Part One: Understanding the Rise of the Modern State. The modern state, as we know it today, arose in Europe. In part one of my larger essay Understanding Global Hegemony and its Implications, I will first discuss the role of agriculture in the rise of the modern state and then study the roles of the kings, the nobles, and the merchants in the creation of the modern state. We will then focus on how this relates to mercantilism (also known as economic nationalism or realism). Remember that by definition the modern state must have territory (land), people, a government, and that government is considered to be sovereign. State sovereignty developed with the signing of the Treaty of Westphalia in 1648 that ended the 30 Years War in Europe. States protect their citizens, enforce economic contracts, protect private property, have the ability to tax their citizens, and have a legal monopoly on the use of force or have the authority to use force within their borders. States are the highest authority over their land and people.
From the 1400s through the 1800s the major form of economic activity in Europe was agriculture. Agricultural goods made up more than 80 percent of all economic activity. Even as late as 1929 on the eve of the Great Depression, agriculture made up 60 percent of all international traded goods. Thus, wealth during this period was primarily a function of surplus agriculture. Three major actors played a role in the creation of the modern state: kings, nobles, and merchants. Each sought to control the agricultural surplus that was based upon peasant-based agriculture during most of this period. By the 1800s, the most powerful states had created durable compromises between the kings, merchants, and nobles that allowed the creation of a well-armed military capable of suppressing the local peasantry, fending off threatening neighbors, and aligning the interests of the nobles and merchants with the central state or king.
Early in this period there was a problem with wealth primarily based on surplus agriculture in a peasant based system. It is difficult to extract wealth from agriculture largely due to infrastructure (transportation issues), especially over land. Because of the transportation issue over land, micro-economies developed. Micro-economies typically took the form of a market town with a 20 mile radius of access to agriculture and existed as late as 1800. Why only 20 miles? Travel by wagons pulled by horses was largely limited to 20 miles a day. Those bartering or selling the agricultural product in the towns had to bring enough extra agricultural product to pay for their own trip to and from town. Much of this trade took the form of barter as there were no banks and often there was no medium of exchange such as gold and silver. Most economic activities occurred within these micro-economies with very little occurring outside them. By 1490 political units in Europe were typically made up of two micro-economies, thus about 40 or so miles in radius.
Two exceptions to the limits of land transportation were access to wind power via wind mills or water power via water mills on rivers and streams. Nobles came to dominate micro-economies after the collapse of the Roman Empire. Nobles controlled the land or the feudal estate. Land that could make use of water or wind power to create mills that could grind the grain for bread and make it easier to transport agriculture over land if it was necessary. Peasants were forced to work and live on the land owned by the nobles. They were provided lodging but had to pay rent in terms of working the fields to grow agricultural products for the noble and themselves. They also had to pay rent to use the mill. The nobles, who did not work the land, were trained in the skills of warfare and riding horses. This was necessary to fend off other nobles who may want to take their land and to suppress the peasants if necessary. Since the feudal estate created and consumed virtually everything it needed, there was little need for “money” as a medium of exchange. Barter was the primary form of economic exchange. In one sense, this created a mobile people (the nobility) who controlled an immobile agricultural surplus.
Nobles were linked together through a network of hospitality that allowed them to travel from one feudal manor to the next without carrying grain or needing “money.” Most feudal manors were no more than one day’s ride via horse. These social and hospitality networks were based on marriages of the children of the nobles.
Nobles had everything they needed except luxuries. By definition a luxury is anything that cannot be produced on the noble’s estate. Luxuries had to be purchased from merchants in the towns. Thus, the nobles only needed enough “money” to purchase luxuries from merchants. This is important because nobles often opposed the monetization of the economy (using gold/silver as a medium of exchange for all economic activities) and this brought them into conflict with Kings and merchants who desired to monetize the political and economic units.
