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We are accustomed to remark on the extraordinary economic changes which have taken place during the last three hundred years. Commercial intercourse has increased enormously; the age of invention has brought about a veritable revolution in the processes of manufacture; and agriculture has been indirectly, but deeply, affected by these influences. Despite the growth, however, in the volume of trade, in the mass of wealth, and in the numbers of the population, similar principles of economic policy and commercial enterprise have been in vogue all this time. The seventeenth, eighteenth, and nineteenth centuries belong to the same period in the world's history. The turning-point was passed when the age of geographical discovery opened up the possibility of communication between all parts of the globe; and when the seventeenth century began, there had been time for the readjustment of the more limited ambitions of the Middle Ages to the new conditions. Rival nationalities were trying then, as they are to-day, to strengthen their naval and military forces with the aid of resources drawn from distant lands; and a close analogy is observable between the practices which were then pursued by the most progressive countries and some of the expedients which are being proposed at the present time. The commercial struggles and the economic controversies of the seventeenth century may seem petty and trivial; but the atmosphere is perfectly familiar, since they are thoroughly modern in character.

The preceding period of three hundred years with which we are concerned at present-the fourteenth, fifteenth and sixteenth centuries -was also a time of rapid movement in the economic sphere; but the changes which occurred in that era contrast forcibly with those of the modern world. There are few indications of steady growth in those troubled times; they were marked, instead, by the break up of medieval society and the reconstruction of economic organisation on entirely different lines. It is probable that according to modern standards no startling change in the total volume of trade occurred between the reign of Philip the Fair and the accession of Henry of Navarre; but during that time the methods of commercial practice had been fundamentally altered, and the institutions which controlled industrial activity had been remodelled. Although the processes of manufacture and agriculture remained almost the same, there was a veritable revolution in commerce at the close of the Middle Ages; and as its result, every aspect of economic life and every member of the body economic was transformed. The drastic character of these changes will be more easily understood, if we try to compare economic life in the earlier part of the fourteenth century, when medieval institutions were at their best, with the state of affairs at the opening of the seventeenth, when the modern period was already beginning.

The area traversed by fourteenth century merchants was very restricted, when compared with the voyages of Dutch or English traders in the seventeenth century. Medieval Christendom was hemmed in on the east and south by Mohammadan lands; and though Europeans ventured to the borders of these territories and founded factories at many points in them, they could not penetrate into the interior or establish direct commercial connexions with the distant regions which supplied spices and silk. Maritime intercourse was confined to the Mediterranean and the Black Sea, the Baltic and the North Sea, and the eastern border of the Atlantic. Within these narrow geographical limits, each commercial community aimed at obtaining a profitable monopoly in some line of trade, and at ousting competitors; this policy gave rise to arbitrary restrictions on trading voyages. The Genoese and the Venetians contended for the possession of the commerce of the Black Sea; Venice succeeded in controlling the trade on the Adriatic and in the valley of the Po; the merchants of the Hanse towns would not admit any rivals in the Baltic. The command of particular harbours carried with it a supremacy in neighbouring waters, and secured the exclusive possession of particular routes so long as coasting voyages were in vogue. The geographical discoveries of the fifteenth century not only opened new regions to maritime intercourse, but they also gave a new form to commercial rivalry. The maintenance of privileged rights at particular ports was less important in the new era when the compass had come into common use; with the wide field for their activities presented by the New World and the now accessible East, merchants no longer confined themselves to struggling for a share of the limited trade which had grown up at special points; statesmen learned to vie with each other in trying to extend the market for goods by establishing factories in remote lands and planting colonies, for this seemed to be the secret of commercial success. Political and commercial considerations were so closely mingled at the opening of the seventeenth century that it is difficult to distinguish the trading enterprise from the military ambition of this period; but at least it may be said that the merchants who were content to abide by the old routes and methods of business were being rapidly deposed from their former supremacy.

As compared with the conditions which prevail in modern days, society in the fourteenth century was very definitely organised in recognised groups. Personal relations were not easily alterable at will; there were few opportunities for change of employment or even for change of residence from one place to another. In rural districts the peasantry were everywhere practically attached to particular estates as serfs; and the artisan classes had but little encouragement to migrate from place to place, though in some callings, such as that of masons, special provision was made for undertaking work in any locality where building was required; while in other instances there seems to have been a recognised period of Wanderjahre. Even the merchants engaged in active trade were forced, as we have seen, to keep to certain routes of commercial connexion, and at other times their operations were confined to transactions in some one class of goods and no other; there was comparatively little freedom for change in any department of trading activity. In the most advanced communities such restrictions had not been swept away entirely even at the beginning of the seventeenth century; but they were much criticised, and the difficulty of enforcing them was increasing.

The deeply-marked social distinctions and strong local attachments of the Middle Ages were closely connected with another economic feature, the importance of which is sometimes overlooked. The use of money was not nearly so general in the ordinary affairs of life, as it has come to be in modern times. In many rural districts the peasant's payment for the use of his holding was rendered in service or in kind; labourers were often remunerated, in part at least, by being provided with rations of food, shelter, and necessary wearing apparel. Even when these vestiges of natural economy had passed away and payment in money had been introduced, the terms of exchange were frequently the subject of regulation. There was often a recognised rate at which dues in service, or in kind, could be commuted for money; or attempts were made to determine the prices of goods and the rates of wages by authority, either in the interest of the consumer or, at other times and places, in that of the producer. All sorts of rates, which are now reached by bargaining and by the higgling of the market, were then regarded as the proper subject of official regulation. The circumstances of the day and the limited character of the markets rendered this system convenient; but it had also very strong support in the current morality of the time. So long as theorists maintained that every article had an intrinsic just price which was ordinarily ascertained by "common estimation," and which was, as a matter of fact, closely related to the expenses of production, the strongest prejudice was excited against those who made a living by taking advantage of variations of price in different places or at different seasons of the year. However imperfectly they may have been carried out, these efforts to enforce reasonable prices probably put considerable restraint on certain forms of extortion, while they tended to check the violence of the fluctuations which must occasionally occur in every kind of trade.

In the fourteenth century this elaborate system of economic regulation was organised by civic authorities; it was to a very small extent a matter for royal or national interference. Each town formed a separate economic centre, which not only regulated its own internal affairs, but pursued its own policy in its trading relations with other places. Some cities were banded together for the sake of maintaining common interests and formed confederations like that of the Hanse League; but on the whole they cherished economic independence. Each city had to deal with the problem of its own food supply; some towns, such as Nîmes, could rely on the produce of their own lands, though others, like Bordeaux, were dependent on commerce for the sustenance of the inhabitants; while many erected large granaries, to enable them to tide over occasional periods of scarcity, which might arise from the failure of crops or the interruption of trade. The diverse circumstances in which they were placed rendered it inevitable that each should, more or less consciously, devise its own economic policy, and control the machinery which regulated industrial life; some towns had special advantages for one branch of manufacture and some for others. Florence owed her prosperity to skill in the working and dressing of cloth, Genoa excelled in the production of arms, and Venice was successful in bringing the manufacture of glass and silk to a high state of perfection. The precise status of the companies and gilds and lodges of the Middle Ages varied from place to place, and the organisation of one craft might differ considerably from that of another. But this one characteristic held good generally, that all these bodies were municipal institutions which had regard to the welfare of the public, or of the trade, in each particular town.

Civic patriotism not only affected the character of the internal regulation of industry, but it also determined the policy of each town towards outsiders. The jealousy of "foreign" artisans, i.e. of those who were not burgesses, gave rise to bitter disputes in the neighbourhood of Bruges and other Flemish towns; and "foreign" merchants were seriously hampered in attempts to trade, unless they could secure special privileges, and particular establishments of their own, with accommodation for residence and for the warehousing of their goods. The cities of Aragon, Provence, and Italy had such factories in the Mohammadan towns of Morocco, Tunis, Egypt, and Syria; the members of the Hanse League had a similar establishment in London, and their settlement at Bergen became so powerful as to dominate over the native portion of the place. In the fourteenth century commerce was intermunicipal rather than international in character: though similar usages prevailed very widely and disputes could be settled according to Law Merchant, which was recognised as generally binding. Trade was carried on to the greatest advantage at the fairs, where the merchants of many cities could meet on equal terms. In the present day free-traders take account of the economic advantage of the world as a whole, and discuss industrial and commercial affairs from a cosmopolitan standpoint, while protectionists are inclined to limit their consideration to the interests of some one particular country. In the Middle Ages, very few merchants or politicians were in a position to take account of national prosperity; they limited their views to a narrower sphere, and were content to concentrate their attention on the welfare of a particular town. With regard both to the administration of industry and to the regulation of commerce, the city was the principal economic unit, in the medieval as it had been in the ancient world.

Such were the chief contrasts between the economic life of medieval and of modern times; were we to seek a phrase which should indicate the general character of the transition from one to the other, we might say that this revolution consisted in the rise of nationalities as the bases of industrial organisation and commercial policy. Economically considered, medieval Christendom consisted of a system of city States, while modern history describes the commercial and colonial rivalries of great nations. During the fourteenth, fifteenth, and sixteenth centuries we can trace the gradual subversion of the older institutions, and we can also see the rise of the newer forms of organisation. The corresponding changes were not of course exactly synchronous in every land; indeed, those places where the older and stereotyped system had the greatest vitality were at a positive disadvantage in accepting modifications and adopting new methods. To follow the course of so widespread and complicated a revolution would be wellnigh impossible, without a clue; but fortunately we can have little doubt as to the factor primarily concerned in producing these momentous changes. Even the fourteenth and fifteenth centuries were marked by the formation of capital, and the process went on with great rapidity in the sixteenth; the whole period furnishes abundant illustrations of the power of moneyed men; and by fixing attention on them and their action, we can most easily trace the influences which were at work in building up the economic system of modern Europe.

