The Forgotten Book that Helped Shape the Modern Economy

A British merchant's long-forgotten seventeenth-century book may not only fuel a radical rethinking about how modern economies developed in Europe and America, but also add historical perspective on today's hot-button issue of the proper relationship between government and business.

In his new book, Translating Empire: Emulation and the Origins of Political Economy, Harvard Business School historian Sophus A. Reinert unearths John Cary's An Essay on the State of England. Writing in 1695, Cary laid out a powerful case for how England, through muscular government intervention in economic affairs, could create national wealth based on manufacturing. This production would be fueled by an imperialistic British Empire, which through its expansion would provide the needed raw materials.

The book proved extremely persuasive at home and also abroad after being translated into French, Italian, and German. Government leaders and policymakers in each of these countries were influenced by the Essay's key idea that government should be a dominant player in helping shape economic development.

Of particular interest to Reinert is that modern-day economists and historians seemed to have forgotten this fact. "Where the consensus today is that eighteenth-century economists believed that free trade would bring peace and prosperity to all, the mainstream of political economy at the time was actually preoccupied with how trade could be a form of conquest and how political communities could best nurture and encourage their industries against foreign competitors."

We asked Reinert to discuss his book and some of its central ideas.

Sean Silverthorne: How did you get the idea for this book? I'm especially interested in how you hit on the format to hang your work on John Cary's little-known Essay on the State of England?

Sophus Reinert: My book is essentially about how political economy first emerged as an "academic science" in the early modern period, and about the actual ideas and policies—the national strategies of the 1600s and 1700s, so to speak—that successfully led to economic development and were therefore emulated in other nations at the time. The idea for it probably came from my love of old books, which allowed me to see quite starkly the discrepancy between past and present fame in the discipline of economics. The most printed and most translated books were just not the ones other scholars were talking about. I wanted to read and write about those books.

I first had the idea of hanging the book's structure on Cary when I saw on my shelf a number of increasingly voluminous translations sitting next to what to me seemed a distressingly tiny original. Cary's 1695 Essay had indeed been cumulatively translated three times (into French in 1755, Italian in 1757-58, and German in 1788). The Italian and German translators never even returned to the original English edition, and the work gained hundreds and hundreds of pages along the way. This provided me with a unique opportunity, because all the changes that were made to the text survived as archaeological layers for me to excavate. The ever-expanding Essay became my way of making sense of the larger question I was facing—namely, how a rigorous history of political economy overturned the classical narrative of Western divergence in the eighteenth century.

Q: Why is the Essay and its various translations written for other countries important for our understanding of the development of the political economy in Europe and the New World?

A: Because they help us understand the actual ideas and policies that were influential as Europe first took off relative to the rest of the world. They also shed light on the historical interconnection of businesses and governments at the dawn of real globalization. The reigning idioms of political economy, its proposals, and their implementation in the long eighteenth century were very different from the ideas later celebrated by the economics profession.

“We need to completely rethink what economic ideas were actually influential in that period.”

Whether or not we like it, we have to accept that European governments played a crucial role in assuring the Continent's competitive development, and that international emulation was a major vehicle of this process. This is something of which "founding fathers" from Alexander Hamilton to Manuel Belgrano were all too aware, and my book concludes by highlighting the historical irony of how European debates about political economy were translated with time across the Atlantic in the late-eighteenth and early-nineteenth centuries. Through acts of translation, and in the context of intense processes of international and even global emulation, what previously had been tools of empire became instruments of liberty; economic ideas once marshaled to the cause of imperialism were transformed into a political economy of independence in former colonies, a political economy anchored in the essential necessity of encouraging domestic industries on the British model.

Q: Why do you think Cary's work became so influential in those times and places? And why did it lose that influence, especially with academics, in the modern era?

A: At home, Cary became influential because he was an eloquent architect and popularizer of English imperial policies. In fact, he found ardent supporters in this all the way from lowly London artisans to intellectual luminaries like John Locke. Abroad he became influential because he revealed the economic principles driving England's success.

Cary was theoretically innovative in justifying the relative importance of manufacturing for national wealth and translated this insight into a sustained political and publishing campaign to ensure that the English and later the British Empire would consist of an industrializing core and a periphery producing and providing raw materials. He offered convincing arguments for extreme government interventions to ensure the development of domestic industries, and the profound and measurable success of these policies lionized him further, not only in England but also in the European world more broadly.

But as the British Empire matured, its policy needs changed and so did the way it understood its own self-image. When John Ramsay McCulloch essentially invented the British economic canon in the mid-nineteenth century, he downplayed the likes of Cary in favor of historical unknowns like Dudley North, a pamphleteer whose work had no impact and was never republished or translated, but who is today curiously thought to be representative of his age. This historiographical problem was clear to many historians in the 1920s and '30s, but was again unfortunately forgotten because of the direction in which economic theory developed in the postwar period.

