From Mercantilism to a More Humane World
Ozay Mehmet
Yale historian Alan Mikhail’s book, God’s Shadow: The Ottoman Who Shaped the Modern World (Mikhail 2020), is a superb account of the global transformation launched by the Ottoman Sultan Selim, who, unintentionally, gave birth to Western mercantilism. It is essential reading for anyone interested in why the USA is being overtaken by China. A new Silk Road Economy (SRE) is unfolding, the theme of another major book, by Oxford historian Peter Frankopan, The Silk Roads, A New History of the World (Frankopan 2018.). Combined, these books signal the birth of a new, hopefully, a better world than the capitalist system built on inequality and injustice.
This paper argues that our world economy has always lacked an equitable foundation. Machiavellian power and Darwinian selection of the fittest have shaped the economy, from its Ottoman origins to the contemporary multinational capitalist system. In the future, if ever a new SRE is realized, new ideas and institutions will have to be developed, going beyond infrastructural investment, learning from the past to build a more humane world order.
II. The Ottoman World Economy at Its Zenith
When the Ottoman Sultan Selim I conquered Egypt in 1517, for the first time the Ottoman Empire became a majority Muslim empire. Selim’s victory made his vast Empire the center of the global economy. “Not since the days of the Roman Empire had the Black, Red, Caspian and Mediterranean seas been governed by a single polity,” Mikhail writes. (Mikhail, 2020: 309-10). The Ottoman trading system financed imperial prosperity in accordance with the Circle of Equity, the Islamic ethical code for good governance, succinctly summarized by Ibn Haldun (Mehmet 1999: 64). But the Circle of Equity was left at the Sultan’s mercy.
The Ottoman Sultanate personified Machiavellian power and Darwinian survival of the fittest. Selim and his son, Süleyman the Magnificent, represented role models for Machiavelli’s masterpiece, The Prince, offering advice on how to win and keep power in politics. In its heyday, the Ottoman merit system made no distinction based on religion or ethnicity. All subjects of the multinational empire, Muslim, Jewish or Christian, were equal, effectively slave subjects, all possessions, indeed the life of the subject, belonging to the Sultan.
When, under Süleyman the Magnificent, the Ottoman Empıre reached its apex, Spain was the rising Christian power. Isabella-Ferdinand launched their Catholic crusade, the Inquisition, their ruthless act of ethnic cleansing[1]. The homeless Moors moved to North Africa, many entering the Sultan’s service in the Ottoman armies and navy. For the Jews, the Ottoman Empire became the New Jerusalem, “a paradise for the Jews” (Mikhail. Ibid: 173). Jews, with gold and skills, flooded into Istanbul, Salonica recreating their high culture anew.
At its zenith, the Ottoman trading system was truly global (Inalcik 1973). Spices came from the Orient; Chinese porcelain and merchandise moved along the Silk Route. The China trade was linked to the Black Sea trading ports like Kaffa, Azov, Taman, and Trabzon. Beyond the Caspian Sea, Samarkand, and Central Asia were trading hubs linking the Ottoman and Oriental worlds. Slaves came from Africa through the Red Sea and Alexandria. Italian traders, Venetians, Genoese, Florentines, Phanariot Greeks were at the forefront, with networks in the Ottoman trading cities like Aleppo, Damascus, and Alexandria. By mid-16th century, France, Holland and then England followed the Italian states in seeking trade privileges in Ottoman lands.
Profits from the Ottoman Euro-Asian trade system accumulated in Italy and then Europe. Banking began as family businesses by Medici’s. The ascent of money was launched (Ferguson 2009). Ottomans never developed a banking and solid currency. Interest was haram under Islam. In Europe, trade surplus first financed the Italian Renaissance, subsequently the Industrial Revolution, enabling the Mercantilist economy.
III. The Creation of The Atlantic Mercantilist Economy
In 1492 two momentous events occurred: In January, Granada, the last Moorish state in Muslim Spain surrendered, and in August, Christopher Columbus sailed for the New World. Atlantic Mercantilism was thus launched.
The Origins of Mercantilism: Ideas First, Institutions After
In this transformation, ideas led the way. First, it was Nicolo Machiavelli (1469-1527) of the trading Republic of Florence, who, in a brief book, The Prince, put forward an original, and brutally realistic theory of power and political survival: A successful prince must pursue power ruthlessly, eliminating all competitors. Machiavelli’s ideal prince was Süleyman the Magnificent who, in 1553 had his ablest son, Mustafa, beheaded, to preserve his reign.
The other epoch-making idea for mercantilism came from the Scot Adam Smith. In 1776, Smith wrote his Wealth of Nations, putting forward the idea that man is self-interest driven. National interest resides in the hands of a strong state. The foundations of such a state are its army, navy, rule of law and institutions. Currency and banking reforms pioneered in the European central banks (Ferguson, 2009). Bank of England was established by the Royal Charter in 1694 after the Glorious Revolution a few years earlier to function as the government’s banker. Napoleon created Banque de France in 1804.
Amsterdam became the world’s first financial center by the 1690s. Financial innovation led the way: The Dutch improved the Italian banking and lending system, by introducing the first central bank to stabilize currency and even experimented with the public lottery to mobilize public savings. But the most popular innovation was legislation to enable joint-stock companies. This enabled the Dutch shareholders to invest, with tolerable risk, equivalent to the amount of one’s investment, in new ventures, especially in the new Asian spice trade. At this time, European diets craved spices like cinnamon, cloves, nutmeg, and pepper. The famed VOC, the Dutch East India Company, thus acquired monopoly control of Indonesia (Ferguson 2008:128-9).
The English East India Company was the equivalent of VOC, headquartered in London. Granted its royal charter in 1600, it controlled trade in India for the next three and a half centuries, cultivating tea and opium under monopoly production. Tea was exported to England, while opium was forced upon China, backed by the British navy. When China banned opium imports, Britain sent its navy, getting its way in Opium Wars that effectively extended British imperialism over China till Mao’s Communist victory after WWII. In 1786 the East India Company acquired Penang island and penetrated British Malaya. During the next century and a half, Britain followed a “cheap labor policy.” Millions of Chinese “coolies” were shipped from China to work as virtual slaves in tin mines. Fortunes from tin were made by British investors in Perak and Larut. Then, in the late 19th-century rubber plantations were introduced, the rubber trees stolen from Guyana and introduced to Ceylon and Southeast Asia by way of Kew Gardens.
By the end of the 19th century, the Age of Imperialism was global, as Europe expanded in search of new markets for its industrial products and raw materials for its factories. The idea of national prosperity was recast in the Darwinian theory of survival of the fittest. Geographers and explorers “discovered” the Nile, while geologists went after gold mines, and capitalists like Cecil Rhodes exploited them. Literature, newspapers, novelists, and journalists emerged in the service of imperial expansion, writing, and informing the public of exotic, mysterious but rich Orient. In this way, a whole new genre, Orientalism emerged as mainstream literature. H. G. Wells summarized this Eurocentric system in racist terms: “In the closing years of the 19th century it was assumed…to be a natural and inevitable thing that all the world should fall under European domination.” (Wells, 1971, Vol. II: 851). Mercantilism was built on slavery and plantations in the tropics, reaching its climax in the age in 19th-century imperialism and colonization.
The Plantation System, Slavery as Pillars of Colonialism
Plantations are large-scale, labor-intensive production systems in the tropics taking advantage of ample rainfall and sunshine. A long list of tropical commodities and primary products were produced: spices, sugar, coffee, cocoa, bananas, cotton, and minerals, shipped to Europe for consumption or further processing.
Colonial mercantilism’s chief bottleneck was labor. First, the slave trade, then “cheap labor policy,” were implemented. Massive profits from slaving enriched Europe. According to the Trans-Atlantic Slave Trade Database, between 1525-1866, the total number of African slaves shipped to the New World was 12.5 million. Of this, 10.7 million survived the dreadful passage, landing in North America, the Caribbean, and Latin America for work as slaves on plantations. Additionally, the British transported some 2 million “indentured” Indian workers to various British colonies, including Fiji, Mauritius, Ceylon, Trinidad, Guyana, Malaya, East and South Africa, from 1834 to 1914.
In the 16th century, European mercantilism was driven by Christian passion, but the search for gold was no less passionate. The pursuit of gold exterminated Aztecs and Maya. In Europe, gold and mercantilist revenues created banking, originally was controlled by families such as the Medici and Rothschilds. Gradually chartered companies, like the Levant Company, the Hudson Bay, and the Dutch VOC, emerged as chartered or joint-venture companies. In the age of imperialism, it evolved into a Eurocentric system, enriching European nations who controlled shipping, insurance, banking, and financial services, the prototypes of the contemporary Multinational Corporations, when the American hegemon assumed leadership of modern capitalism after WWII.
IV. Paying A More Humane World
The Eurocentric spirit of mercantilism still drives globalization, now dominated by multinational corporations (MNCs). The system has gone through several cycles, but always standing on Eurocentric roots. In the 19th century, the steam engine pioneered railways and shipping. At the turn of the 20th century, the Automobile Age was launched, and fossil fuel energy emerged as the biggest single trade fueling industries, homes, and cars. In the post-war period, import-substituting consumer goods manufacturing, highly capital-intensive, was transferred into labor-surplus developing countries. These new industries, urban-based with limited jobs, suddenly became magnets for jobseekers. Rural exodus led to urban poverty in shantytowns with no end to the poverty of developing nations. Now, new information technology is the new frontier and new trade wars are all about digital technology, smartphones, and robotics and ownership of intellectual property.[2]
Self-interest still drives the system, but increasingly capital gains have replaced profit as the driver. Greed in stock exchanges has shaped casino-like gambling institutions. Huge volumes of speculative capital movements do not search for net profits, but rather short-term capital gains realized in shorting, hedging and currency manipulations by financial elites (Picketty 2014).