Modern economists maintain that there are three requisites of production,—labour, capital, and land; but in the early Middle Ages agricultural and industrial work were both carried on without the intervention of capital, as we now understand the term. A capitalist may be regarded as the owner of a mass of wealth which is constantly altering its form by means of exchange. He tries to get gain by turning over his stock, and is on the look-out for opportunities of applying and replacing it frequently. This is equally true of the capital of the financier and the merchant; and till recently it held good of capital engaged in the processes of manufacture and of tillage. The age of invention has rendered it necessary to lock up large amounts of capital in expensive machinery, or to sink it in permanent improvements of the soil; but, at the beginning of the modern era, capital might be described as a mass of wealth that was constantly being put into circulation and replaced. The financier exchanged his ready money for securities, which he held till the sum was repaid; the merchant bought and exported a cargo of goods which he hoped to sell for money; manufacturers obtained the services of labour by paying wages, and bought materials which were converted into commodities for sale. Facilities for exchange were necessary at every step, before the capitalist administration of industry and agriculture could be introduced; there had been no opportunity for such an introduction, so long as society was organised on a basis of natural economy. In any department of life where payments are made in kind or in service rather than in money, no room remains for the operation of the capitalist. So long as the cultivator' continues to live on the produce of his fields and his stock, and only occasionally offers some of his surplus for sale, he is conducting his business in a fashion quite incompatible with the aims of the enterprising capitalist, who desires to dispose of his whole crop at a profit. During the long ages when society had been organised in self-sufficing estates, the famXlia, in each being engaged in catering for household needs and not in working for a market, there was no true exchange, and therefore no occasion for a measure of value, or for the use of money, among those engaged in different avocations.

The transition from natural to money economy was a gradual process, and afforded great opportunities of gain to the men whose wealth consisted of coins and bullion. In the twelfth and thirteenth centuries many private persons had large hoards, and received a handsome income by making advances to such wealthy people as were in temporary straits for want of ready money. Much of this business arose in connexion with the revenue system; kings were glad to borrow on the security of the royal jewels, thus making it possible to anticipate the slow collection of taxes and fit out an armed expedition. The financiers also lent money to landed proprietors, to enable them to meet some sudden demand for an aid, and took as security the title-deeds of an estate so as to enjoy the certainty of being reimbursed when rents were due. The lending of the thirteenth and fourteenth centuries was almost entirely for military and other unproductive purposes; it enriched the moneyed men who obtained high interest on their loans, but it did not provide capital or invigorate the industry of the country. Even in those cases where debts were contracted in order to erect magnificent buildings, these costly edifices were not available for promoting the further increase of wealth. Medieval capital was lent for purposes of unproductive consumption. Thus applied, the money failed to bring about an increase of wealth, but remained, as Aristotle would have said, "barren." This fact goes far to account for the long-continued prejudice against Jews and Lombards. Since no addition to the wealth of the community arose through their intervention, it seemed that any gain accruing to them in their operations must have been made at the expense of the borrowers and ought to be condemned as extortionate. Under these circumstances the traditional objection to interest of every kind was strongly maintained, and found expression in the writings of casuists and in the decisions of ecclesiastical Courts against usury.

The unsatisfactory character of the transactions of medieval bankers reacted on the prosperity of their business, and eventually brought about their ruin. It was a constant difficulty for their debtors to scrape together money which would reimburse the Jew or the Lombard for wealth that had been unremuneratively expended; and it was natural enough that the capitalists should suffer in turn from defaulting creditors. The Jews were under such serious disabilities that it was only by special favour that they could recover their debts, and several of the Florentine and other Italian bankers were ruined by breaches of royal faith, about the middle of the fourteenth century: but the failure of the Templars, who had also organised an immense banking business, was due to political rather than economic causes. At that time very few opportunities existed of so using capital that it should not only bring in a return to the owner, but also increase the wealth of the community.

There was, however, all through the Middle Ages one such opening for the profitable employment of capital; and of this the great Italian houses took full advantage. The merchant who engaged in active trade and visited distant markets with a cargo of goods, was rendering a real service to the community. He was enabling the inhabitants of certain districts to enjoy the benefit of products which did not grow on their own soil, or of wares which they had not the skill to manufacture. So long as the merchant confined himself to such operations, no question was raised by the strictest moralist as to the legitimacy of his transactions or as to the lawfulness of gains thus derived; and capitalists, who joined together in taking the risks of useful business of this kind, were held to be perfectly justified in sharing the profits which accrued to them from their enterprise. While nearly all moneyed men were under suspicion of occasional unfairness, the medieval conscience clearly recognised that the capitalist was fully entitled to some gain, so long as he transported commodities without trying to bargain himself out of risks. Capital engaged in active commerce was employed in producing goods at the places where they were most wanted; and it was being applied to facilitate the production of wealth. The importing merchant neither increased the material objects nor altered their intrinsic qualities; but he gave them greater utility, by conveying them to places where they were largely required.

The economic revolution at the close of the Middle Ages was largely due to the discovery of new methods for the productive employment of capital. New lines of commerce were opened; and it was also found that various branches of industry could be prosecuted to greater advantage, when taken up and organised by capitalists. Success in these ventures enabled enterprising men to amass more wealth and to form additional capital, while it tempted those who had hoards lying idle to find means of employing them as capital; by so doing they brought large sums of money into circulation and moreover secured an income for themselves. The formation of new capital and the employment of hoards as capital for facilitating production went on apace in the fifteenth and sixteenth centuries; the lending of capital for purposes of unproductive consumption did not cease, but came to be an entirely subordinate, because it proved to be a less secure and less remunerative, method of employing wealth.

There was no apparent reason, so far as we can see in looking back to the beginning of the fourteenth century, why the material progress which had been steadily maintained for some generations should not have been continued. Medieval society, stereotyped as it was, had been capable of considerable readjustment, as circumstances had changed. It seems as if capital might have gradually found openings in new directions, so that the medieval system would have been slowly transformed without any serious rupture with the past. At Florence, in particular, capitalist organisation existed side by side with the older forms of industrial life at the beginning of the fourteenth century; and as money economy became increasingly prevalent, capitalistic enterprise might have taken advantage of the new fields which were ready for its operation. But circumstances combined to render this impossible; medieval society and its institutions suffered an especially severe blow from the terrible pestilence known as the Black Death, which ravaged Europe in the middle of the fourteenth century. From this shock the various countries of Europe only recovered slowly; and when material prosperity began to be restored, the old institutions were no longer suitable to the changed requirements of the times. The old industrial life had been so far disintegrated by the disturbed conditions of the fourteenth and fifteenth centuries that the change from the medieval to the modern was accomplished, not as a gradual transition but as a violent revolution.

Three principal causes combined to subject the social and economic system of medieval Europe to an overwhelming strain. Some uncertainty must necessarily attach to conclusions based on the statistics drawn from medieval sources; and there can be little doubt that the estimates of the mortality due to the Black Death, made by contemporary writers, were grossly exaggerated. Many records, however, exist of the deaths in particular places, or among a special class such as the parochial clergy; and these statements appear to be well worthy of credit. It seems to be generally agreed that at least half of the population was swept away by the successive visitations of this pestilence. While we cannot easily conceive what must have been the full effects of such wholesale destruction, we may at least conclude that considerable tracts of country were depopulated, so that the area devoted to tillage was necessarily reduced; we have also abundant evidence of labour agitation in many branches of industry. The whole system of regulated rates and prices was seriously undermined; under the new conditions the old payments had become unsatisfactory; changes of some kind, both as to the terms on which land was rented and as to those on which labour was employed, were inevitable.

The constant wars of the latter half of the fourteenth and the fifteenth centuries were another disruptive force and proved fatal to the maintenance of the highly organised system of medieval times. In the countries which were the scene of frequent warlike operations, immense mischief was done to agriculture; it is difficult to understand how a rural population should have survived in France at all, when we read of the ravages of the English armies, and the devastations caused by the factions. The chronic disorder not only affected tillage and the food-supply, but rendered internal trade so insecure that it was practically suspended altogether. What had been a prosperous kingdom, with many well-organised cities, and with fairs that were frequented by merchants from all parts of Europe, was reduced to utter desolation and ruin. Similar results attended the Hussite Wars in Bohemia, and, to a lesser degree, the Wars of the Roses in England; the Italian cities must also have found their intercivic hostilities a serious drain on their resources. Venice and Genoa had carried on a long-protracted struggle about Chioggia; Pisa was at length forced to succumb to Florence, and Milan gradually established her superiority over her neighbours. Doubtless, to many districts the wars brought profit as well as loss; Swiss and Italian mercenaries often engaged in fighting as a regular trade, in which much booty was to be obtained; and successful cities might recoup themselves for their outlay by securing new avenues of commerce at the expense of their rivals. Still the fact remains that war was a disturbing element; the instability introduced by it into all the relations of' life was irreconcilable with the maintenance of the old industrial system or old trading connexions. The countries which for any considerable period enjoyed a relative immunity from external war, such as Flanders, the duchy of Burgundy, the Rhineland, and Bavaria, made rapid progress, while others failed to regain the prosperity they had enjoyed before the Black Death, or sank into deeper and deeper decay. The most obvious and important commercial result of the Wars in France was seen in the diversion of the traffic between Italy and Flanders from the Rhone valley, so as to increase the intercourse over the Alps and by the valley of the Inn. Augsburg, Nürnberg, and the cities of the Rhine-land came to be for a time on the great highway of Europe; while there was also increased maritime communication between the Mediterranean and the Low Countries by the Straits of Gibraltar and the English Channel.

Other political causes affected the more distant trading connexions of European cities. The union of the northern kingdoms of Denmark, Norway, and Sweden under Queen Margaret consolidated the opposition to the monopoly asserted by the Hanse League over the commerce of the North; while the rise of the power of Poland, and her successful contests with the Teutonic Order, interrupted the lines of its Eastern communications. When in 1477 Ivan, Czar of Russia, brought Novgorod into complete subjection and it ceased to be an independent city, the merchants of the Hanse League lost their footing at the point where they had established connexions with traders who were engaged in traffic with the East.

There were other movements in eastern Europe which seriously affected the course of merchandise. The advancing power of the Turks destroyed the commercial colonies on the Black Sea, and interrupted the trading intercourse in the Danube valley; in the latter half of the fifteenth century the commerce between East and West was almost entirely confined to the Egyptian and Syrian routes; Venice was the chief depot on the northern side of the Mediterranean for Eastern spices, and the centre from which these highly-valued commodities were distributed to Germany, Flanders, and the North.

The Turkish conquests had forced the principal trade of the East into restricted channels, and Christian successes were responsible for the increasing difficulties under which the commerce of the western Mediterranean was carried on. The expulsion of the Moors from Spain, which was completed by the conquest of Granada, was followed by an extraordinary development of national vigour and material prosperity in many parts of the peninsula; but the exiled population aroused the sympathy of their co-religionists in Africa; an increase of marauding expeditions by sea ensued, and the difficulties of merchants who trafficked with Morocco were seriously aggravated.