In reality, all nobles were “wannabe” Kings. The authority of Kings was weakened by several factors. Nobles owned much of the land and wealth was in the form of agricultural surplus which the nobles controlled. Nobles were autonomous military powers as they were trained in warfare. The king was also limited by the nature of his/her relationship with the nobles, such as mutual defense obligations. Kings ultimately desired to centralize the micro-economies into a centralized state that they could control. They could control these micro-economies through a state bureaucracy which controlled information (laws, orders, and reports) and money via taxes. In order to centralize and create a larger political unit or state, the economy had to be monetized. Kings also wanted to centralize power (the means of violence). This could be problematic given that often nobles controlled independent military forces. The kings wanted to shift control over law, taxation, and wealth from the nobles to a centralized bureaucracy which they controlled. In order to monetize the economy, Kings had to gain access to money (gold, silver, and copper). The merchants controlled access to the gold, silver, and copper at this time. Kings also had an external problem, other ‘wannabe” kings. The only way to increase wealth was to take land from other kings and nobles. To fight other kings and nobles, the king needed a large army with better equipment. At this time kings had to pay nobles and their armies to fight for them. This created another need for access to money (gold, silver, copper). Kings initially turned to merchants.
Merchants were typically located in towns along well established over land trade routes or in towns along waterways. Merchants largely traded in luxuries which required money. I should note that it wasn’t until Kings established centralized law and order that merchants came to be involved in large amounts of bulk goods such as grain, wool, timber, and pitch. The merchants were the first then to build extremely large wagons to trade in bulk goods. For long distance trade over water, merchants either built or controlled ships for transport. Trade between merchants in different cities were based on contracts. Merchants established water (river and seas) trade routes that linked major cities, even outside of Europe. Because of the ease of water transportation, cities along rivers and seas often accumulated bulk food stuffs in surplus. This brought people to live in the cities and the population to grow because of the greater food supply. Merchants were true capitalists, they wanted to make money with minimal interference by the kings or nobles who often stole from them. They did want law and order and a monetized or central economy. Some of the wealthier merchants created a network of armed trading cities such as the Italian city states and Genoa.
So, kings, nobles, and merchants were powerful actors that had some common interests and some conflicts of interest. Kings were powerful because they owned land and usually had control over some military forces. Their authority was based on the Church until 1648 and then they became sovereign. Nobles were powerful because they also owned land and had access to military forces. They were largely self-sufficient. Merchants were powerful because they had access to money (gold and silver) and larger external markets via shipping routes on land and water. Kings and merchants had several things in common. They wanted to unite the micro-economies into a larger economy. They wanted to monetize the economy, centralize the state and create a better infrastructure. They wanted to give the state the ability to enforce economic contracts. Much of this was opposed by the nobles. Merchants and nobles were fearful of the King’s power and thus wanted to limit the King’s power legally via advisory councils and later legislative assemblies. This was often opposed by the king. The King was often in debt to the merchants and needed the military capabilities of the nobles. Kings and nobles wanted to unite to some extent to provide security from internal peasant uprisings and other nobles and kings. Kings and nobles often developed social, military, and legal relationships often through marriages and bloodlines. All wanted to define and protect private property (land) and to control the agricultural surplus.
During this era, warfare was almost constant. Kings had a fixed source of wealth beyond taxation of the surplus agriculture. By working with merchants in the mid-1400s they started going abroad looking for gold and silver for their treasuries. This also included luxury items and some bulk agricultural items not found in Europe such as corn and potatoes. A regularized global trade network was established. Each state competed with other states for control of its own global trading networks. This is known as colonialism and the earliest states to do this were Spain and Portugal.
It was the “working out” and compromises of the conflict and common interests of the kings, nobles, and merchants that gave rise to the modern state as we know it. Kings wanted to create a strong, centralized state largely via military power (security) and wealth through a state treasury with a monetized economy. To create this state, kings developed an economic policy of mercantilism (economic nationalism or realism). Mercantilism had internal and external components to it. The internal goal was to create a strong centralized state and the external goal was access to and control of external or foreign markets, especially those with gold and silver. The gold and silver was then placed in the state treasury and was used to continue to centralize and build the modern state as we know it. In sum, the modern state was defined by the intersection of the economic and political interests and conflicts between kings, nobles, and merchants and mercantilism was used to create it.
It should be noted that outside Europe, Imperial China reflected a total victory by the monarchy and its centralized bureaucracy over the merchants and nobility and was even more absolutist than European states. In the Indian Ocean and the southeast Asian archipelago, merchants came to dominate in a way that the merchants in Europe could only envy.
In Part Two of Understanding Global Hegemony and its Implications, I turn to the rise and decline of Great Britain as the first global hegemonic power.
For more information please see the writings of Herman Schwartz, J.H. Thunen, Paul Krugman, Charles Tilly, and Charles Kindleberger.
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