Absolutism 7 / Mercantilism 1

1. Russia differs fundamentally from the West in basic ways, though Russian history has paralleled that of the West in other aspects. The Eastern Slavs’ conversion to Christianity and a loose political union of the east-ern Slavic territories under a single prince and dynasty were common in all of Europe. Also was the typical feudal society under a boyar nobility and a commoner peasantry. The powerful Kievan principality’s de-fragmentation was similar to other European kingdoms. However since Russia was conquered and con-trolled by a foreign invader, it created a system of rule unlike anywhere in the West. The absolutism founded by Peter the Great was considerably different that absolutism in the West. The Mongols devas-tated and conquered Russia and forced all bickering Slavic princes to submit to their rule and to give them tribute and slaves. If the conquered people rebelled, the Mongol would quickly punish with death and de-struction. This dear unified the eastern Slavs under a common ruler. The Mongols used local princes as ob-edient servants and tax collectors.

2. Ivan III conquered the territories around Moscow. In around 1480, he felt strong enough to stop acknowl-edging the khan as his supreme ruler and used the Mongol’s concept of kingship as an unrestrained power. After the fall of Constantinople in 1453, the tsars saw themselves as the heirs of both the caesars and Or-thodox Christianity, the only true faith. They believed that all the other kings of Europe were heretics.

3. The boyars were the Russian nobility and they had begun to lose their power and influence in the 1400s at the same time the peasants had begun to lose their freedom of movement. When Ivan III conquered the principality of Novgorod in the 1480s, he confiscated 80% of the land and executed or relocated the pre-vious owners. He kept all of the land for himself and distributed the rest under the service nobility on the condition that they serve in the tsar’s army. Ivan III began to require boyars outside Novgorod to serve him if they wished to retain their land, giving the king absolute power.


1. The bubbles grew after the War of the Spanish Succession had left England and France in economic trouble. There was a great debt in both countries. There was much private demand for lending and bor-rowing money. People were looking all over Europe for an enterprise to invest in. promoters and organiz-ers were looking for capital to work with. Out of this grew the “South Sea bubble” in England and the “Mis-sissippi bubble” in France that would both break in 1720.

2. Mercantilism was a close connection between government finance and private enterprise. In England, a large portion of the government debt was held in companies specifically for that purpose. The government would charter a company, strengthen it by monopolizing that enterprise, and then receive a large sum of cash as a loan after stockholders had invested in it. The wars from 1689 to 1713 had created a large British debt that was held in the Bank of England, the East India Company, and the South Sea Company. The Bank had a legal monopoly over certain banking operations in London, the East India Company over trade with the East, and the South Sea Company for exploiting the asiento and other privileges won from Spain. The companies were owned by private investors as well as place to put shares in for economic reinvestment and defraying the costs of war. John Law was a Scottish financier who had developed a mathematical system in gambling at cards and was the founder of the French central back and the Mississippi Company in 1717. The company obtained a monopoly on trade with Louisiana and founded New Orleans in 1718. It absorbed the French East India, China, Senegal and African companies and had a legal monopoly over all French colonial trade. Law assumed the entire government debt by receiving individuals’ bonds and by giving them shares of stock in return. It proposed to pay dividends on the shares and to get rid of debt from profits in the colonial trade and from a monopoly over the collection of indirect taxes in France. Shares rose crazily and were up to 18,000 livres a share. However, the company was only based on unrealized projects and shareholders began to sell their shares, causing people to become broke and lose their houses. However, those who had owned shares before the rise lost nothing and enjoyed their successes.

3. The South Sea Company took over a large portion of the public debt in England by receiving government bonds from their owners in return for shares of its stock. The size and speed of profits in Spanish America was greatly exaggerated and the value of their shares rose from £100 to £1,050. Other companies got into the fraud business. In September 1720, the South Sea stockholders began to sell, causing many people to lose all of their savings as in the Mississippi bubble. Robert Walpole, a Whig who had long been in the House of Commons, warned of the South Sea bubble and was chosen as the principal minister to George I.

4. Law’s bank was dissolved in the aftermath of his scheme, leaving France without a good banking system for the rest of the century. French investors feared paper securities and preferred putting their savings in land. Commercial capitalism and the growth of credit institutions were stopped. Parliament passed the Bubble Act forbidding all companies except those specifically chartered by the government to raise capital by the sale of stock. The development of joint-stock financing in both countries was slowed for over a cen-tury. Walpole was able to save the South Sea Company, the East India Company, and the Bank with only a temporarily discredited reputation.

5. Much of the French war debt was repudiated in some way, causing people to lose economic faith in the government. The French nobles continued to evade taxes imposed on them by Louis XIV, John Law’s plans for taxation went out when he went out, and the 1726 2%-tax was annihilated by the Parlement of Paris. The French monarchy had little credit without adequate revenue and its repudiations of debt. The debt was considered to be the king’s debt, something that only the king and a few ministers were responsible for. The government borrowed from the church, the Provincial Estates, or Paris. The government was han-dicapped in its foreign policy and its wars because it could not fully utilize the wealth of its subjects. In Eng-land, none of the debt was repudiated and Walpole launched and kept going the system of the sinking fund where the government regularly set aside money to pay interest and principal on its debt. The credit of the government was firm and the debt was considered a national debt that the British people assumed responsibility. Parliament made this development possible because in France no one could tell what the king or his minister might do, creating suspicion of them with their money. In England, people with money could, through Parliament, determine the policies of state, decide what the money should be spent for, and levy taxes to maintain confidence in the debt. There were similarities between the two countries. Both countries used indirect taxation rather than direct taxation. There were no exemptions in classes or ranks.

6. The cabinet that Robert Walpole created helped guide the ruler of England. He acknowledged the principle of cabinet responsibility to a majority in Parliament. He selected colleagues who agreed with him and got rid of those who did not, advancing the idea of the cabinet as a body of ministers bound to each other and to the prime minister, obligated to follow the same policies and to stand or gall as a group. Parliament thus developed an executive body.

7. Fleury and Walpole avoided war so they would not have to raise taxes. Raising taxes would assure peace and quiet in domestic politics. France got involved in the War of the Polish Succession in 1733 and England got involved in 1739. Captain Jenkins was a British captain who claimed that the Spaniards had cut off his ear. He stirred Parliament into fighting the War of Jenkins’ Ear.