Thomas Mun Biography Theory

Thomas Mun

Book IV of Adam Smith's Wealth of Nations (1776) is largely a refutation of mercantilistic theory and policy; in it, Smith quotes Mun as a leading mercantilist. Mun (1571-1641) was a director of the East India Company, which had been criticized for two things that some writers found undesirable: (1) England imported more from India than it exported, and (2) England sent precious metals to India to pay for imports. Mun was a typical mercantilist—a proponent of governmental policies that benefited a particular business interest. Mun's first book, A Discourse of Trade from England Unto the East Indies, was published in 1621; it defended the East India Company against these charges in a partisan manner. His second book, England's Treasure by Forraign Trade, was produced in 1628 and was published posthumously in 1664 by his son. The book had several editions, and its popularity was evidently the reason Smith chose it for rebuttal. It is often said that Mun's 1664 book is the classic of English mercan­tilistic literature.

American students are indirectly informed about mercantilistic theory and practice because of their awareness of the history of the American colonies. English policy was designed to keep the colonies a raw material-exporting economy that was dependent on England for manufactured goods.

Mun asserted in the title of his book that England's treasure was gained by foreign trade. His thinking was typically mercantilistic in that he confused the wealth of a nation with its stock of precious metals and therefore argued for a favorable balance of trade and an inflow of gold and silver to settle the trade balance. He believed that government should regulate foreign trade to achieve a favorable balance, encourage importation of cheap raw materials, encourage exportation of manufactured goods, enact protective tariffs on imported manu­factured goods, and take other measures to increase population and keep wages low and competitive.

Mun presented these mercantilistic ideas but refuted some of the cruder mercantilistic notions that embodied criticisms of the East India Company. He pointed out that even though a favorable balance of trade with all nations was desirable and an outflow of precious metals to all nations was undesirable, the unfavorable balance of trade with and export of precious metals to India was beneficial to England in that such practices enlarged its trade balances with all nations and, thereby, its inflow of gold and silver. By the time the last edition of Mun's famous book was published in 1755, many of the more perceptive mercantilists were seeing the serious errors of the mercantilistic paradigm. These liberal mercantilists were beginning to articulate the intellectual foundation for Smith's Wealth of Nations.