MONETARY THEORY AND CAMERALIST ECONOMIC MANAGEMENT, C. 1500-1900 A.D. BY PHILIPP RÖSSNER* Abstract More than England and other states the German principalities were, in the preindustrial period, hampered by silver outflow and persistent pressures on the balance of payments which led to idiosyncratic models and strategies of economic development usually but not entirely helpfully called “Cameralism”. It is less well understood how Cameralism as a policy of order and development and monetary theory went together. The present paper will attempt a sketch of these working mechanisms as well as provide a few angles for new perspectives and future research. A first section after the brief introduction studies general issues of development in relation to balance of payment constraints (II), followed by the discourses on whether the domestic currency ought to remain stable in terms of intrinsic (silver) value (III), or whether it may be debased so as to raise domestic exports and competitiveness (IV). Both options were considered, at times and by varying actors, as valid strategies of promoting economic development, especially export-led growth, although most contemporaries viewed coin debasement as harmful to the economy. A fifth section discusses an alternative to the aforementioned strategies, by raising effective monetary mass through increasing velocity. Since the middle ages and into the nineteenth century the German economic tradition had a clear understanding of how velocity could be managed and the common weal stimulated by an increase in “vivacity” of circulation (V). Upon hindsight it appears that we find here a powerful programme towards promoting economic development and Europe’s rise towards capitalism. A conclusion will offer some thoughts for further research (VI) *University of Manchester, Manchester, England. Email: [email protected]. I would like to thank Lars Magnusson and Carl Wennerlind for commenting upon earlier drafts and aspetcs of the paper presented at various conferences and workshops, as well as the two anonymous referees for the JHET. The usual disclaimer applies. This “preprint” is the peer-reviewed and accepted typescript of an article that is forthcoming in revised form, after minor editorial changes, in the Journal of the History of Economic Thought (ISSN: 1053-8372), volume 40 (2018), issue TBA. Copyright to the journal’s articles is held by the History of Economics Society (HES), whose exclusive licensee and publisher for the journal is Cambridge University Press (https://www.cambridge.org/core/journals/journal-of-the-history-of-economic- thought ). This preprint may be used only for private research and study and is not to be distributed further. The preprint may be cited as follows: 1 Rössner, Philipp. “ Monetary Theory and Cameralist Economic Management, c. 1500-1900 A.D.” Journal of the History of Economic Thought 40 (forthcoming). Preprint at SocArXiv, osf.io/preprints/socarxiv 2 I. INTRODUCTION: MONETARY MANAGEMENT AND STATE INTERVENTION AS POSSIBILITIES FOR DEVELOPMENT IN PRE-INDUSTRIAL EUROPE Recent research has stressed the fallacy of the “free market” paradigm. Even the perfect markets of today’s capitalist economies are tightly regulated (Harcourt 2011; Stanziani 2012; Rössner, ed. 2015c). What historians of economic thought have often tended to forget is that this idea, almost a truism, has had a long intellectual history as well as tradition as applied policy. Historical evidence shows that since the last half-millennium or earlier (see Reinert 1999), Europe’s rise towards capitalism and modern economic growth took place under the fetters of order, regulation and state interventionism. Without a sense of order and state intervention, the mere concept of economic freedom would sound counter-intuitive (Sombart 1921; Braudel 1982-4, vol. 3; Vries 2002; Vries 2015; Reinert 1999; Reinert 2007; Epstein 2000). Neither did the world become more liberal, nor did the state withdraw from the economy in any way after c.1800 (Stanziani 2012; Magnusson 2009). But whilst means and theories of state interventionism post-1800 are increasingly well understood by historians and economists (summaries in Reinert 1999, Reinert 2007, Vries 2006), the pre-1800 period, which in many ways laid the pre-conditions for later economic growth (van Zanden 2009), still remains understudied. In an age when neither modern states nor modern economies existed, state intervention in the economy came across in shapes and forms profoundly different from what we have learnt to view as “economic policy” nowadays. And as late as the nineteenth century, state interventionism looked very different from twentieth-century economic governance (Hall 1986). Even the more powerful fiscal military states of the