European Economic History: How Enlightenment Ideas Influenced Contemporary Economics

Posted: January 4th, 2023

[Name]

[Professor]

[Course]

[Date]

European Economic History: How Enlightenment Ideas Influenced Contemporary Economics

Although commerce typically promoted self-centeredness, and often greed, it also inspired to mitigate other adverse societal aspects, especially regarding governments, thus eventually enhancing social harmony, from an economics point of view. The era of the Enlightenment proved to be a critical revolutionary period in global history since it changed te perception regarding how European societies viewed the association between the ruled and the ruler. As the 1700’s progressed, the role of economics became even more significant in the enlightenment because of the drastic transformations that were occurring in society since the commencement of the Industrial Revolution. Consequently, to keep abreast with the fast advancing technological alterations impacting the European economies, particularly within the economic sphere, Enlightenment philosophers started considering the role played by the mercantile in individuals’ lives and the ways in which it suppressed freedoms. Enlightenment thinkers throughout Europe questioned customary authority and incorporated the belief that it was possible to improve humanity through rational change, which was achieved through revolutions, wars, laws, scientific discoveries, essays, and books and their thoughts continue to impact on current societies and economies.

Background

Also referred to as the Age of Reason, the enlightenment describes a cultural and intellectual movement during the 18^th century that accentuated nous above superstition and science above visionless faith (Mokyr 285). In global history, the period roughly corresponded with the mentioned century, originating from the Great Britain countries, the German-speaking kingdoms, and France, then spreading to the remainder of Europe and the continents colonies. The period saw the rise of philosophers such as Voltaire, Rousseau, and Locke, who promoted an ideology of political freedom, and ultimately influencing a critical shift toward more republican and democratic governments towards the end and the start of the 18^th and 19^th centuries respectively. Essentially, it was during the 1700’s that the thoughts of the previous century were executed on a broad scale.  According to Robertson, in academia, the comparatively novel areas of mechanics and calculus started to influence the philosophers regarding the universe’s workings (136). In particular, while Thomas Hobbes’ and Locke’s political ideas provided fodder for the rise of the democracy notion and eventually supplanted the monarchical authority structure in the continent, Adam Smith’s economic thoughts served to offer an intellectual foundation for the advancement of contemporary capitalism.         

However, despite the enlightenment era being more popular today because of the political thoughts emanating from it, the period also gave rise to pioneering changes in economic hypotheses and practices that occurred within its milieu, most of which are practiced to date.[i] Scholars continue to spend so much time exploring the possible effects of the enlightenment era on modern times and as studies and research reveal, the period laid a fundamental foundation for contemporary practices.

Literature Review

Staring in the world’s history of the Early Modern Period, approximately in the 16^th century, consistent with the Exploration Age and the urgency to surmount and lay claim to the New World, a novel economic system started in Europe. The historic feudal economy was substituted by mercantilism, a financial structure in which the mother country exploited the resources inherent in her colonies and subsequently sold the manufactured products in the colonies (Barnett 258). For some time, the structure functioned well, but during the start of the 18^th century, innumerable challenges became apparent. Ultimately, enlightenment thinkers realized that the mercantile system was not only inadequate, but in many ways, it was an anathema to the elementary ideas characterizing enlightenment. Further, the economic thoughts of Hume, smith, and others were finally promoted by the leaders of the then most powerful nations, which augmented the push to embrace contemporary Gold Standard and contemporary capitalism that thrives today.

Concerning economics, the thinkers believed that, in spite of commerce propelling thoughts encouraging self-interest and greed, it simultaneously helped to lessen other adverse societal phenomena, especially regarding governments, and in so doing, eventually indorsing social harmony. In the century preceding the Age of Enlightenment, the economic structure significantly muffled individual thought (Peters 889). Among the most significant ways that thinkers in the era con tribute to contemporary economy is through their literary works, in which they espoused more open governments, and correspondingly, more open economies. For instance, David Humes, a Scottish philosopher, was one of the most renowned writers during the British Enlightenment (Israel 335). Among his most important writings were “The History of England” and “Essays” in which, despite not concentrating on macroeconomics or international relations, formed his thoughts on these particular matters across all his other works. His specific thoughts on economics were relatively revolutionary and nuanced for during the era. He believed that the nation state was fundamentally a good conception and tat health amounts of country pride would emanate in the economic wellbeing, including progression, of sciences and arts (Jones 79). Akin to Smith, he opposed the modern economic structure of mercantilism since he possessed the belief that it disadvantaged free trade by imposing export controls, which influenced the ripple effects of stifling free will in general. Thus, Humes was one of the pioneering thinkers to call for autonomy in commerce, which is still practiced today. His vision was of “free” commerce un-hampered by tariffs, geographical boundaries, and other levies on imports. Essentially, he argued that foreign transactions increased the labor stock within a nation, which can in turn be utilized for public works initiatives.

