Mercantilism and urban inequalities in eighteenth-century Sweden

Abstract

It is sometimes argued that inequality promotes growth. If savings are the key to economic growth and the marginal propensity to save rises with income, a more unequal society will save more and grow faster. Thus, by sacrificing equality and concentrating income and wealth in the hands on the entrepreneurial class, society might enjoy higher economic growth. The economic policies taken by the Swedish state during the eighteenth century had the explicit goal of concentrating trade and opportunities for income formation and capital accumulation in the hands of the merchant class. Both an older tradition as well as recent research have emphasised the positive sides of these policies, as the privileged merchants are depicted as dynamic engines of growth and an important factor in the process of capital accumulation. However, in this paper it is argued that this assertion is not warranted. The mercantilist policies resulted in neither measurable per capita growth nor dynamic transformation but in institutional rigidities and the enrichment of the rich and impoverishment of the poor, leading to increasing urban inequalities.