On every side, the old lines of distant trade were greatly modified by political changes; and the prosperity of the towns, which had risen into greatness as centres of commerce, was shaken at its very foundations, while rural and urban districts alike long continued to show the desolation caused directly and indirectly by the Black Death. From this brief survey of the nature of the revolution and the causes which occasioned the decay of the old order, we may now turn to look for the first signs of reconstruction. No part of Europe had been more ruthlessly devastated than France, during the fourteenth century and the earlier part of the fifteenth; but a turning-point was reached at last, and the reviving prosperity of the country shaped itself upon new lines. Control of industry and commerce was now exercised by national rather than civic authority, while the financial and commercial business of the realm was no longer left to Italians and other strangers, but was organised by native merchants of enterprise and resource. In this new class one figure is preeminent; no other French merchant attained to wealth at all comparable to that of Jacques Coeur of Montpellier; and few experienced such a sudden reverse of fortune as he suffered when the royal master whom he had served so faithfully imprisoned him and allowed him to die in exile. Apart from these elements of romance, the story of Jacques Cceur's rise is interesting because of the important part which he took in the political life of France. By helping to reorganise the finances of the realm he brought the Crown and the bourgeoisie in all parts of the country into much closer relations, and contributed to the remodelling of economic life and to the rise of one great nationality. His extraordinary commercial prosperity, though transitory, helps us to understand the circumstances under which a merchant class came into prominence in lands where the active trade had hitherto been prosecuted by aliens; the rapid rise of one man to a pinnacle of greatness as a merchant prince throws considerable light on the opportunities for forming capital and investing it available in his day.

Jacques Cosur's work as a statesman had a permanent value for his country; he was for a time the most influential of the royal advisers; he did much to improve the financial administration, and instituted a reform of the coinage. There can be little doubt, when we regard his position, his preponderating influence, and his financial ability, that the creation of the permanent tattle was due to his initiative. During the Hundred Years' War France had been subjected not only to the ravages of her enemies, but to pillage by her undisciplined soldiery, who were unpaid and had no other means of obtaining supplies. With the view of removing the excuse for these outrages, the Crown, at the meeting of the Estates in 1439, announced its intention of maintaining a standing army; and the taille became a permanent source of income which was practically levied at the royal pleasure. The project answered the immediate expectations of those who devised it; the regular troops, well-disciplined and restrained from the habitual pillage which had proved the ruin of France, expelled the English, and helped to bring large districts of the old Burgundian kingdom within the boundaries of France. But the ulterior effects of the measure were far more important; the basis on which French finance rested was altered so as to place it on a firmer footing. The main resources of the feudal monarchs had been drawn from the royal estates and supplemented by occasional aids; but the institution of a permanent faille now furnished to the Crown a regular income from taxation} which was defrayed by the trading and industrial as well as the agricultural classes. The French Crown had been mainly dependent for its revenue on the landed classes; but it henceforth became the direct interest of the King to watch and promote the welfare of industry and commerce. As a result of this financial policy extraordinary pains were taken in regard to the supervision and direction of industrial life. The corps-de-metier were revived in one town after another, but they were not permitted to retain the old status of mere municipal institutions; they were brought into direct relations with the Crown, so that they became part of a centralised system for the administrative control of the whole of French manufactures. This centralisation and over-regulation came in time to be baneful to industrial interests; but at the outset it was a natural result of the efforts of the royal authority to foster material prosperity. Under Charles VII the foundations were laid of that bourgeois policy which was pursued more thoroughly, and in defiance of the expressed disapprobation of the nobility, by Louis XI. We shall be better able to gauge the importance of this change when we come to examine the special character of the subsequent revival of French prosperity in the time of Henry of Navarre.

The far-reaching influence exercised by this fiscal change contrasts curiously with the instability of the great commercial connexion established by Jacques Coeur. He desired to open up a direct trade with the East, and succeeded in obtaining numerous concessions not only from the French Crown, but also from the Pope, and from Muslim Powers in Egypt and Syria. These privileges secured to him the monopoly of many lines of profitable trade; he is said to have had no fewer than three hundred factors at various points on the eastern Mediterranean. This great commercial fabric, however, rested on concessions personal to Jacques Coeur and his representatives; and, on his fall from favour, the whole structure collapsed. Montpellier was the principal seat of his business, and the town enjoyed a period of extraordinary prosperity through the trade which he brought to it; but this brief efflorescence seems to have had little abiding influence on the future of French commerce. The main interest attaching to the career of Jacques Coeur as a merchant lies in the illustration which it furnishes of the possibilities open in the early fifteenth century to men who had the capacity to use them.

At first sight, the conditions of life in that age appear to have been such as to make it impossible to understand how great fortunes could have been amassed. If the career of Jacques Cceur had been absolutely unique, it might be sufficient to say that he was able to take advantage of a great monopoly and to trade at an enormous rate of profit; but he did not stand entirely alone. His case was not altogether solitary; though, like William de la Pole and William Canynges, he was preeminent among a considerable number of wealthy men. It is not easy to see how this class could have come into being in so many places during this particular period; but this difficulty must be faced. An increasing scarcity of the precious metals would seem to have involved a steady fall in prices; so that, apart altogether from the effects of war and pestilence, the monetary conditions were singularly unfavourable to successful trade. Commerce between Europe and Asia was carried on by means of a constant drain of silver from the West; there was . no other suitable commodity for export in return for silks and spices, nor was the stock of bullion being adequately replenished from European mines. The trade with Morocco did not result in an importation of African gold, but involved an additional demand on the European supply of silver. It appears that the value of silver was steadily rising from the middle of the fourteenth century onwards, though the fall of prices was not so great as might have been expected; a counteracting influence was at work which affected the currency and prices in much the same way as an additional supply of silver bullion; there seems to have been a greatly increased rapidity of circulation. Money was not laid by in hoards to the same extent as formerly; and masses of bullion, which had been stored for public or private purposes, were being regularly utilised. The treasure of the feudal monarchs had been withdrawn from circulation for years; Charles V of France had accumulated a reserve of not less than 17,000,000 livres. But the Kings who borrowed from Jacques Co3ur and his contemporaries were less thrifty; they only obtained money when they had need to spend it, and there was no reason that it should ever lie idle. In the same way it would appear that, as the monopoly of the aliens was broken down, the hoards of humbler citizens were drawn upon and employed in active commerce.

By increased rapidity of circulation the diminishing stock of silver seems to have been rendered available to meet commercial demands, and Europe was saved from the embarrassment of severe financial depression. It is certainly remarkable that, during the century which immediately preceded the discovery of America and the importation of bullion from the New World, there should have been so many instances of men who rose to considerable wealth, and who in some cases amassed very large fortunes. This phenomenon should be borne in mind, even if we are dissatisfied with attempts to account for it; but it seems to be at least partially accounted for by the shifting of trade into new channels and into the hands of native merchants, and partly by the practical increase of the available currency which resulted from the manner in which hoards of bullion were being brought into circulation. Success in commerce had apparently been the chief avenue to wealth in the earlier part of the fifteenth century; when we pass to the latter half, there is less difficulty in tracing the means by which fortunes could be amassed. The matter is particularly clepr in the case of the group of Augsburg capitalists, who were destined to exercise such a potent influence on the political and economic condition of Europe. They could draw from three sources of wealth; for they had access to many frequented trading centres, they were connected with an important textile industry, and they had the opportunity of engaging in profitable mining speculation. The fresh supplies of silver which they obtained from the mines enabled them to accumulate and store wealth for profitable investment as opportunities arose. The man of frugal habits, with a prosperous self-sufficing household, can lay up supplies against a bad season; but his wealth is not in a form which enables him to avail himself of chances for turning over his capital. Only those who are in the habit of using money or of handling the precious metals are likely to make rapid gains and so to amass a great fortune.

The Fugger family of Augsburg eventually became pre-eminent among European financiers; they were originally interested in the weaving of cloth; but, early in the fifteenth century, they began to take part in the spice and silk trades, and established connexions with Venice; Jacob Fugger, who settled the style and constitution of the firm, received his business training at the German factory in that city. Even before his time, the family had made some profitable speculations in mining; they were engaged in working for silver in Tyrol in 1487, and ten years later they took up copper mining in Hungary; they contrived to combine with other Augsburg merchants and form a ring which controlled the copper market at Venice. The career of the Fuggers was not exceptional; the Welsers attained to great financial eminence by similar methods; they too had laid the foundations of their fortune by trading with Venice, and subsequently engaged in silver mining in Tyrol and in Saxony.

Altogether, there was about this time in different parts of Germany a great development of mining, both for the precious and the useful metals. The working of silver at Schwatz dates from 1448, at Salzburg from 1460, and in Saxony from 1471; while the Bohemian mines, which had been practically closed for eighty years in consequence of the Hussite Wars, were reopened in 1492. Early in the sixteenth century some Nürnberg capitalists established iron forges in Thuringia and they were also actively engaged in copper mining. Apparently, in all these cases, commerce gave these enterprising undertakers their first start; the mineral resources of Germany, though not unknown, had been neglected; but money made in commerce was available in the fifteenth century to work the mines, and large fortunes were gained in connexion with these operations. Even before the discovery of America, with her extraordinary treasure, there had been considerable additions to the supply of silver in Europe; it is easy to see that the Augsburg merchants were able to secure the means of hoarding, and of thus amassing wealth which they were eager to use as capital in any direction offering a profit.

Though Augsburg and its neighbourhood had afforded excellent facilities for the formation of capital, it gradually ceased to be the best centre for making profitable investments. The changed political conditions of Europe and the new discoveries had to some extent interfered with the traffic on the great route from the Adriatic by the Brenner and the Inn; the commerce of Venice was declining, relatively even to that of some other Italian cities. The Genoese secured a practical monopoly in the wool trade between the North and Italy by the valley of the Rhone; and after the fall of the Greek Empire at Constantinople they had been permitted by the Turks to establish a factory there. Florence, by her victory over Pisa, and her agreement with Genoa as to Leghorn, was becoming a considerable naval Power; and the trade with Morocco offered the opportunity for the rise of a new Florentine commercial aristocracy. Venice had lost much of her old importance as a trading centre; and a large proportion of the traffic which was maintained between the Adriatic and the Low Countries was now conducted by sea. Augsburg, formerly situate on one of the great routes of the world's trade, found that the stream of commerce had been diverted; its merchants recognised the trend of affairs, and began to establish themselves in the Low Countries. They could gather the threads of old connexions there; the Genoese were in the habit of frequenting Bruges; but the Venetians despatched some of their galleys to its rising competitor Antwerp, and in this city an Augsburg capitalist, Ludwig Menting, established a business in 1474. The other leading houses subsequently followed this example, and Antwerp came to be the chief centre for the financial operations of the great German capitalists. Their fortunes were not inseparably linked with the prosperity of the town of their origin; capital is fluid, and can be easily transferred from one city or one employment to another. The Fuggers and Welsers and other Augsburg capitalists were ready to adapt themselves to the changed conditions of business; the centre of the world's commerce was shifting, but they would not submit to be kept back from having a share in the new developments of trade and finance.