Too often, capital movements avoid taxation, taking advantage of modern information technology and ease of global mobility, increasingly hiding in tax-havens avoiding national tax. Trade-based money laundering is now big business (https://www.egmontgroup.org/sites/default/files/filedepot/external/Trade-Based-Money-Laundering-Trends-and-Developments%5B1%5D.pdf …accessed on 25/1/2021), often linked to illegal arms trading. Drug trade (http://people.exeter.ac.uk/watupman/undergrad/Kirsty/ws2%20trends%20in%20international.htm …accessed on 25/1/2021) and human trafficking[1] are expanding exponentially. Failure to take progressive measures to tax capital movements for an equitable world would mean that our post-modern, pandemic-ravaged world is doomed to deepening inequality and injustice. Equitable international development, financed and paid for by international corporations, is long overdue. This is a moral obligation, in lieu of reparations, for injustice and exploitation done to the colonial people under the mercantilist system. MNCs, the contemporary descendants of the chartered and joint-venture companies of the age of imperialism, must be taxed and revenue channeled into global sustainable development. That would be equitable and efficient to contain the refugee influx into rich countries.
V. Conclusion: A New Euro-Asian Silk Road Economy
The Pandemic has exposed the fragility of the Eurocentric mercantilist economy. With about 100 million infections and over 2 million deaths (as of 20/1/2021), First World economies have been shattered, the world trade checked. The Pandemic has accelerated the rise of China, at the expense of the American hegemon.
Poverty, war, and conflict have devastated many Third World countries already suffering from poverty, injustice, and now the virus. In war and conflict zones, waves of refugees and economic migrants are crushing the gates of the First World. Europe and the USA, severely hit by the Pandemic, are torn by systemic racism, and xenophobia.
The contemporary multinational capitalist system is very much neo-mercantilist. Machiavellian power and Darwinian survival of the fittest rule still the world, creating inequality, exploitation, and injustice. Artificial walls and barriers do not protect as desperate migrants always find ways.
New ideas and institutions are required for a more equitable world order. One such innovation would be taxing international corporations and capital movements, to create viable jobs and livelihoods in the Third World. These international tax revenues could then be invested in building a humane world, sustainable development, and stopping climate warming and degradation of our fragile ecology.
Who will tax MNCs? The European Union has discussed the topic, and there are proposals on how to do it from economists such as Tobin and Feldstein. But the MNC tax needs to be linked to creating a more equitable world order. A first step in this direction would be the free distribution of the COVID-19 vaccine to poor countries, essential for a safe world.
There are clear signs that a great new global transformation is unfolding. China is rapidly rising, while the USA under Trump, torn asunder by urban violence and police brutality, has regressed. The new Biden Administration will have its hands full healing a divided nation.
A new Euro-Asian hub is slowly, but surely rising once again, with new markets through Central Asia. Megaprojects in energy are underway, and road and rail transportation are now linking Beijing and Istanbul. New SRE is reshaping the map of the global economy (Frankopan 2018, 2015).
However, roads and physical infrastructure are not enough to create a new, hopefully, more humane world. Creative ideas and institutions are required to match physical with social capital. Paralleling physical capital expenditures there must be social development, employment creation and sustainable development. A Silk Road Bank would be essential because if humanity has learnt any lesson from the Pandemic it is the necessity of investing in health, sanitation to build safe communities. Likewise, education and skill development are essential to meet basic needs. These are costly public investments. Only an international bank, tailor-made for the SRE can provide the financial resources needed. To its credit, China has uplifted more than half a billion people of poverty. That is a huge leap forward in global equity. Can it be replicated in the SRE economy, westward from China, in Central Asia to the Caucuses, Southward into the Indian Subcontinent? China, of course, is a party dictatorship with a terrible human rights record. However, it is also the biggest creditor country in the world. International taxation, as suggested above, in the SRE may generate the required funds to invest for a more humane world order. As Frankopan stated in an interview with BRB: “The great opportunities of the 21st century lie in the east; but so do the great challenges.” ( https://bosphorusreview.com/new-page-96).
[1]. To cite one example: “Children are especially at risk due to their specific vulnerabilities and the threat of traffickers exploiting children online is growing: for example, the National Center for Missing and Exploited Children in the United States “reported an 846% increase from 2010 to 2015 in reports of suspected child sex trafficking – an increase the organization has found to be directly correlated to the increased use of the Internet to sell children for sex.” (
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Ozay Mehmet is a retired professor of economics and international affairs, living in Ottawa, Canada. He is originally from Turkish Cyprus. In retirement he has written three historical novels, two of them about Cyprus. UZUN ALI SHAME AND SALVATION is a family history of the Cyprus Problem, from Ottoman days through British rule to the short-lived independence in 1960. The second one, a prequel, is on Ottoman Cyprus. The third one to be published in the USA later this year is THE SAINT OF TULMEN. It is an uplifting story of human survival to overcome war atrocity in Canada and Anatolia in during the WWI.
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