Ancien Règime (Bonney 1999; Yun-Casallila and O’Brien 2012) had a fairly limited strategic menu of economic policy choices available at their disposal (Magnusson 2009, chs. 1 and 2). These usually extended to basic means of regulatory policy, especially market regulation, including price caps (usually at times of harvest crises), prohibitions of usury and forestalling; quality controls, or regulation of access and market hours.1 England was an exception, with a somewhat deeper history of economic interventionism. Industrial and economic development had been state-promoted since the middle ages, in particular by the stimulus which the woollen manufactures received by the policy of bounties and export prohibitions on raw wool since the later fifteenth century 1 We still lack a systematic account of government policies regarding the economy (state interventionism, so to speak) in the pre-modern age. But useful remarks are to be found in Magnusson 2009, ch. 2, Vries 2015 (with a focus on early modern England and China), as well as Reinert 1999, with a focus on the theory and history of economic thought relating to the state and the economy pre- and beyond 1800. 3 (Reinert 2007, ch. 3). But similar prohibitions are known from the German Imperial Diets of the 1530s (e.g. Blaich 1970) and many other European regions; there is still scope for large- scale comparative surveys. New research has found proactive interventionist states at work in the eighteenth-century Habsburg Netherlands (Flanders) as well as Scotland, which worked according to the modern Infant Industry promotion scheme (ISI) (Coenen 2016; Rössner 2015a).2 To what extent such measures were effective, still remains a matter of mystery; comparative long-term studies on European economic policy and economic growth are still wanting.3 One major branch of economic policy and state intervention that has evaded the radar of historians so far, was monetary policy and monetary management. Indeed, it is in the realm of monetary policy as a “policy of order” – which the German language still has as Ordnungspolitik (Eucken 1950; Woll 1999, pp. 8-17) – where we find a rich economic discourse, mainly in continental Europe but in particular the German lands since the fourteenth century. We find competing paradigms on how the well-being of the common wealth – the emerging “states”, nations and national economies in early modern Europe, which did not yet quite exist in their commonly-recognized post-1800 shapes yet were in the making – could be raised by a well-designed monetary paradigm, policy and management. This discourse has remained underexplored, both in regards to its possibilities of actively interfering with the economy and thus the promotion of the common weal, as well as in terms of its general contributions to modern economic reasoning.4 It is these underexplored lines of the continental economic discourses, sometimes called “Cameralism” (on the virtues and pitfalls of this nomenclature see Rössner 2015b, 2016), that provide a new vision not only of the rise of the modern state but ultimately also the rise of modern capitalism. These lines of thought will be explored in the present paper, with specific regards to Cameralist monetary theory; Cameralist economic practices have been dealt with elsewhere (e.g. Rössner 2012). Similar to its step-brother mercantilism “Cameralism” represents in many ways a misnomer. It implies a degree of epistemic stringency it may have never had. Apart from the 2 As the present paper is mainly concerned with ideas and not practice of state interventionism in the economy, the reader is referred, for policy implementations and “real” trajectories since the middle ages, to the following works: e.g. North, Wallis, and Weingast 2009; Epstein 2000; on Germany in the early modern period, see, e.g., Blaich 1970, Blaich 1973, and Blaich 1992. An interesting case study for Württemberg around 1500 is Weidner 1931. For early modern Britain, see Parthasarathi 2011, and Ashworth 2003; further Hoppit 2011a, Hoppit 2011b; Sickinger 2000; Gambles 2000. For global comparison, see Vries 2015 and Vries 2002. 3 The present author is currently completing such a comparative long-term survey for the European economy since the Renaissance. 4 An excellent sketch, however, that goes into this direction is Reinert 1999. 4 fact that not even the modern economic sciences have ever been fully paradigmatic or “closed” theories (such as Keynesianism/Post-Keynesian economics, Neoclassical Economics, Monetarism etc.), eighteenth-century Cameralism was at least sufficiently codified and “canonised” to a degree to classify as a visible and peculiar economic theory. Since the 1720s Cameralism was a fully accredited course of study at German, Swedish, Italian and