At the beginning of the sixteenth century Antwerp afforded unexampled opportunities to enterprising men of any nationality who had wealth at their command and were anxious to engage in commerce. The Portuguese had opened direct trading intercourse with the East; but they were too busily engaged in securing their footing in the Indies, and in prosecuting the distant trades, to have energy to spare for increasing their shipping in northern waters. They left to other merchants the business of distributing to European consumers the spices and other valuable products which were imported to Lisbon; and Antwerp, from her position and still more from her policy, became the chief centre of the capitalists who were ready to take a part in this profitable commerce.

The organisations for intermunicipal commerce in the Middle Ages hampered the enterprising capitalist, as they tended to confine him to dealings in one particular class of goods and to limit the amount of his transactions. The modern capitalist desires to be free to engage in any promising venture, and to push his business as fast as he can; but to this the medieval merchants hardly aspired. To secure a footing at some particular port was a difficult and costly business; and'when they succeeded in this they organised the trade with care, so as to avoid flooding the market with their imports, and to ensure that all who joined in maintaining the factory and in contributing to the expenses of the establishment should have a share of the available trade. The old merchant organisations, with their particular privileges, their private factories, and "well-ordered trade," were a mere encumbrance at a time when the main routes of the world's commerce were being shifted; the real chance of rising to fortune lay with the men who were free to adapt themselves to these changing conditions; and Antwerp was a town which imposed little restriction on the employment of capital in any direction. The Merchant Adventurers had transferred their factory from Bruges to Antwerp in 1446; but they were almost the only traders who enjoyed special privileges in the city on the Scheldt. English commerce had given a great impetus to the growth of the town, which also became a staple for the products of Holland, and eventually secured much of the trade in fish, barley, and salt that had been previously carried on at Malines. The men of Antwerp were thus brought into direct antagonism with other Flemish cities, and were forced, almost unconsciously perhaps, to adopt an economic policy in consonance with the requirements of the coming age. The towns which followed the traditional scheme tried to make outside commerce directly subservient to their particular interests as producers or consumers; the men of Antwerp were merely concerned to increase the volume of trade and to take advantage of any benefit that happened to accrue; they bought out the rights of the landowners who took tolls on the Scheldt and made their city a centre of free intercourse, where men of all nations were welcome to engage in trade on equal terms. During the Middle Ages the only opportunities for such unrestricted intercourse had occurred at fairs; Antwerp owed its first importance to one of these gatherings, and so far as its economic institutions were concerned it was not so much a city as a permanent fair. Hence it was most natural that the German capitalists, who saw that traffic was being diverted to new centres, should emigrate to a town which offered the fewest restrictions to their operations as merchants or financiers. Bruges was completely distanced at the close of the fifteenth century; it continued for a time to be the privileged resort of Spanish merchants; but it lay off the line of Portuguese trading connexions. The German merchants, who had been the distributors of the spices imported by the Venetians, now became the principal intermediaries in connexion with the cargoes brought from the East to Lisbon, which was frequented by the factors of the principal German houses, though Antwerp was the chief centre of their commercial operations.

It followed, almost as a necessary consequence of the commercial activity of Antwerp, that this city soon became a great monetary centre; in this respect again it had the character of a permanent fair. The fairs of the Middle Ages had been the great occasions for financial transactions of every kind; rates for making remittances could be easily quoted, and loans could be negotiated to run to the date of the next fair; there was a sort of clearing-house at each fair for settling the transactions that took place during its continuance. One district after another had been the principal scene of these operations; the fairs of Champagne had given place to those of Geneva; Geneva had been superseded by Lyons, which Charles VIII found a convenient place for making payments to his Swiss mercenaries. In the sixteenth century Antwerp took the lead; it was a money-market where there was less organisation and more freedom for negotiating loans than at Lyons; business was carried on with little variation all the year round and was not restricted by the definite dates fixed by the occurrence of the fair; nor was there any attempt to fix a normal rate of exchange, as had been the practice at Lyons. The merchant had far better opportunities here than elsewhere of borrowing capital at the moment when he required it, and for the precise term desired by him; so that mercantile life at Antwerp had many features in common with the commercial centres of the modern era. The discovery of the New World, with its enormous treasure of precious metals, introduced an extraordinary confusion into economic relations in Europe. There are many unsolved problems as to the course of the distribution of the American silver and the effects produced by it in different countries; but at all events we can see that the money-market at Antwerp was so arranged as to be capable of taking a very effective part in the transference of the precious metals from country to country, and in facilitating the application of capital to new enterprises.

These monetary and commercial conditions were favourable to rapid growth; and Antwerp rose quickly from comparative unimportance to be the leading city of Europe. She was enriched by her connexions with Lisbon and the spice-trade of the Portuguese; she did not, however, remain a mere trading city but became a manufacturing town as well. There was a considerable migration of German industry in the wake of German capital: both the linen and the fustian manufacture were attracted to a region from which there was such easy access to distant markets. The prosperity of the town increased by leaps and bounds, until in 1576 the Spanish Fury dealt it a blow from which it never recovered.

Though her greatness was short-lived, Antwerp occupies a very important place in the transition from medieval to modern commerce; for her merchants are said to have developed the modern system of commission-business. In the Middle Ages every possible obstacle had been put in the way of such transactions. Each merchant travelled personally with his own goods, or consigned them to a factor who acted exclusively as the representative of a single employer. Each -city was cautious about admitting outsiders to any trading privileges within its walls; and no merchant, who was free to carry on business himself, was allowed to "colour" the goods of an unfree trader, or to act as his broker. At Antwerp no such jealousy of outsiders existed: any one might settle and commence trade, and there was no objection to his doing business for the men of any city, or on any terms that suited him. This implied an immense reduction in the cost of maintaining agencies and in the incidental expenses of trade; and when once the new system got a fair trial, there could be no doubt that it had come to stay.

The rise of Antwerp is also significant of the change in the centre of gravity of the world's commerce which has occurred, since ocean voyages have become the chief means of mercantile intercourse. The Mediterranean ports were left stranded, and Lisbon failed to take their place. The trade which had been opened up by Portuguese enterprise did not react on home industries, or give increased and profitable employment to productive labourers. The carrying trade between Lisbon and Antwerp was largely taken up by the merchants of Holland, who had ships and sailors engaged in fishing, and these could be easily and remuneratively employed in other waters. The Iberian peninsula offered an immense market for the salt-fish, the cloth, and linen of the Low Countries; Antwerp merchants had the means of purchasing the products brought from the East. While the energies of the Spaniards and Portuguese were thrown into the task of establishing their power in the Indies, and prosecuting distant trade, the Netherlanders reaped much of the profit of carrying goods in European waters, and their industrial and maritime activity was greatly stimulated. Antwerp obtained for a time that supremacy in the world's commerce, which has never since been wrested from northern ports.

The discussion of the application of capital to commerce, and of the changes in business practice which it introduced, have led us far away from the rise of the Augsburg merchants in the fifteenth century. We should have to turn back to a very early time in order to trace the first beginnings of the influence which capital exercised on manufactures; indications of it can be found in the thirteenth century, but it was at that date quite exceptional. Medieval industrial organisation usually consisted of a number of separate gilds, each composed of independent craftsmen; these associations had the power of regulating the trades with which they were respectively connected, subject to the approval by municipal or royal authority of the manner in which they exercised their rights, and of the particular rules which they framed. If we are careful to remember that, while this was the ordinary state of affairs, it was not universal in all cities, that its origin was not the same in all places and that it did not hold good equally in all trades, we may look a little more closely at the economic features and conditions of this type of organisation.

The craft-gild was formed with reference to the requirements of a particular city, and looked to a very limited circle of the public for the demand for goods. Part of its function was to see that the quality of the goods was maintained; but its policy was chiefly determined by a desire to give each member his fair share of the available employment. Each master was to have his chance, and none was allowed, by unduly multiplying the number of apprentices or journeymen, to supplant other workmen. These restrictions told in favour of the good training of apprentices, and improved their chance of employment as journeymen after they had served their time, but the rules hampered any man who was trying to push his business and manufacture on a large scale.

The master workman would be in the habit of buying on his own account the material which he required, or he might have the advantage of purchasing wholesale in association with other members of the craft; he would also sell the finished article to the man who wished to use it-the consumer; in some crafts, such as the tailors', an even more primitive practice was long maintained, and the craftsman worked on materials furnished to him by the consumers. Hence we can see that there were two points at which the intervention of the capitalist would easily occur. In the case of goods exported to a distant market, when an exporting merchant was the customer, he might find it convenient to have them manufactured under his direction and at his time instead of procuring them from an independent craftsman; the transition was easy from the position of a constant purchaser to that of an employer. On the other hand, when good$ were made from imported materials, it was convenient for the merchant to retain his ownership in the materials and employ craftsmen to work them up. The effect of drawing any industry into the circle of distant trade with reference either to the materials or to the vent for the product, was to render capitalist intervention almost inevitable; when the capitalist system is thoroughly adopted, the employer owns the materials and also undertakes to act as an intermediary in the disposal of finished goods. It is needless to observe that, when this transition is complete, it becomes the interest of the employer to push his trade and to turn over his capital as rapidly as may be; he has to cater for a varying market, and the restrictions devised for those who have been sharing the employment afforded by a known market would not suit him at all.