Additionally, Humes held the notion that imports represented a sign of wealth within a nation’s economy and that elevated volumes of imports typically con tribute to an influx of more luxury c0ommodities, which sooner or later meant that the populace would be better-off (Schabas and Wennerlind 95). As per Hume’s perception, under a truly unrestricted economy, trade imbalances would not pose a challenge and that the weight of silver and gold leaving the economy in such a structure would be negligible since foreign ventures would be enhanced because of the inexistence of tariffs. Despite Humes acknowledging that wars were often inevitable, he also believed they played critical roles in disrupting economic advancement. He suggested that any benefits accrued from territorial subjugation were typically mitigated by the reality that the wars disturb free trade, lead to a lazy workforce, and become costly and increase national debt (Schabas and Wennerlind 96). In the end, the whole concept of a monarchy was financially destroyed, which was a compelling reason for its abolishment. Humes maintained that monarchs were ordinarily beneficial to the mother territory in the start, but almost always started heaping financial burdens on it, and ultimately hurting the general economy. His revolutionary economic thoughts resonated with some of his fellow Enlightenment Age philosophers, no more so than Adam Smith, a Scotsman.

Smith, perhaps one of the most popular economic philosophers, synthesized and enhanced most of Hume’s principal economic hypotheses to introduce a worldview that continues to influence international economics. In his most famous publication, The Wealth of Nations, as well as his previous, yet no less significant, The Theory of Moral Sentiments, Smith contends that economic autonomy was tangled with political liberty and that most societal paybacks were actually the proceeds of greed (Wight 342). Accordingly, smith’s philosophy was tremendously optimistic, since he contended that individuals were innately good and that the economically-inclined people would aspire to better themselves while concurrently indorsing the society’s welfare.

However, the aspect that made Smith a renowned revolutionary economic philosopher was his vociferous opposition towards the historic economic order. As outlined by Wight, Smith truly believed that the mercantile commerce structure was obsolete and fundamentally unfair since it undermined any endeavors to conduct or build a just, honest government (342). Akin to Hume before him, he reasoned that the unrestricted exchange of goods would contribute to a greater, far-reaching political autonomy characterized by the free interchange of ideas. Within the previous, perceived unjust mercantile structure, the governments subsidized corporations, for example, the British East India Company, which was given a monopoly to exert control of all commerce in a given colony, although Smith contended that the system’s benefit might have offered to the majority of a society were trifling at best, being more of a detriment most of the time. Specifically, Smith stated, “But these kinds of monopolies derange more or less the natural distribution of the stock of the society: but they do not always derange it in the same way” (West 832). Despite Hume being a pragmatist like Hume and being cognizant to international trade would not deter wars and that countries wielding more authority would dominate over the weaker ones, he opposed interventionism nevertheless (Forman 144). Most of Smith’s works emanated during the decades preceding the American Revolution, and he cited the phenomenon as illustrations of colonialism’s idiocies. To him, colonialism was pointless and unnecessarily costly. For instance, the reality that states subsidized companies undertaking colonialism in Africa were habitually inefficient and tended to depend on state bailouts. Smith was of the thought that mother countries mad unwarranted economic interventions since, if the British empire provinces could not be compelled to contribute towards supporting the entire empire, it was certainly time to free herself from the costs of defending those communes during war times, and supporting any of their military or civil establishments during peace times. Instead, they ought to exert efforts in accommodating the region’s future perspectives and schemes to the actual mediocrity of her state of affairs.

