The Old Mercantilism

The typical economic institution of the old mercantilism was the merchant trading company, operating under royal prerogative, or similar monopoly, granted in the metropolis. Operations in the peripheral areas extended from exploration, plunder and exchange to the organization and financing of local cultivation or ex­ traction or staples, whether of tropical commodities such as tobacco, sugar and cotton or of temperate ones such as fur and fish, for the metropolitan market. The particular institutional forms within which production was organized and the particular relationship between the producing establishment in the hinterlands and the metropolitan-based mercantile enterprises became important formative factors in the foundation of the different New World societies.

Broadly speaking, the old mercantilism was a system in which metropolitan merchant enterprise supplied the hinterland with goods, organized the sale of staples on metropolitan markets and provided the necessary trade credit and much of the organization and enterprise. The metropolitan government assisted the trading companies in defending their long lines of communication on the continents and on the high seas against rival enterprises.

Against the background of this generalization, the story becomes interesting when we examine, in each particular case, the manner in which the entrepreneurial function was divided or shared between the metropolis and the hinterland. We refer, for example, to the significant differences between structures in plantation colonies where planters were typically resident, and those where they were typically absentee. Or again, we may, note the difference between the Hudson Bay Company organised out of London and the North West Company, operating out of Montreal. The former was a centralised bureaucratic institution whose entire personnel was salaried from London; the latter was an association of independent English, Scottish, and American fortune seekers who maintained ties of credit and markets with London but themselves performed the entrepreneurial function. The Hudson Bay Company contributed little entrepreneurship to Canada – besides Lord Strathcona. From the fur traders of the North West Company derived much of the commercial, political, and social elite of English Canada.