There were some industries, however, in great commercial centres, which from their first planting were dependent, either for materials or for the vent of their products, on distant trade. Organisation, in such callings, was almost certain to proceed on capitalist lines; the rules laid down by the leading men were devised by great employers, and not, as in the craft-gilds, by small masters who personally worked at the trade. The working and dressing of cloth at Florence was dependent on the importation of undressed cloths, which were converted into excellently finished fabrics and exported on profitable terms. This Arte di Ccdimala appears to have been organised and regulated as a capitalist industry from the earliest times; and the Arte di Lana, which was dependent on the importation of raw wool from the North, was also an association of wealthy employers. The Arte di Seta was another long-established industry; it had been improved by immigrants from Lucca in the early part of the fourteenth century, and was conducted on similar lines. Capitalist organisation was not universal in industries of this commercial type; for we find that the silk-trade of Venice in the thirteenth century was regulated by small masters, who were however dependent on the services of merchants for securing a stock of materials to be used in regular work and for selling the fabrics of the looms; it need be no matter of surprise, that a change had occurred before the most flourishing period of the Venetian silk-trade in the fifteenth century, and that merchants were engaged in it as capitalist employers.

The capitalist organisation of industry was not confined to the more advanced communities, but might be found in the most backward countries, when the commercial conditions were favourable. In the twelfth and thirteenth centuries, when there was little export of cloth, weavers' gilds existed in London, Winchester, Beverley, and other centres, and the trade was probably conducted by independent workmen. But the clothing-trade of England was developed with increasing success, so that in the fifteenth century large quantities of woollen cloths were exported; it was evidently assuming the conditions of a capitalist trade, and was being organised by large employers. In England the transition to the new condition of affairs took place with little friction; weaving began to be practised in villages where civic gilds had no jurisdiction, and the quality of the product was inspected by a royal officer, so that the capitalist system of giving out materials to the weavers and buying their cloth was able to make its way imperceptibly.

In continental towns, where there was a large number of independent masters strongly organised in craft-gilds, a very decided antagonism prevailed between the old order and the new that was being gradually introduced. In France the corps-de-metier assumed a more and more oligarchical character, as increasing obstacles were being put in the way of journeymen who aimed at attaining the status of independent masters. A further indication of the same tendency, and of the differentiation of the journeymen as a permanent class within the trade, is found in the existence of journeyman gilds at Strassburg and elsewhere. The rise of a wealthy capitalist class within a craft-gild tended on the one hand to change the character of the old association and to make it a company of capitalists and traders, each of whom employed a large number of paid workmen; and, on the other hand, to call forth associations among the journeymen who had little hope of attaining to a higher status as independent masters, and who were therefore interested in maintaining favourable conditions for a wage-earning class. In other cases the pressure of the changed conditions was most severely felt by the small masters, since the men with large capital and a growing trade were able to pay better wages; the capitalists and journeymen were then united in opposition to the small masters, who desired to retain the restrictions imposed by the old craft-gilds.

Where the conservative policy was successful and the small independent masters held their own, the results were not satisfactory; the craft-gilds could maintain the old rules, but they could not control the course of trade; business migrated to the centres where it could be conducted on capitalistic lines. In Flanders and in England we hear much of the conflict between urban and suburban workmen; this antagonism was partly due to the fact that the journeymen were inclined to migrate to districts where the rules which prevented them from setting up in business or working for capitalist employers could not be enforced. The trend of affairs was going against the old type of craft-gild; and these institutions, in so far as they were incompatible with the investment of capital in industrial occupations, were bound to pass away.

To some extent, however, they proved to be compatible with the new order; the craft-gilds played an important part by exercising a right of search, and by insisting that the wares exposed for sale should be good in quality. Both in France and in England they were retained to some extent as convenient instruments for the royal or parliamentary control of the conditions of work and the quality of the output; occasionally, too, they retained their name and tradition, though they had changed their character and become associations of employers. At the close of the sixteenth century the organisation of industry by capitalists, which had been exceptional in the fourteenth century, had come to be an ordinary arrangement in the principal manufacturing centres.

The freedom thus obtained for capitalist administration proved of immense importance in facilitating the planting of industries at new centres and in undeveloped lands. Under no circumstances is this a simple task; but in the Middle Ages and in the earlier part of modern times it could only be accomplished by transferring skilled labour from one place to another. It was through the migration of great employers, with the labour which followed in their wake, that the silk-trade was developed in Venice, Bologna, Genoa, Florence, ^.nd France; that an improved manufacture of woollen cloth was introduced into England under Edward III; that the Spanish cities responded in some degree to the call made upon them by colonial demand, and that the manufactures of linen, glass, and pottery were introduced into France. A most remarkable development of industry in the fifteenth century seems to have been carried through by the Florentine capitalists, who were interested in the dressing and dyeing of cloth. They devoted themselves to encouraging the weaving of cloth in the wool-growing lands of the North, in order to command a supply of the half-manufactured goods which could be so finished at Florence as to be a most valuable article of commerce. In medieval times the industrial system had been intensely local in character; but as capital and capitalist organisation were introduced, the local attachments were severed one by one; in the new era the great employer is prepared to carry on business in any place and under any government where there is good prospect of working at a profit.

In the preceding sections an attempt has been made to show how the rising power of capitalism broke down the medieval forms of commercial and industrial regulation; the capitalists, who could not dominate them, migrated to places where they were free from old-fashioned restrictions. Capital offered facilities for the planting of new industries, the development of trade, and the opening up of mines and other natural advantages; so that the means lay at hand for promoting material progress of every kind. Hence new questions of economic policy came to the front. The efforts of traders were no longer confined to retaining exclusive commercial rights; but they began to consider how the various resources within a given area might be developed, so that by the interaction of different interests the greatest material prosperity might be attained in the community as a whole. We have already seen that in the fifteenth century the French monarchs had come to be directly interested in the welfare of the trading as well as in that of the landed classes; and at this period some of the German princes were becoming alive to the necessity of paying attention to all the different elements in the community. Other influences were at work elsewhere which tended to the growth of a new economic system; many of the cities of Italy and of Germany had become great territorial Powers, and, with a keen eye to business, they were endeavouring to devise schemes of policy which should enable them to reap the greatest advantage from their acquisitions.

It is of course true that many European cities had from the earliest period of their development had landed possessions and agricultural interests, and that the burgesses had enjoyed rights in respect of tillage and pasturage. But the questions which arose under these old circumstances were very different from those which presented themselves to citizens ruling over a large province and controlling the development of a considerable territory. Several of the cities of Italy and of the Rhineland had attained to great political importance in the early part of the fourteenth century; in some cases they were successful in military operations and extended their domain by conquest; in others the power of some city promised protection and attracted neighbours to commend themselves to a civic superior; in other instances land temporarily assigned to some town as a pledge for money borrowed was permanently transferred, when the borrower proved quite unable to repay his debt. In these various ways civic control came to be exercised over considerable areas, and civic authorities were concerned in regulating a large territory, with its distinct and conflicting interests, in such a way as to produce the best results for the commonwealth as a whole.

The great Italian towns, which were the seats of manufactures, had considerable difficulty in obtaining a sufficient food-supply for the very large population which had been attracted to them, or had grown up within their walls. Venice was forced to control the agricultural produce of her own district, and to prevent all other towns, such as Ancona, Ferrara and Bologna, from competing with her in Lower Italy, the district from which she obtained corn, eggs, and other produce; to purchase these commodities, the neighbouring towns were compelled to frequent the Venetian market. Florence and Milan, Bern and Basel, Ulm and Strassburg had alike to give close attention to the question of food-supply, and pursued a similar object, though with such modifications as the special circumstances of each town might suggest.

There was a marked contrast between the expedients adopted by the Venetians and those which commended themselves to the Florentines. The merchant princes of Florence bought large estates in Tuscany, and devoted themselves to agriculture. The conditions of the rural population were such that capitalist farming could be easily introduced; serfdom had entirely disappeared in this neighbourhood, and money dealings permeated the whole fabric of rural society; but agriculture cannot have been a very profitable investment. The policy of the city was that of providing cheap food for the consumer; export was forbidden, and the price at which corn might be sold was fixed by a tariff. Free access was given to food-stuffs imported from abroad, so that the 1 farmer was not only restricted in his operations, but was obliged to:'| contend with foreign competitors in the home markets. There is reason! to believe that this policy must have pressed with great severity on the rural population; a maximum was fixed for the wages of labour; and the terms of their contracts were such that the loss from bad seasons fell on the cultivating tenants rather than the proprietor. The depression of the rural inhabitants in the interest of the consumers was disastrous; but many communities besides Florence were tempted to pursue this policy. It seemed as if the peasant could be forced to carry on the work of tillage, whatever pressure was put upon him; there was little danger of his giving up rural occupations altogether, while the advantage of cheap food to an industrial and trading community was obvious.

The cities were also concerned in the wise management of such parts of their territory as were suitable for pasturage, partly for the sake of a supply of meat, but also with the view of procuring wool; the Florentines had large flocks upon the Maremma, for the obtaining of raw material was of primary importance to the Arte di Lana. We also find evidences of the introduction of sericulture in the neighbourhood of the towns where the weaving of silk had been introduced. The provision of raw material and of a proper food-supply were the two main points in the economic policy which the towns pursued in the large territories under their control.

This practice of treating town and country avocations as parts of one economic whole was commonly adopted, though it had hardly been definitely formulated in the fifteenth century; but the general principles which it involved had at least been so far thought out that they could be habitually assumed in the political writings of Machiavelli. He is quite clear as to the necessity of subordinating the interest of the citizen to that of the State; the civic policy of the Middle Ages had been that of severing different trading bodies and keeping them from encroaching on one another, rather than of subordinating all to an ulterior object. With Machiavelli the ulterior object towards which all commercial activities should be directed is the power of the prince. He points out that measures which tend to increase the wealth of the prince, without enriching the people, provide the firmest basis for absolute power.

Such ideas were widely current at the beginning of the sixteenth century, and they may easily have affected the statesmen who were guiding the destinies of the rising nationalities of Europe. In many countries all the elements that combine to form true national life were present; for there was a common stock, a common language, and a common law. But the fusion was incomplete and local divisions were deep and real. The ambitions which were opened up by the age of discovery strengthened national sentiment by affording an unlimited field for national rivalries; and the religious differences, which accentuated the divisions of Christendom, rendered the sense of national religion a convenient badge in warfare. These positive elements in the growth of national life were strengthened in any country where a territorial economic policy was adopted, so as to bring out a community of interest among the citizens, and to give solidarity to the whole social system. Definite schemes for the development of material resources, with a view to one supreme object, involved the suppression of local privileges and the increase of commercial intercourse; and this tended in its turn to give the opportunity for the healthy interaction of rural, urban, and commercial life upon each other. As the economic life of a country adapted itself to these new conditions, and as appropriate institutions were organised, the body economic came to be reconstituted on a national, not as of old, on a civic basis. The recognition of ties of common interest throughout a large territory gave definite shape to the groups which were pervaded by similar sentiments of race and religion. The sense of economic welfare as something common to the whole of a country strengthened the bonds which united each rising nationality in a common economic life, that was of importance to all citizens alike.