Consequently, the thoughts of the economic thinkers during the 18h century influenced the ensuing economic systems. During the late 18^th century and the early 19^th century, the economic policies implemented by the most developed countries globally closely resembled what the philosophers imagined (Israel 313). In the ensuing periods, governments that tended to subsidize monopolistic corporations started dwindling, tariffs and associated commercial restrictions became less prevalent, with the Classical Gold Standard being the main economic system. Similarly, since the, monarchies and imperialisms came to a steady end, representing the zenith of one political and economic order and heralding the commencement of another, in many perspectives that endure to date. Today, people prefer a free market where they indulge each other without unnecessary regulations, and the aspect of economic globalization creates the urge for more indulging leadership. Consequently, economic historians have hailed the Age of Reasoning as the underpinning of contemporary western intellectual and political culture, which in turn, led to the start of economic freedoms through democratic institutions and values, as well as the creation of current, liberal democracies. Despite pushing for absolutism, another scientist and philosopher, Hobbes, developed various fundamentals buttressing European liberal ideology: the liberty of the person; the natural parity of all men; the simulated character of the prevailing political order; the perspective that all authentic political authority ought to be representative and based on people’s consent; and the liberal interpretation of the Constitution that leaves individuals free to undertake whatever they deem fit, as long as it is within the law’s confinements (Clave, Soto and Pinilla 223). However, Hobbes was deemed as being vague, although he demonstrated his comprehension of a framework for value and a commercial structure that requires peace and stability to function. The mentioned aspects have more than ever proven to be critical factors to ensuring economic growth among the dominant powers in contemporary politics.      

Conclusion

Undoubtedly, the Enlightenment thinkers Humes and Smith ineradicably influenced contemporary economics. Their literary criticism of the mercantile economic structure, especially the perception of imperialism and government-subsidized monopolism, impacted economic and political leaders throughout the 1700’s, leading up to the latter centuries and thriving to the present time. In addition to changing political attitudes and beliefs that stifled trade, the Enlightenment thinkers made it possible for the global leaders of the then most authoritative states to consider a liberal economy that respected individual participation and choice, which continues to date. Therefore, the Age of Reasoning is a momentous period in economic history since its effects persist to date. Current and future researchers should acquire so many lessons from the past thinkers and incorporate or expound their studies on areas they think require more evaluation to expand people’s understanding of how the era is important today.

Notes

[1] In the words of Isaiah Berlin: “The intellectual power, honesty, lucidity, courage and disinterested love of the truth of the most gifted thinkers of the eighteenth century remain to this day without parallel. Their age is one of the best and most hopeful episodes in the life of mankind” (1).

Works Cited

Barnett, Vincent. Routledge Handbook of the History of Global Economic Thought. Routledge, 2014.

Berlin, Isaiah. The Age of Enlightenment. The Isaiah Berlin Virtual Library, 2018.

Clave, Palabras, Alejandro Pérez y Soto and Katherine Flórez Pinilla. “Thomas Hobbes: The Modern Economist.” Praxis Filosófica, vol. 44, 2016, pp. 221 – 250.

Forman, Fonna. The Adam Smith Review: Volume 9. Taylor & Francis, 2016.

Israel, Jonathan. Democratic Enlightenment: Philosophy, Revolution, and Human Rights 1750-1790. Oxford University Press, 2013.

Jones, Peter. The Reception of David Hume in Europe. A&C Black, 2005.

Mokyr, Joel. “The Intellectual Origins of Modern Economic Growth.” The Journal of Economic History, vol. 65, no. 2, 2005, pp. 285-351.

Peters, Michael A. “The enlightenment and its critics.” Educational Philosophy and Theory, vol. 51, no. 9, 2018, pp. 886-894.

Robertson, John. The Enlightenment: A Very Short Introduction. Oxford University Press, 2015.

Schabas, Margaret and Carl Wennerlind. David Hume’s Political Economy. Routledge, 2008.

West, E. G. “The Burdens of Monopoly: Classical versus Neoclassical.” Southern Economic Journal, vol. 44, no. 4, 1978, pp. 829-845.

Wight, Jonathan B. “The Treatment of Smith’s Invisible Hand.” The Journal of Economic Education, vol. 38, no. 3, 2007, pp. 341-358.

---

[i]