Over the last few years, we have arrived again at an uncertain economic juncture in which a more historical perspective on economic theories and practices is acknowledged to be important. Our attempts to solve the present problems of the West will necessarily strengthen this trend.

Q: How does your research change the ways economists might think about the foundations and future of their discipline?

A: My analysis of the actual flows of economic translations in the European world between 1500 and 1849 suggests that we need to completely rethink what economic ideas were actually influential in that period. The mismatch between the ideas that historically had consequence and those that contemporary scholars have claimed to have had consequence is truly staggering. If we want anything like a realistic idea of how the world got where it is this has to be remedied.

“Our debates should be over what sort of interventions and what level of regulation is appropriate in a given context rather than whether regulation itself is a moral good or evil.”

Where the consensus today is that eighteenth-century economists believed that free trade would bring peace and prosperity to all, the mainstream of political economy at the time was actually preoccupied with how trade could be a form of conquest and how political communities could best nurture and encourage their industries against foreign competitors. In addition to ideas, the economic policies resulting from them in the early modern period will need to be engaged with more actively by historians and economists. It is now obvious that economic policies, even aggressively interventionist ones such as high tariffs, at times have had extremely beneficial consequences for some.

At the very least, this suggests that we need to acknowledge the possibility of positive synergies between governments and businesses and conceive of economics in light of this. And the policymakers and business leaders of the future can only benefit from a more accurate view of the role of government in economic development in the past.

Q: In the upcoming presidential race, this issue of to what extent government should regulate or encourage commerce will be a central debate. How does your research help us think about this question?

A: History is a mirror that is both reflecting and distorting, and can very seldom offer us easy answers to current problems. That said, it can raise the level of our debates on these issues.

We are stuck now, not only in the United States but in many European countries, in a polarized polemic in which pundits and politicians alike suggest to us that the essential question of political economy is one of choosing between planning and laissez-faire, between Stalin and Ayn Rand, between stupidity and intelligence. This is as specious as it is dangerous. The encouragement and regulation of economic life has been a mainstay of civilization since the dawn of written history. There have been periods of dogmatic laissez-faire before, though never on the scale we have experimented with since the 1980s, and it must be said, they have tended to end in famine, bankruptcies, and social unrest. Governmental interventions can of course create much mischief, but they have also nurtured practically every economic miracle we know of, from the commercial revolution in Renaissance Italy to the nineteenth-century USA to South Korea in the 1960s and contemporary China. This does not mean that governments always know what they are doing, far from it, but it does indicate that our debates should be over what sort of interventions and what level of regulation is appropriate in a given context rather than whether regulation itself is a moral good or evil.

Joseph A. Schumpeter once wrote that his reader would "have to make up his mind, whether he wants simple answers to his questions, or useful ones—in this as in other economic matters he cannot have both." Schumpeter's point is admittedly difficult to sell in the "sound-bite" culture of our political debates, but that's why it is so important.

Q: What are you working on now?

A: I am currently working on a book about Renaissance economics and its legacy. In all fields of human endeavor, from art to zoology, the Renaissance is praised as one of the most creative periods in human history. Yet in economics, it is simply discarded as an era of wrongheaded "mercantilism." My new book aims to look beyond that by analyzing the nature and politics of capitalism as it first emerged in the different Italian city-states of the late Middle Ages, by seeing how subsequent economic development was first theorized there in the late Renaissance, and finally by embracing the enduring ideas and institutions that it bequeathed us.

Some of the issues I consider are the cultural origins and reflections of capitalism; the rise of accounting and accountability; the origins of industrial policy in the West; and the ways in which merchants and bankers thought about risk, particularly the deadly risk of international trade. Just to take one example: Roughly 2 million Europeans sailed eastward around the Cape of Good Hope with hopes of economic gain in the early modern period, and less than 1 million made it back. This is not because they all married beautiful Fijians and settled down, but because they died prematurely. This tells us a great deal about the nature of early capitalist ventures and the economic culture we have inherited. This was not merely casino capitalism, it was Russian roulette capitalism.

Finally, I do close readings of the actual economic texts of the time, particularly of those related to the so-called reason of state tradition, from Machiavelli to Giovanni Botero and Antonio Serra, generally acknowledged to have been the world's first economist. Harvard Business School is uniquely able to facilitate such research. Not only does Baker Library hold one of the greatest collections of Medici manuscripts outside Italy, it is also home to the Kress Collection of Business and Economics, arguably the most comprehensive collection of early economics found anywhere. The institution in effect has a very long history of engaging with such questions, dating back to its first dean, Edwin F. Gay, and it is simply an extraordinary place to work on the deep histories of capitalism and economics.