In the earlier sections of this chapter it has seemed convenient to deal chiefly with the rise of capital and the influence of its growing power over the economic institutions of medieval cities. The city was the type of economic organisation which had flourished in the ancient and in the medieval world; but it was not adequate to the requirements of modern life, and the old associations were disintegrated and destroyed. In the sixteenth century we see the signs of real reconstruction, and the growth of economic institutions and regulations which were compatible with capitalistic enterprise both in industry and commerce; even though this was still restricted within limits that we regard as narrow. One nation after another adopted a territorial economic policy, which implied the conscious subordination of certain private interests to the welfare of the realm, the conscious development of the resources of the country, and the conscious building up of the sinews of national power. The main feature of this territorial economic policy was similar in the case of all nations; all the rivals desired to accumulate treasure, as the means of equipping 'or of hiring armies; but there were different methods by which this aim could be attained, and different subordinate objects to be pursued, according to the circumstances of each particular country. To these we must now turn; for by briefly tracing the special schemes of territorial development which were adopted in Spain, England, and France respectively, we shall see most clearly the nature of the enlarged body economic which has come into prominence in modern times. The discovery of America by Colombo gave the Spaniards access to an enormous territory of which they were complete masters, and which they were free to develop on any lines that seemed good to them. It is no part of our present purpose to discuss by itself the colonial policy which the monarchs followed; we have rather to consider the aims pursued by them for their empire as a whole. The large mass of bullion that was imported, together with the great commerciahopportunities that were opened up, exercised a remarkable influence upon economic conditions in the peninsula. The amount of gold and silver which the Spaniards acquired was quite unprecedented, and'might have been used to form a very large capital indeed. The West India islands supplied increasing quantities of gold from the time of their discovery until 1516. In 1522 the exploitation of Mexico began; silver was acquired in greater and greater masses, and the introduction, in 1557, of a simpler process of reduction of the ore by means of quicksilver diminished the cost of production and still farther augmented the yield of bullion. In 1533 the Spaniards also obtained access to Peru, from which additional supplies of silver were procured. Altogether, an enormous stream of bullion poured into Spain during the whole of the sixteenth century.

The Spaniards were able to rely on the best possible advice as to the organisation of business of every kind. Genoese financiers were ready to give every assistance, and the South-German capitalists, who had so much experience of mining and enterprise of every sort, were closely attached to the interests of Charles V; after his accession to the throne of Spain they were attracted to that country in large numbers, as great privileges were conferred upon them. They were able to take part in colonisation, and to engage directly in mining. The Fuggers undertook to develop the quicksilver deposits of Almaden; they formed business connexions in the New World, and founded settlements in Peru. The Welsers established a colony in Venezuela, and undertook copper-mining in San Domingo. There was at the same time an incursion, chiefly to Seville, of other German capitalists, who were prepared to devote their energies to developing the industrial arts of Spain. With all these material and technical advantages it seems extraordinary that the dreams of Charles V and Philip II were not realised, and that they failed to build up such a military power as would have enabled them to establish a complete supremacy in Europe.

It would be exceedingly interesting if we were able to examine in detail the extent to which the precious metals came into circulation in Spain, and the precise course of economic affairs in different parts of the country; but the material for such an enquiry does not appear to be forthcoming. Yet one thing is obvious; the Spanish colonists devoted themselves almost entirely to mining for the precious metals, and they were largely dependent for their supply of food of all kinds on the mother country. This caused an increased demand for corn in Spain and a rapid rise of prices there, as the colonists were able to pay large sums for the necessaries of life. Charles V, indeed, endeavoured to carry out works of irrigation, and to increase the food-supply by bringing a larger area under cultivation. But tillage could not be developed so as to meet the new demands. The methods of cultivation already in vogue were as high as was generally practicable in the existing state of society; the vine- and olive-growers on the one hand, and the pasture-farmers on the other, resented any encroachments on the land at their disposal, so that it was impossible to bring a larger area under crop. So powerful were the Mesta, a great corporation of sheep-farmers, that they were actually able in 1552 to insist that Crown- and Church-land which had been brought under tillage should revert to pasture. The result was inevitable; food became dearer, and the government was forced to recognise the fact by raising the maximum limit of price; as a consequence, the necessary outlay of all classes increased, while a large part of the population were not compensated by the profit obtained through the new facilities for trade.

Under ordinary circumstances the increase in the price of food would have been merely injurious to industry; it would necessitate a larger outlay in the expenses of production, and would leave less margin for profit, and no opportunity for the formation of capital. Ultimately, this seems to have been the effect on Spanish manufactures, and the high cost of production in the peninsula rendered it possible for other European countries, where the range of prices was lower, to undersell the Spanish producer in the home market. No serious attempt was made by the government to check this tendency, as the policy pursued was in the main that of favouring the consumer, and protective tariffs were not introduced.

The circumstances which prevailed in Spain at the opening of the sixteenth century were, however, quite exceptional, and as a matter of fact there seems to have been a considerable, though short-lived, development of industry. The colonists not only imported their food, but manufactures as well; there was a sudden increase in the demand both for textile goods and for hardware, to meet the American requirements, and of course there was a great rise of prices. The small independent masters, working on the old industrial system, were unable to cope with this new state of affairs; but the foreign capitalists saw their opportunity. Manufacturing of every kind was organised on a large scale at Toledo and other centres; wages rose enormously, and a great influx of population was attracted into the city. This was doubtless drawn to some extent from the rural districts; but the stream must have been considerably augmented by the immigration of French and Italians. Hence it appears that this rapid industrial development was merely an excrescence, which had no very deep attachment to the country; the Spaniards themselves appear to have regarded it as an intrusion, and to have resented it accordingly. The Spanish gentry had no means of paying the increased prices which the colonial demand had occasioned, for natural economy was still in vogue in many rural districts, Indeed, this revolution in industry must have given rise to many social grievances; the craftsman of the old school would suffer from the competition of the capitalist in his own trade, while the great rise of prices to consumers was attributed to the greed of the foreigner. The government was persuaded to pass measures which imposed disabilities on foreign capitalists; it succeeded in forcing the withdrawal of the French and Italian workmen, as well as in expelling the Moriscos. As these changes ensued, the foreign capitalists were doubtless successful in transferring large portions of their capital to other lands; but the decline of alien competition on Spanish soil did riot enable native manufacturers to take their place or to recover the lost ground. With the new scale of outlay they had little opportunity for forming capital, and the bourgeois class may not have had the skill for organising business on the new lines. On the whole it appears that the large colonial demands for food on the one hand, and the large supplies of foreign manufactures on the other, prevented a healthy reaction of commercial on agricultural and industrial development; Spain was left •exhausted by the feverish activity which had been temporarily induced, and which passed away.

The Spanish government was firmly convinced that the best means of promoting the power of the country was by hoarding the large share of the produce of the mines which came into their possession, and they made frequent efforts to prevent the export of any bullion into other parts of Europe, though the Genoese and German capitalists had special licenses which allowed them to transmit it. It is obviously impossible that the government could have succeeded in enforcing this prohibition, under the existing conditions of trade; most of the bullion which arrived at Seville belonged to the merchants and manufacturers who were concerned in supplying the colonial demand for goods. The ingots which were not taken to the mint may have been hoarded for a time; but the foreign capitalists would not allow their money to lie idle, and much of it must have been exported, in spite of all laws to the contrary, to pay for the cheaper manufactures which were coming in from abroad. Comparatively little coin could have passed into general circulation in Spain itself; payments from the towns for agricultural produce would scarcely overbalance the payments due from the country for the dearer manufactured goods.

The Spanish rulers had ignorantly and unintentionally pursued the precise course of policy recommended by Machiavelli. They had sought to accumulate treasure in the coffers of the State, and they had by their mistaken measures allowed the subjects to continue poor. The wealth which passed into the country had no steady and persistent reaction on industrial and agricultural life; and when the military exigencies of Philip's policy reduced him to bankruptcy, it became obvious to the world that the Spaniards had completely misused the unique opportunities which lay within their grasp. They had sacrificed everything else to the accumulation of treasure by the Crown, and they had completely failed to attain the one object on which they had concentrated all their efforts.

The permanent gain from the treasure imported into Europe went to those countries which were able to employ it as capital for industrial or agricultural improvement, and Spain could do neither. There was every prospect, at one time, that the greatest advantage would be reaped by Spanish subjects in the Netherlands. The policy of the government, however, and the failure of the Duke of Alva to recognise the importance of trading interests, rendered this impossible. The War in the Low Countries not only caused the migration of industry from that part of Spanish territory, but tended to bring about the collapse of the great capitalists who had allied themselves to the Spanish interest. The foreigners were being gradually excluded from taking any direct part in the new industrial developments in Spain; they confined themselves more and more to banking business, and to financial operations in the government service. But the persistent failure of the Spanish and imperial policy in one country after another had the effect of crippling several of the great Genoese and German houses, and at length drained the resources even of such millionaires as the Fuggers. The decline of these bankers proved that the control of the treasure of the New World was passing into other hands; as a matter of fact it was shifting more and more into the possession of the Dutch, who were making their country a harbour of refuge for persons expelled from the Spanish Netherlands, and who were building up a great centre of commercial and industrial life at Amsterdam. At the beginning of the seventeenth century the people of Holland had succeeded in winning the greater part of the gains which accrued from the Portuguese discoveries, vchile they had also succeeded in drawing to themselves a large share of the treasure of Spanish America, and in using it as capital in commerce, in shipping, and in industrial pursuits. It was the nemesis of the policy of his Catholic Majesty that his subjects failed to derive real advantage from the much vaunted American possessions, and that the gains which might have enriched the peninsula went to his bitterest enemies.

