Gustav Schmoller’s account
According to Schmoller, what makes this system coherent and explains the support that it generated was that it was the response best adapted to the historical circumstances that characterised Europe at the end of the Middle Ages.
This response was extremely modern. Between the fifteenth and the seventeenth centuries, he observed, Europe moved from a particularist and local phase, organised around towns, districts or small territories, to a national phase that itself was based, from the seventeenth and eighteenth centuries, on establishing national states and national economies. This process of unifying a large territory, one illustration of which is Frederick II’s Prussia, was inseparable from a “selfish national policy of a harsh and rude kind” (Schmoller 1884 [1902]: 77). Reacting to these new circumstances, the young nations, driven by a “strong and exclusive feeling of community” and a “spirit of violent rivalry” (ibid.: 62), were led in their search for self-sufficiency, independence or supremacy to imitate and expand at the international level the policy of small trading entities of the Middle Ages (ibid.: 63-4, 73). The doctrine of the balance of trade was just a consequence of this process of expanding trade between these new nations. The essence of mercantilism lay neither in this doctrine, nor in a particular doctrine of money, or even in protectionism, but in “something far greater” (ibid.: 51), namely, the transformation of national political communities into national economic communities. Considered as a “state-building system”, mercantilism connected the establishment of political institutions and the search for the means of prosperity and national power in a coherent way.However, Schmoller did not cling to the stereotype of the subordination of economic objectives to political or strategic objectives. On the contrary, he thought that the two objectives were achieved simultaneously (Schmoller 1884 [1902]: 50) and sometimes he even inverted the relationship of subordination (ibid.: 69). As for the idea of trade as competition between nations and possibly as a zero-sum game, Schmoller did not make this a question of principle, but of context: historical circumstances were that international trade had been reduced to a series of opposing interests between states that had recently emerged, all eager to maintain or to improve their position in the “circle of European nations” (ibid.: 50). The doctrine of the natural harmony of national interests was no more justified than that of the conflict of these same interests. The second simply prevailed more in a context of the formation of colonial empires (ibid.: 63).