And it was not simply the external loss in men and capital which brought about this retrogression of Germany, during a period of more than one century, in comparison with the Powers of the West; it was not even the transference of the world's trading routes from the Mediterranean to the ocean that was of most consequence; it was the lack of politico-economic organisation, the lack of consolidation in its forces. What, to each in its time, gave riches and superiority first to Milan, Venice, Florence, and Genoa; then, later, to Spain and Portugal; and now to Holland, France, and England, and, to some extent, to Denmark and Sweden, was a state policy in economic matters, as superior to the territorial as that had been to the municipal. Those states began to weave the great economic improvements of the time into their political institutions and policy, and to bring about an intimate relation between the one and the other. States arose, forming united, and therefore strong and wealthy, economic bodies, quite different from earlier conditions; in these, quite unlike earlier times, the state organisation assisted the national economy and this the state policy; and, quite unlike earlier times too, public finance served as the bond of union between political and economic life. It was not only a question of state armies, fleets, and civil services; it was a question rather of unifying systems of finance and economy which should encompass the forces of millions and whole countries, and give unity to their social life. There had always been great states;but they had been bound together neither by traffic nor by the organisation of labour nor by any other like forces. The question now was, - with a great society divided into social classes widely different one from another and complicated by the division of labour, - to bring about, as far as possible, on the basis of common national and religious feelings, a union for external defence and for internal justice and administration, for currency and credit, for trade interests and the whole economic life, which should be comparable with the achievements, in its time, of the municipal government in relation to the town and its environs. This was no mere fancy of the rulers; it was the innermost need of the higher civilisation itself that such enlarged and strengthened forms of social and economic community should come into existence. With the growing community in speech, art, and literature, with the growth of the spirit of nationality, with increasing communication and commerce, with money transactions and credit transactions becoming universal, the old mediaval forms of loose association no longer sufficed;and all the rigid local, corporate, class, and district organisations of an earlier time became intolerable hinderances to economic progress. Out of misery and conflict of every kind had arisen, in Spain as well as in France, in Holland as well as in England, the feeling of unity, the realisation of common interests; these it was, also, that prompted the stumbling search after new and wider forms of association. Herein economic and political interests went hand in hand. The stronger was the sense of nationality, the economic forces, the political power of any state, the more energetically did this movement get under way;for it meant a combining and organising of resources at home, even more than a measuring of them, when thus combined, with like creations across the frontier. The whole internal history of the seventeenth and eighteenth centuries, not only in Germany but everywhere else, is summed up in the opposition of the economic policy of the state to that of the town, the district, and the several Estates; the whole foreign history is summed up in the opposition to one another of the separate interests of the newly rising states, each of which sought to obtain and retain its place in the circle of European nations, and in that foreign trade which now included America and India. Questions of political power were at issue, which were, at the same time, questions of economic organisation. What was at stake was the creation of real political economies as unified organisms, the centre of which should be, not merely a state policy reaching out in all directions, but rather the living heartbeat of a united sentiment.
Only he who thus conceives of mercantilism will understand it; in its innermost kernel it is nothing but state making - not state making in a narrow sense, but state making and national-economy making at the same time; state making in the modern sense, which creates out of the political community an economic community, and so gives it a heightened meaning. The essence of the system lies not in some doctrine of money, or of the balance of trade; not in tariff barriers, protective duties, or navigation laws; but in something far greater: - namely, in the total transformation of society and its organisation, as well as of the state and its institutions, in the replacing of a local and territorial economic policy by that of the national state.
