Istvan Hont is a highly respected historian of eighteenth-century economic and political thought. Jealousy of Trade brings together seven of his previously published articles, together with a book-length introduction. The aim, particularly that of the introduction, "is to identify political insights in eighteenth-century theories of international market rivalry that continue to be relevant for the twenty-first century" (p. 4).

As a member of the Cambridge School of Intellectual History, Hont emphasizes the importance of context. The works of David Hume and Adam Smith, for example, are to be understood in the intellectual context of their time rather than anachronistically from a modern perspective. This is fine as far as it goes, but it does not go far enough. It construes context too narrowly. To understand Hume and Smith, we must recognize not only the different intellectual context in which they wrote, but also the different economic and political context in which they lived. Consistent with his exclusive focus on intellectual context, Hont is a historical idealist: he seems to believe that it is ideas that determine economic and political reality rather than vice versa.

One aspect of the economic context of the eighteenth century that Hont seems to miss is particularly important for his purpose. In the eighteenth century, and indeed for most of economic history, commerce and production were separate and distinct activities. Producers operated on a small scale, and those who produced for long-distance trade had no direct contact with consumers. Rather, they sold their goods to merchants, commercial middlemen who were not themselves engaged in production. Merchants purchased their goods with the hope of reselling them at a profit. So trade involved not two parties—producers and consumers—but three—producers, consumers, and merchant-intermediaries.

Trade looks very different from the point of view of merchants. For producers and consumers, "Jealousy of Trade" is a pernicious fallacy; for merchants it is a perfectly rational attitude. If one merchant mediates a given trade, another cannot. If they compete for the trade in question, margins will fall and both will lose. For merchants, therefore, trade is a negative-sum game. Merchants will consequently do their best to monopolize trade and to exclude their competitors. If they succeed, the resulting high margins will, of course, reduce the volume of trade to the loss of producers and consumers.

The monopolization of trade required force and force was the specialty of governments. So there was a natural bargain to be made between governments and merchants. Governments would use their power to enforce monopolies of trade and to break the monopolies created by other governments. In exchange, the merchants who benefited would provide governments with revenue and loans. Loans were especially important: to wage war, governments needed not only resources (a revenue base) but also the ability to mobilize those resources quickly. Merchants commanded, by virtue of their occupation, far greater liquidity than any other group in society. So in the absence of developed markets for government debt, they were the most promising source of ready cash. Of course, monopolization of trade reduced government revenues in the long run, but it was in the short run that wars were won or lost.

It is this bargain between merchants and governments that lies at the heart of the policy that Hont labels "Jealousy of Trade"—"global market competition as a primary state activity." It was not market competition in the modern sense of capturing markets for domestic producers: it was a competition to establish trading monopolies for domestic merchants.

The roots of "Jealousy of Trade" lay not in the realm of ideas—in a failure by governments to understand the welfare benefits of free trade—but in the real world of rational self-interest of governments and merchants.

All this was clear to Hume and Smith. They made the social welfare case for free trade—that it was in the interest of producers and consumers. They understood the conflict of interests between producers and consumers on the one hand and merchant monopolists and governments on the other. They believed that governments should serve the general interest of the governed—of the producers and consumers that constituted the vast majority of the nation.

It was not, however, the persuasiveness of their arguments that led to freer trade. It was changes in economic and political reality. The development of financial markets made governments less dependent on commerce for financing. The institution of the income tax made them less dependent on it for revenue. Merchants vanished as a distinct group: in the late nineteenth century, as industry grew in scale, the mercantile function was absorbed into production. Producers became politically more powerful. Popular democracy happened.

So is Hont right? Are the insights of writers of the eighteenth century relevant to today's debate over trade and globalization? Yes and no. Certainly their insights are valuable in making the case for free trade: Hume and Smith had a much richer understanding of the economy and of the benefits of trade than is to be found in any modern textbook. (I am particularly grateful to Hont for drawing our attention to the "rich country-poor country debate" in chapter 3.) However, the economic and political context of the debate is very different. The opposition to free trade today is driven not by the narrow interests of merchants, but by the narrow interests of particular producers. And it is sustained not by rulers seeking to finance their wars, but by democratic politicians seeking office through populist rhetoric and campaign contributions from special interests.