In the middle of the sixteenth century, England was not a competitor with Spain and France for the sovereignty of the world; her political ambition was far humbler; the dangers that threatened her were so imminent, and her means of defence so insufficient, that it was only by devoting great care to the development of her resources that she could hope to retain political independence. William Cecil found him* self called upon to guide the destinies of the realm, at a time when the $| country was destitute of munitions of war. Elizabeth's Protestantism seriously interfered with the opportunities of procuring military stores 5 the chief supply of saltpetre and sulphur, which were required for gunpowder, as well as of the metals which were necessary for the making of ordnance, came from ports controlled by the great lioman Catholic Powers. The native mining industries we're. quite undeveloped, and England could easily have been prevented from purchasing copper and iron from abroad. Woollen cloth was the chief export from the country; but alum, which was used in the processes of dyeing and finishing, was obtained from Ischia, an island which belonged to the Pope. . A hoard of bullion, laid up against possible emergencies, was a political luxury which Cecil could not afford; all the resources that the Crown could dispose of, either as personal possessions, or by influence exercised on loyal subjects, were devoted to the planting of industries which directly subserved the strength of the realm and rendered it less hopelessly unprepared for the struggle that could not be indefinitely postponed. When the storm burst at last, and England had to get ready for meeting the Spanish Armada, it was found that the leeway had been entirely made up, and that English guns and gunners were as good as those of Spain, and better too.

It would in any case have been useless for Cecil to imitate the Spanish policy and amass bullion to serve for the payment of mercenaries. England had no access to silver mines, and she was forced to rely on her own sons to man her fleets and to serve in her armies. It was essential to adhere to the policy which was even then traditional in England, and to take pains that there should be a well-diffused and healthy population. With this end in view, the government was specially anxious to maintain tillage, as an avocation which gave employment to vigorous labourers; and agriculture came to be encouraged, not merely on economic but on military grounds. In a similar way, much attention was paid to securing favourable conditions for the maintenance of a large sea-faring population. The fishing trades were important as a source of wealth, but even more so as a school of seamanship and a ready way of training men who should be capable of serving in naval warfare; this employment was artificially stimulated, and people were compelled by law to eat fish on three days in the week. The special exigencies of the situation forced Cecil to devote the greatest possible care to developing native resources of every kind in such a fashion that they should, as much as possible, contribute directly to the national strength. The government was of course aware that the general increase of industrial skill and of commercial activity was likewise of importance; in the actual circumstances of England these were the only means of procuring treasure at all; but, since the supply could only be secured indirectly, it was not treated as an immediate, far less as an exclusive object, as it had been with the Spaniards.

The method which Cecil adopted for carrying out these aims presents another interesting contrast with the course of affairs in Spain. He had, indeed, to obtain assistance from the group of Augsburg capitalists who had taken such a leading part in European finance; but he relied on them rather for their technical skill and enterprise in organising undertakings, than for the capital with which new schemes were carried out. The usual plan was to grant a concession to a company, the capital being subscribed in England, though the management was controlled by the Hochstetters and other German adventurers. By these means, the arts of brass-founding and wire-drawing were planted, and mining for the useful metals was largely carried on. Most important of all was the skill of German engineers; their methods of pumping water were introduced, and rendered mining possible where it had never been practised before. Not only the hardware trades, but whatever other industry was subsidiary to any of the forms of national strength, came under Cecil's special care; among these may be instanced the manufacture of sailcloth, which he was at personal pains to promote.

The government looked with a favourable eye on the introduction of useful industries of any kind; but especially welcomed those which consisted in the working up of native products, and which would save the necessity of importing finished goods from abroad. The favourite mode of encouragement was one which cost the Crown nothing, while yet it encouraged alien adventurers to do their best. Exclusive privileges for the exercise of the trade were granted, and in this way the manufacture of glass, paper, starch, soap, and other commodities of common consumption were successfully established. Circumstances were specially favourable to such attempts at this particular time. England served as a haven of refuge for many of the artisans who were dispersed by the wars in the Netherlands, and skilled workmen emigrated hither even from such distant countries as Greece, Italy, and Spain. Some of them appear to have possessed capital, and many of them were highly skilled in departments of industry which had been practically unrepresented in England.

The dislike felt by Englishmen for foreigners was almost as strong as that of the Spaniards, and there was some little difficulty in disarming the local hostility to these settlers. The new industries were on the whole developed on capitalist lines; the old craft-gilds had ceased to be effective forces, and there was little serious opposition from them. In so fftf as native industrial organisation was reinvigorated in England towards the close of this reign, it took the form of capitalist associations, and these appear to have been for a time the strongholds of opposition to the alien invasion. The central government, however, was firm in its attitude of encouraging the immigrants, while it also desired so far as possible to merge them with the existing population, and to use them as means for the technical education of Englishmen. In this Cecil, who personally revised the regulations for settling the aliens, was singularly successful; though the Dutch and Walloon colonies were separately organised for social and religious purposes, they soon came to be highly appreciated by their neighbours as an important factor in the economic welfare of the country. Spain had suffered seriously by imposing disabilities on-aliens, and England gained immensely by encouraging their immigration and absorbing them as an integral part of the nation.

The improvement of industry had a very favourable reaction on the progress of agriculture. At the beginning of Elizabeth's reign the condition of rural life was eminently unsatisfactory; an increasing area was being diverted from tillage to pasture-farming; the wool which was produced in such large quantities, and the cloth into which it was manufactured, fetched very high prices; this export-trade was undoubtedly the channel through which a portion of the treasure from the New World began to flow into England. Beneficial as this development was in many ways, it yet entailed serious grievances in rural districts. The price of corn was relatively low, and there seemed to be a danger that the food-supply would fall short. Measures were devised for giving the farmer the best opportunity for selling his corn in any part of the country, and not unfrequently for exporting it on easy terms. Great pains were also taken to ensure that he should have an adequate supply of labour, and to encourage those particular forms of industry which were subsidiary to agricultural operations. In no other country of Europe were the interests of agriculture put so prominently forward. English statesmen realised that it was necessary to render tillage profitable if it was to be properly maintained, and progress in the industrial arts was treated as a subordinate consideration. As the demands of the industrial population for food increased, and as the improving marine of England gave access to markets abroad, those who were pursuing agriculture as a trade found that they could work at a profit. The revival of agriculture, moreover, was possible without a serious diminution of the area which was devoted to sheep. The conflict between the two rural interests in England was not so keen as in Spain. By the introduction of convertible husbandry, a better return could be obtained from the same acreage. The old common fields were broken up; land was occupied in severalty; and each farmer was free to pursue his avocation to the best of his ability and means. By this new method the land enjoyed long periods of rest, and the soil recovered from the exhausting effects of the persistent, though slovenly, tillage to which it had long been subjected. Enclosure and readjustment afforded the opportunity of greatly increasing the production from the land, without additional expenditure of capital. The improvement of industry and tillage had very favourable effects on the commerce of the country. There was each year a larger and larger available surplus which could be exported. The export of English cloth came to be entirely in the hands of English shippers; and, when the opportunity at length occurred for England to plant colonies beyond the seas, she was able to meet their immediate necessities without any strain upon her internal condition. Partly through the force of circumstances, but partly also through the wisdom of the government, there was a development of the manufacture of native products, which reacted in a healthy and natural manner on the improvement of agriculture and the increase of trade. The admirable picture given in Hales' Discourse of the Common Weal, of the condition of affairs under Edward VI shows us the evils of the transition at a time when both the Crown and the people felt the pressure of poverty. This was in some ways more apparent than real, and was partly due to the debased condition of the coinage. When with the restoration of the currency England began to receive her share of the treasure of the New World, improvement proceeded rapidly. At the close of Elizabeth's reign the people were wonderfully prosperous, and the pauperism of earlier years had ceased to be a serious problem. The political future of England was largely affected by the fact that the industrial population was becoming wealthy while the Crown was relatively poor.

The rapidity with which countries may recover from the ravages of war has been often remarked upon; in no case was it more strikingly exemplified than by the marvellous growth of material prosperity in France, so soon as Henry IV was complete master of the realm. This can hardly be ascribed, however, to a natural recuperation after the removal of the disturbing causes; it was really due to the view which Henry and his advisers took of the duty of government, and the excellent manner in which they discharged their task. It was to the interest of the French monarchy, with its large income drawn from taxation, that measures should be taken to advance internal trade, to plant industries, and to improve agriculture, so that the people might be prosperous and able to contribute their quota to the revenue. Henry IV set himself consciously and deliberately to develop the material resources of France, and his schemes were so well devised that the foundations of the magnificent and powerful monarchy of Louis XIV were successfully laid. The King was admirably assisted by Sully, and profited from the suggestions of Laffemas and Olivier de Serres, who were respectively experts in the organisation of industry and in promoting agriculture; and he possessed, moreover, the means for carrying out the schemes that met his approval. The revival of France was brought about on royal initiative, by royal administrators, and to a large extent by drawing on royal wealth for the necessary capital. A comparison with the position of the Crown in England, when Cecil was working for the development of the realm, may serve to point the contrast. Elizabeth was very poor, and she was particularly averse to summoning Parliament and levying taxation; she had little money to spare for encouraging improvements in rural and industrial pursuits that would only bring indirect gains to the government. The King of France had a large permanent income from taxation, and it was worth his while to invest a part of it in undertakings that were not directly remunerative; the increase of the wealth of iig subjects was the surest method of increasing the prospective income of the Crown.

At the time when Sully became superintendent of finances in 1598, he had to face an enormous burden of debt, entailed by the expenses of the Wars in which Henry had rendered his possession of the throne secure. The debt amounted to no less than 348 million livres; loans had been obtained by pledging the personal estates of the King, as well as a large part of the receipts from taxation. Only a comparatively small portion of the taille was available for current expenditure. Sully's first care was to reform the abuses in the collection of the revenue; he completely overhauled the fiscal administration and rendered the incidence of taxation more equable; while, by cancelling heavy arrears of taille, he relieved the tax-payers from an intolerable burden, and placed them in a position of solvency which rendered it possible for them to meet the current demands of the government. By these means he was able to steadily diminish the burden of indebtedness, while there was money at command, not only for the expenses of the Court, but also for much-needed public works.

