Sir Thomas Mun (1571-1641)
Sir Thomas Mun was an Englishman and born in 1571. He was a prominent British mercantilist writer of his times. He served on the Board of East India Company. A merchant by profession, he was greatly responsible for shaping trade policies of England. His two important works are ‘A Discourse of Trade, from England unto the East Indies (1621)’ and a posthumous publication in 1664 though written in 1630 entitled ‘England’s Treasure by Foreign Trade or The Balance of our Foreign Trade is the Rule of our Treasure’. This book contained valuable instructions for his son. In this book, he has clearly enunciated the theory of balance of trade.
This work is “the most famous exposition of Mercantilist principles” (Munroe). As a perfect mercantilist, Thomas Mun emphasized surplus balance of trade and not the restriction on exportation of gold. He has started the theory of balance of trade in the following words: “The ordinary means to increase our wealth and treasure is by foreign trade, wherein we must ever observe this rule: to sell more to strangers yearly than we consume of in value”. This results in export surplus.
Thomas Mun says that accumulation of treasure could be possible only by chopping off imports and encouraging exports. For this he advocated heavy import duties on goods meant for consumption within the country and moderate duties on goods meant for exports. But unlimited accumulation of money within the country has an adverse effect on balance of trade via increase in the domestic price level making exports costly.
Hence, Thomas Mun did not favour limitless expansion in money in the domestic economy. Thomas Mun in Chapter 3 of his book, England’s Treasure by Foreign Trade, explained 12 methods by which a country could have a favourable balance of trade making it rich with increased treasure.
- Cultivation of Waste lands for the production of agricultural products for saving imports of tobacco, hemp, and flax.
- Reduction on domestic consumption of imported goods resulting in export surplus.
- Judge the needs of the England’s neighbours so as to gain so much of manufacture as we can and to sell them dear. For instance, if the good exported by England is a necessity to its neighbour, a higher price will be charged on the good. In respect of other goods, suppose England faces tough competition from other countries, it must sell the goods exported at cheaper rates instead of losing the foreign market.
- Regarding invisible items of the balance of trade, i.e. service charges like insurance and freight, Mun advocated that England should insist its traders to ship their goods only through English ships.
- Export of finished products must be allowed and not of raw materials. This is only to increase the net worth of exports.
- England should exploit her own natural resources. Instead of importing fish, better learn how to catch a fish from its own waters.
- England should be made entry-point so that it would increase shipping, trade and customs.
- Mun regarded trade with distant lands is more profitable.
- Export of money should not be permitted except in trade. He argued that ‘money begets trade and trade increases money’.
- Export duties on goods made out of the imported raw material should be removed. For example, goods manufactured in England from foreign raw materials such as velvets and silks should be allowed to be exported free.
- High customs duties on native goods should be removed.
- England should, as far as possible, be self-sufficient.
To go into the other views of Mun, he praised industry and condemned idleness and luxury. In this context, he praised industrious Dutch and deplored idleness of Englishmen. Mun does not even want to allow all kinds of luxury to be avoided. This is because that he was afraid that if Englishmen did not use foreign goods, then who would buy theirs? What would happen to their ships?
Mun advocated the export of money (treasure) for purposes of augmenting trade and commerce. He asserted that it was not a desirable policy to insist on the receipt of money always by every exporter from trade. Only unfavourable balance of trade makes a country to lose precious metals. What he meant is that he is talking about general (overall) balance of trade, but not particular. Therefore, trade must result in overall balance of trade.
Mun also contributed to the theory of money and interest. He advocated for the extension of lending activities. He also pleaded for a long-term taxation policy to promote the economic interests of the country.