English goods for export (p. 54). A few years later in England's Treasure he concludes that the Statute of "Imployments" cannot increase or preserve England's specie (ch. X). At first blush it seems an efficient way to augment England's treasure. On reflection he argues that bilaterally balanced trade is inefficient, as it distorts channels which might fit into multilateral patterns, that forcing foreign merchants to take English wares reduces the supply that English merchants might export, and that treasure can still be exported by English importers. Thus the multilateral balancing by bills of exchange of A Discourse is generalized.

In England's Treasure Mun comes close to developing a theory of international trade and specie movements as a self-equilibrating mechanism, but falls just short of the notion of the price-specie-flow mechanism that had to wait for David Hume (1752) to express with great clarity. As Viner points out, however, the essential elements of

the theory were already available in previous literature and several fairly satisfactory attempts had been made to bring them together (1937, p. 84).

As plenty or scarcity of mony do make the price of the exchange high or low, so the over or under ballance of our trade doth effectually cause the plenty or scarcity of mony. (England's Treasure , p. 39)

It is a common saying that plenty or scarcity of mony makes all things dear or cheap; and this mony is either gotten or lost in forraign trade by the over and under ballancing of the same. (Ibid., p. 20)

It is argued that the Spanish treasure cannot be kept from other kingdoms by any prohibition made in Spain (ibid., p. 23) and that no force such as the public authority proposed by Malynes could keep the price of bills at par if the underlying balance of trade is not favorable (ibid., ch. XIV).

Mun's pamphlet was published posthumously in 1664 by his son, as noted earlier, because of the Second Anglo-Dutch War. Large parts of the essay are spent not in detailing the qualities required in a merchant trading abroad — an excursus in which he anticipated Jacques Savary's Le parfait negociant (1675) and which differs sharply from Adam Smith (1937, p. 112); in arguing with Misselden against Malynes; or in developing the theory of the balance of trade — so much as in criticizing the British for being too little like the Dutch who work hard, trade industriously, and consume little. He is critical of the Dutch for their weak ships (the flyboat, or fluitschip ), resents their competition and attacks in Asia, protests that they take too many fish in English waters, and objects that they depend on alliance with England against Spain but reap the rich fruit of British trade "out of our own bosoms" (England's Treasure , p. 80). None the less it is clear that he admires the Dutch for having done so much in trade with such limited resources, all the while resisting the Spanish armies, and wishes that the English would reform "our vicious idleness" (ibid., p. 84) and compete with the Dutch in shipping, fish and trade. One can find an echo in these chapters of current American discussion of Japan.

The penultimate chapter touches on the topic of how to draw up a "ballance of trade," including not only merchandise as reported by the customs office's books, but also estimates for freight, duties, losses at sea, travel, remittances such as those of the Church, gifts, etc. As a conclusion he dismisses as unimportant most policies of bilateralism, currency manipulation, exchange-rate intervention and regulation of exports of bullion. Any such attempt to gain money for the kingdom may work for a time, but the important policy is to cherish and promote foreign trade as a whole. The point that a country without mines to

produce gold and silver could rely on trade to obtain its money was not original with Mun, although he kept returning to it (Forraign Trade , pp. 135, 145). Jean Bodin in the sixteenth century had said that salt, wine and wheat were the mines of France (Wilson, 1967, p. 524) and Antonio Serra had written A Brief Discourse on a Possible Means of Causing Gold and Silver to abound in Kingdoms where there are no mines in 1613 (ibid., p. 493). The wealth of every kingdom is partly natural — the product of land and sea such as wool, cattle, corn, lead, tin, fish and many things for raiment and munition (Discourse , p. 50) — and partly artificial — cloth. With this wealth, England can acquire the foreign goods it needs and her Treasure by Forraign Trade.

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