History 104: Western Civilization since 1648
Lecture: 18th Century Society and Economy

Economy Click here for audio

The 18th century also saw a big shift in economic thinking. Mercantilism had been the paradigm of the 17th century. It was based on three ideas:
1) There's a finite amount of wealth in the world. Thus one nation becoming richer meant others became poorer.
2) Wealth is gold and silver. Called "bullionism", this meant that nations tried to keep gold and silver within their countries, and export goods.
3) The government should control the economy. This idea is expressed in these documents:

But in the 18th century, new ideas were emerging. Perhaps there was plenty of wealth to go around. Perhaps dominating trade was as important as hoarding bullion. Perhaps free enterprise could create a better global (and national) economy than government control could do.

This new approach will eventually be called Classical Liberalism, and is based on Smith's ideas. I'd like you to think of it as the economic verson of John Locke's political liberalism. In both concepts, freedom is the foundation. For Smith and economic liberals, it's the freedom of trade -- free trade will create the best world for all. For Locke and political liberals, it's freedom within the body politic.

We're using the word liberal, then, in its 18th (and later 19th) century context: do not confuse this with the twisted way we use the word today! Liberals valued freedom over either stability (valued by conservatives) or equality (valued by radicals). In the U.S. today, both the Republican and Democratic parties are conservative liberals.

6. Concepts of warfare->