The Rise of Commercial Empires: England and the Netherlands in the Age of Mercantilism (review)

How does Smithian growth really take place? Economic logic tends to portray the rise in international trade as a spontaneous, market-driven phenomenon, in which the lower cost of transportation and trading stimulates and enhances long-distance commerce in a world of differentiated factor endowments and technology. The best that the state can do is to encourage trade as little as possible. In this richly documented and deeply researched comparative study of British and Dutch international trade between 1650 and 1770, Ormrod provides a detailed study of how Smithian growth really happened in the age before Adam Smith. Clearly, the author feels that in a mercantilist world, the notion so beloved by modern economists that free trade equals more trade and therefore more economic welfare does not hold with the same force.

Ormrod shows repeatedly how the rise of British hegemony and its replacement of Dutch commercial supremacy from about 1690 onward was a result of aggressive policy, protectionism, a tight control of the colonial trade through the Navigation Acts, and a successful defeat of the Dutch and others in a ruthless pursuit of greed. Britain's dominance came about in part because British economic policy was coherent, determined, and backed up by the world's most powerful navy and a government that did not hesitate to use it. Furthermore, the state was fiscally sound, having learned how to tax its citizens without having them rebel or withdraw too much effort and, by comparison, it spent its money wisely. Ormrod's view is that the expansion of the market and the growth of government policies supporting it went hand in hand. The contrast with the United Provinces is telling: The United Provinces was a decentralized and overtaxed confederation of cities and regions, with little coherent state apparatus. The Dutch commercial decline, Ormrod submits, was closely connected to the weakness and incoherence of its trade policy.

Following an introductory chapter, the book consists of three parts—a description of the international trade patterns and the competition between the two nations; a more detailed set of studies about the main commodities (wool, linen, grain, coal, and the staplemarket); and a final two chapters on shipping, war, and protection that describe the collapse of the Dutch hegemony in the eighteenth century and the "divergence" of Britain. The book has little to say about the Industrial Revolution, although it hints that protectionism and an emphasis on self-sufficiency in Britain were deeply engrained enough to "encourage industrial development" (345). The book displays a great deal of the kind of important research that makes people admire the hard work that economic historians do. As an example, consider Ormrod's painstaking recomputation of the value of British eighteenth-century re-exports (189) or his re-estimation of British coal exports to the Netherlands, which demonstrate his meticulous research and familiarity with the kind of quantitative information that the eighteenth century has left us.

The odd thing about Ormrod's scholarship, however, is that although he continuously handles economic terms and concepts, he seems blissfully innocent of the theory that economists have been using to understand them. Indeed, he seems contemptuous of it: He notes that Wallerstein's world-system perspective (about which he otherwise has little good to say) "is a useful corrective to neo-classical theory" (9), a remark that would generate howls of laughter in an undergraduate economics class.¹ Ironically, a little bit of neoclassical, or any other, economic theory might have helped Ormrod to write a truly important and insightful book rather than just a descriptive one.

Ormrod observes a British economy that became highly protectionist in the eighteenth century, and experienced an amazing growth in trade. Before, however, we merrily jump to the conclusion that economic theory (which favors free trade and characterizes it as a...