The most important undertaking was that of facilitating internal trade by improving the water-communication through different parts of France. Humphry Bradley, who had had much experience in Holland, was the principal engineer employed; in some cases rivers were opened to the passage of barges, while canals were also laid out to connect the river-basins, and thus to provide great channels of through communication; a canal was planned between the Garonne and the Aude to complete a water-way from the Bay of Biscay to the Mediterranean; and another to connect the Loire with the Seine was begun. Great engineering works were also undertaken in the way of banking and draining, so as to recover considerable stretches of land that were lying waste; and attempts were made to improve the facilities for travel by land, especially in the reconstruction of bridges. In many instances the town chiefly concerned defrayed part of this last expense; but the main burden generally lay with the government which had been responsible for initiating these improvements, and no less a sum than a million livres a year was devoted to the construction of main roads.

The policy pursued by the French Crown in the planting of industry is open to criticism; but it must at least be allowed to have attained success. France was already richly supplied with the necessaries of life, and considerable progress had been made in the useful arts; but large sums were expended yearly in the purchase of luxuries, and it seemed possible to introduce the manufacture of silk and artistic goods, so that there should be less reason for the drain of treasure, and that the country might be entirely self-sufficing, not only for necessaries, but also for luxuries. Sully was doubtful as to this policy; he would have preferred to check the use of luxuries by sumptuary laws, and to develop those industries in which French products were the materials employed. This objection was partly met by extensive efforts to introduce sericulture on French soil; and, on the whole, experience seems to have proved that the King was well-advised in following the example of Venice and Florence and trying to plant this new industry, even though it required large subventions at first. In the latter part of the seventeenth century it flourished to such an extent as to provide an important and valuable article of export trade, so that foreign customers had to pay a considerable balance in bullion. The manufacture of glass and that of fine pottery were introduced during this reign into various districts of France by persons who had special privileges conferred upon them; the tapestry-manufacture needed still further encouragement, and obtained a royal subvention of 100,000 livres, and a sum of 150,000 livres was lent to two merchants of Rouen who proposed to undertake the making of fine cloth. While such pains were taken to stimulate exotic and plant new industries, a very careful scheme was devised for the reorganisation of the corps-de-metier, so as to provide more effective supervision for the existing trades; attempts were made to check the preposterous claims of the "Kings of the Mercers," and to break down the arbitrary restrictions by which the status of master in any trade had been guarded. A Council of Commerce was established, which carried out some useful changes in particular trades, though it did not reconstitute the corps-de-metier as completely as might have been desirable. Their powers were, however, limited, and they were not allowed to obstruct enterprising individuals who were trying to introduce improved processes of manufacture; many abuses were checked, and these institutions as modified continued to be a convenient piece of administrative machinery. The efforts that were made to improve agriculture also resulted in the stereotyping of the old social organisation. The King could not interfere to force on progress in the arts of tillage; all that could be done was to set an example of enterprise on the royal estates, and to bring pressure upon the magnates to follow it. The cultivators could only be effectively reached through the landed aristocracy, and there was a tendency to coerce them for their good by the exercise of seigniorial powers. The preservation of the relics of natural economy was also unfortunate, inasmuch as the metayers were thus cut off from the stimulating influence of the independent pursuit of their calling as a trade.

The French government was extraordinarily successful in consolidating the nation by these means. Separate and local interests were cared for; but they were always kept in conscious subordination to the prosperity of the entire realm. The views of Henry were on the whole most judicious, and the suddenness of the revival of French prosperity is a testimony to the effectiveness of the administration. But a heavy price was being paid for these advantages; the national economic life was rendered dependent on royal initiative and royal supervision; in subsequent times French industry suffered from the over-elaboration of administrative machinery, while the commercial and colonial development of the country was destitute of the healthy vigour called out where private enterprise was allowed free play.

The success of the royal policy in England and France presents a marked contrast to the failure of the Spanish monarch, whose ultimate aim was nevertheless the same; each prince desired to raise the whole land over which he ruled into the highest pitch of prosperity. It was impossible for Charles V or Philip II to accumulate the treasure which was so necessary for the country, and with the aid of which each hoped in his turn to become the most powerful ruler in the world. The American silver could not be kept in Spain, and there was so little native capital for use in that widely extended empire, that it declined. England, on the other hand, was consciously developed by the great middle class, who were ready to invest comparatively small sums in promising undertakings, while the government gave active support to the foreign capitalists and workers whose experience was so valuable. The English minister, Cecil, nursed the realm as carefully as if he were the steward of a private estate, but he was hampered by the poverty of the Crown, and his great work lay in stimulating other people to take the initiative and trust to themselves for their own remuneration.

As we have just seen the revival of France was due to the capital in the hands of the King, whose measures were largely innovations and experiments carried out in spite of opposition. In England the development of the country was carried on by the people, in France for the people; but both countries attained a high degree of national prosperity. Huge empires, like those of Macedonia and Rome, had already been familiar in the ancient world, but nations constituted like France and England were something quite new. The intimate union of all parts of such large areas and the interdependence of each part on the other, as well as the conscious subordination of local interests to the larger idea of "the realm,"—these were conceptions not merely distinct from the civic policy of the Middle Ages but equally foreign to the idea of the great polities of ancient days. The nation is not only a new phenomenon, but it is the characteristic feature of what we are wont to call modern times; and hence the rise of Holland, as the heir of Portugal and a victor over Spain, the increased importance of England and the revival of France, mark an era in economic history. The transition from the medieval to the modern age has been accomplished; we are no longer concerned with the struggle of town with town, but of nation with nation, each trying to secure the greatest material advantages for its own land and its own people. The chief economic interest of the subsequent century lies in the study of the means taken by these three rivals to build up their own strength and to weaken their adversaries. Each had entered on a career of material prosperity, and each had adapted its system with more or less success to modern industrial and commercial conditions. It is worth while, however, to cast a retrospecting glance at some of the places which had been distanced in the race for wealth, and to enquire why so many of the cities which had attained to great prosperity in the fourteenth and fifteenth centuries failed to share in the extraordinary impulse which was given to progress by the discovery of the New World and its treasures. Some of them did not advance, and others distinctly declined.

The change of commercial routes was the most obvious reason for the decadence of some of the magnificent cities of the Middle Ages. Commerce takes the path of the least resistance, and none of the overland routes to the East or passes across the Alps could compare with the convenience of an unbroken voyage from the Moluccas to Amsterdam. The Italian and South-German towns which had been occupied with the Eastern trade, and the Baltic and Lithuanian cities which had been the great depots of the Hanse League, ceased to be the chief centres of commerce, and from the mere fact of their geographical position were left on a siding. In the case of Stettin and other towns which had been merely mercantile, and where there had been no success in developing industry as subsidiary to commerce, the decline of trade was a desperate blow. The towns which had developed an industrial life, Cologne and Strassburg, Augsburg and Nürnberg, Venice, Genoa, and Florence, did indeed suffer severely. They lost their facilities for access to the best markets or for the most convenient purchase of food and materials; but they were able to re-adapt themselves to their diminished opportunities, and to utilise their resources for the maintenance of a prosperous though less notable economic life.

Certain social conditions prevented some communities from adopting innovations which were necessary for maintaining the continuance of their prosperity. Where society had been very definitely organised and a social system was stereotyped, many insensible hindrances opposed themselves to modification of any kind. Success in the new order of things depended on adaptability. Capitalists were organising industry on other lines, and opening up wider commercial connexions. Those who were unable to adopt the modern methods of business were necessarily distanced in the race. The industrial centres where the craft-gilds had been most vigorous and had retained their power most successfully, were at a positive disadvantage in entering on competition with neighbours who had imposed no such restrictions. Modern nations have incorporated the towns which were formerly so powerful and which failed to maintain the leading position they once held; this has been in part at all events because their very success under the old system rendered them incapable of giving a cordial welcome to the new.

In conjunction with this social obstacle to progress may be specially noticed the antagonism which was felt in many quarters to the introduction or the retention of alien and seemingly incongruous elements of population. The strength of the capitalist system consists in its ability to utilise the most varied elements. Both Holland, and to a less extent England, in receiving immigrants from other countries, increased their industrial resources by that most precious of all national possessions,—great skill in industrial employments of every kind. Varieties of type and of intelligence have been of the greatest importance in introducing new methods of business and improved processes of production; France and Spain, on the contrary, suffered severely from the policy which insisted on assimilating the whole population to conformity in religious and political thought.

Such were the trading and social conditions which placed capital at a disadvantage, and which determined those who controlled it to seek opportunities for investment in other lands. But there was one occupation throughout Europe which offered little attraction to the enterprising capitalist, and which therefore continued to lie almost outside the sphere of his operations. The agricultural system on the Continent in general was highly stereotyped. In Germany and Hungary serfdom remained; in Spain, France, and Italy vestiges of natural economy survived. Such a reorganisation of the population as would have produced better results presented great difficulties; while the introduction of improved methods often involved an outlay of capital and a diminished rate of return. The small proprietary and cultivating peasantry were destitute of the means of introducing improvements, even if the value of the change had been apparent. Some public works for the benefit of agriculture were undertaken by the Crown both in Prance and Spain; but it was only in Holland where there was a plethora of capital, and in England where the trade of the farmer was encouraged, that private capitalists became interested in the improvement of the soil. There was, as a consequence, little alteration in the condition of the rural population, and the first changes which occurred with the gradual introduction of capitalism were often for the worse. It was left for the social and political revolutions of the last hundred years to sweep away the system which had been previously left untouched by economic progress.

These were the general conditions that determined the ultimate distribution of the treasure which was brought from the New World. Transferred in the sixteenth century, partly in response to military requirements, partly by successful depredation, and partly by mere smuggling, this treasure sooner or later found its way into the hands of agents of commerce, who desired to use it as capital and who employed it in the places and avocations where they had most reason to expect a large profit. The actual return depended partly on social, partly on physical conditions; but the results that followed were curious and unequal, for while some of the more backward countries moved rapidly forward, making huge strides in wealth and material prosperity, whole classes in every community and large districts of continental Europe remained almost stationary, untouched and unaffected by the march of progress.

Nevertheless, though these great economic movements were retarded, they could not be wholly arrested. Capitalism has gradually overcome the medieval obstacles; it has swept away local exclusiveness, and has been the means of developing large economic areas. A revolution has taken place in business practice, and the breaking down of commercial restrictions is a change which has affected the traders in all lands. Industry has become capitalistic, and the whole foundation of trading relations and commercial morality has been altered so as to open indefinite possibilities to every merchant. Civic has given place to national economic life. At the commencement of the seventeenth century neither Germany nor Italy had become true nations, but in the course of time the European peoples have come to conform more and more to the larger type of organisation that had already arisen in England and in France.