Chapter 10-12

Institutions for Commerce= Banks, Freeports, Trade Rules

by Montesquieu Icon

Chapter 10: Banks

IN economical commercial states, they have luckily established banks which have created a new kind of wealth by their credit. But it would be wrong to introduce banks into governments whose commerce is founded only in luxury.

In an absolute monarchy, only the prince or can have treasure. If wealth is created by others then it is seized by the prince. Thus, banks in an absolute monarchy would suppose money on one side but without any power, and power on the other side but without any means to procure.

This is why mercantile companies are seldom proper in absolute governments. These companies are designed to give the public riches to private persons. But in absolute monarchies, this wealth can only be with the prince.

Mercantile companies are not even always proper in commercial states. If the trade can be managed by a few persons, then it is much better to leave it open than to restrain the liberty of commerce by exclusive privileges.

Chapter 11: Freeports

A FREE port may be established in economical commercial states. The frugality of people always leads to that œconomy in the government and is the soul of its economical commerce. It leads to loss with respect to customs duties revenue. But this can be repaired by drawing taxes from the wealth and industry of the democratic republic.

But in a monarchy, a free port would merely reduce the tax revenue from imported luxury items which is the main source of revenue.

Chapter 12: The Freedom of Commerce Leads to Slavery of the Merchants

THE freedom of commerce is not a power granted to the merchants to do what they please. Instead, this freedom of commerce is more properly the slavery of the merchant – the constraint of the merchant is not the constraint of commerce.

It is in the freest countries that the merchant finds innumerable obstacles and where he is as crossed by laws like a slave.

In England: