¹ Wilson, Charles, “Treasure and Trade Balances: The Mercantilist Problem,” Economic History Review, II, no. 2, 1949, 152–61.CrossRefGoogle Scholar The article has been reprinted in Lane, F. C. and Riemersma, J. C., eds., Enterprise and Secular Change (Homewood, Ill., 1953), 337–49.Google Scholar In my opinion the editors' foreword to this reprinting is unfortunately phrased, and tends to minimize the value of the article.

² It would be unfortunate, I think, if Heckscher's psychological explanation of economic policy—“[It] must be stressed over and over again, that economic policy is determined not so much by the economic facts as by people's conceptions of these facts”—were to hold the field uncontested. See Heckscher, E. F., Mercantilism (London, 1935), II, 58–9.Google Scholar

³ See Heckscher, E. F., “Multilateralism, Baltic Trade, and the Mercantilists,” Economic History Review, III, no. 2, 1950, 219–28CrossRefGoogle Scholar, a reply to the Wilson article cited in footnote 1.

⁴ Wilson, , “Treasure and Trade Balances,” Economic History Review, II, 152.Google Scholar

⁵ “Treasure and Trade Balances: Further Evidence,” Economic History Review, IV, no. 2, 1951, 231–42.Google Scholar

⁶ My definitions of these terms are much wider than those used by Heckscher, who defined them so narrowly that multilateralism became in effect convertibility and bilateralism meant some form of payments agreement. See his article “Multilateralism, Baltic Trade, and the Mercantilists,” 222. On the basis of these definitions Heckscher viewed Mercantilist trade as being multilateral, and not bilateral. His definitions seem much too narrow to be useful in a study of general trading systems, such as “Free Trade” or “Mercantilism.” Thus trade controls and exchange controls are largely substitutes (though not perfect substitutes) for one another as far as control over a country's balance of payments is concerned. Yet convertibility is consistent with any level of trade controls, while it is inconsistent with most types of exchange controls. What I am interested in is the presence or absence of controls, not the presence or absence of convertibility.

⁷ Spices must not be thought of merely as insignificant frivolities from the East. In the Middle Ages the term “spices” was apparently used to refer to a wide range of Eastern wares—seasonings, dye-stuffs, medicinals, textiles, and sugar, amongst others. See “The Trade of Medieval Europe: The South” by Lopez, Robert S., in The Cambridge Economic History, II, ed. Postan, M. and Rich, E. E. (Cambridge, 1952), 331.Google Scholar I am using the word in a similar sense, namely, to refer to all imports from the Far East. In the seventeenth century, imports by the East India Company which were consumed in England included a wide range of articles, among them saltpetre for the munitions industry, dye-stuffs for the woollen industry, silks, calicoes, and, toward the end of the century, coffee and tea. “It was commonly admitted that in general these commodities, with the conspicuous exception of calicoes, were ‘of necessary use’” ( Lipson, E., The Economic History of England, London, 1947, II, 287 Google Scholar; see also 286 and 288). Spices, then, were commodities which played an important part in European industry and in the European standard of living; and for most of them, no adequate substitutes could be produced in Europe.

⁸ I wish to avoid any suggestion that the results of my argument simply reflect a differential willingness to pay. Professor Kindleberger often seems to imply that the contemporary dollar shortage results from the deficit countries' attempts to get something for nothing, or, as he puts it, to consume more than they produce. See especially his The Dollar Shortage (New York, 1950), 180–1.Google Scholar I do not want to rely on this sort of argument.

⁹ The theorist's bias, working as he does with smooth “production opportunity” curves is to assume that any country can produce anything, and to argue, therefore, that if a country has difficulty in adjusting itself to a new situation it is because it produces the “wrong” goods or that its economy is too “rigid.” This seriously underestimates the limiting effects of geography on both the forms and quantity of production. It is heartening to see the influence of resource patterns on international trade given some prominence in a recent controversy. See Leontief, W., “Domestic Production and Foreign Trade: The American Capital Position Re-Examined” in Proceedings of the American Philosophical Society, 09, 1953, 348 Google Scholar; also Swerling, Boris C., “Capital Shortage and Labor Surplus in the United States?” in The Review of Economics and Statistics, 08, 1954, 289.Google Scholar

¹⁰ For a good discussion of this subject see Marsh, D. B., World Trade and Investment (New York, 1951), chap. XXI.Google Scholar

¹¹ Theoretical writings frequently suggest that trade and exchange controls in themselves explain, rather than merely define, the absence of Free Trade in the contemporary world. This contention is cautiously argued in D. B. Marsh, ibid., 557-8, but to the present writer the argument still seems to boil down to the contention that the explanation of controls is controls. When pushed back a step farther the explanation becomes a sort of Schacht theory of neo-mercantilism: “An invention of the devil called exchange control began in 1931 with the rationing of scarce exchange by Germany and Hungary.… With the invention of exchange control a new era in restrictionism began.…” (Ibid., 79.)

¹² I put the problem in terms of maximizing dollar earnings because this is no doubt the way it will appear to the zealous policy-makers whose reach is likely to exceed their grasp. To be accurate, however, I should say that countries attempt to increase their dollar earnings up to the point where the marginal “importance” of the spices which they will buy is equal to the marginal “importance” of the goods which must be forgone to acquire them.

¹³ This statement assumes that the trade between A and B is independent of the trade between A and any other country.

¹⁴ “Multilateralism, Baltic Trade, and the Mercantilists,” 224.