The latter part of the seventeenth century is of far more interest than the earlier half in the consideration of the commercial relations of England and Scotland, and also in the economic history of Scotland. The country developed a great deal in these years, especially considering her depressed state at the beginning of the period. Doubtless she learned something from England, during the years of union, as to the organisation of industry and trade. Her experience then may also have shewn her the importance of trade, and of the wealth which it brings, as factors in determining the position of nations in Europe. Scotland's economical development shewed both countries that the form of relationship between them was most unsatisfactory. The English Parliament had no control over Scottish trade, and in several different directions the Scots infringed the English commercial system. In defiance of the Navigation Acts they traded with the Plantations, and supplied them with their own and with Dutch manufactures. They continued, as far as possible, to trade with France and Holland when England was at war with these countries, and refused to prohibit the import of their products. Across the border these prohibited foreign goods could be imported into England, and English prohibited commodities could be exported. Scotland drove a profitable trade in the export of English wool. Finally England was shewn that it was possible for Scotland to give extensive powers to a trading company, which might have been a rival to the great English companies, and which very nearly embroiled England with her political allies. On the other hand the Scots found themselves treated as foreigners in England. They required markets for their manufactures, but high-tariffs kept out their goods, and entire prohibition checked their trade with the Plantations; English wars hindered their principal foreign trades; English influence and enmity destroyed any chances of success which their great national trading venture might have had. Both nations found the state of affairs impossible. England found that for political as well as economic reasons a union with Scotland would be advisable, and the fifty years of separation, enmity and misunderstanding ended in the consummation of a complete and incorporating union.

a. Industry

The condition of Scotland at the Restoration was such as to make any change welcome. The heavy taxation and enforcement of the English commercial system, after the devastation caused by the wars, had kept the country in a state of great poverty. Many of the new industries introduced by James and Charles had died out, and the long established manufactures of the country, linen cloth, plaiding, etc., had considerably decayed. There was also very little money in the country with which to start new manufactures. Nevertheless the first care of the restored Parliament was to make provision for the King's revenue. An annuity of £40,000 sterling was granted to him for life. This was made up of £8000 from the customs, and £32,000 from the excise on beer, ale, aqua vitae and other "strong waters." New customs rates were imposed, more or less on a protective system. The chief part of the revenue was raised by duties on foreign manufactured goods, cloths, serges, hats, stockings, etc. Certain imports were free altogether, materials for fishing, shipbuilding, soap manufacturing, wool, flax, dying materials, etc., also sugar brought from the Plantations in Scottish ships.

Further legislation dealt with industry. Both England and France were at this time engaged in building up strictly protective systems, in order to develop and encourage their industry and trade. Scotland, influenced by their example, by the damage which their system inflicted on her trade, and by the necessity of attracting capital to the country, also set about creating a protective system, developing the principles of the Act of 1644. The first attempts to encourage industry, as embodied in the Acts of 1661, did not meet with much success. Accordingly in 1681 further Acts were passed which completed a very strict system of protection of native industry, by prohibition of the import of foreign manufactured goods, and of the export of raw materials. This time the policy was more successful, the country having recovered somewhat from the effects of the Civil Wars. Companies were founded, for which a certain amount of capital came from England. Between 1693 and 1695 especially a number of companies were floated, including the Darien Company. In the latter a good deal of the capital of the country was locked up, and a series of bad harvests followed. The manufacturers found the English and other foreign markets practically closed against most of their manufactures, and the attempt to provide a colonial market of their own had failed. The first few years of the eighteenth century were a time of depression and discontent, during which the manufacturing and trading interests alike began to realise that in order to secure the necessary markets they must become commercially one with England.

To superintend the general interests of trade and industry the Parliament of 1661 passed an Act establishing a Council of Trade. This was to consist of five of each estate, and was entrusted with the duties of establishing companies, endowing them with privileges, making and enforcing regulations regarding trade and manufactures. The privileges which the companies were to receive were enumerated in the "Act for erecting of Manufactories." Strangers brought in by natives to teach or to set up new industries were to enjoy all the privileges of natives. Materials for manufactures were to be imported, and the manufactured goods exported duty free for nineteen years. The stock employed was to be free of taxes, and the manufactories were to be free from the quartering of soldiers on them. Another Act dealt with the companies for making linen and woollen cloths, etc. The preamble to this Act states that "many good Spirites haveing aimed at the publict good, have for want of sufficient stocks councill and assistance been crushed by such undertakings." Therefore it is thought necessary "to create and erect companies and societies for manufactories...as the first moderne societies and companies for making of lining cloth," etc. No linen or woollen cloth was to be exported except by members of these companies, and they alone were to be free of customs and excise for nineteen years. The export of linen yarn and of skins and hides was also forbidden. The importation of "made work" which was also manufactured in the kingdom was forbidden. By these Acts a definite scheme of protection of native industry was established. The new companies were assured, as far as legislation could assure them, of a supply of raw material by the prohibition of the export of linen yarn, wool, skins, etc., and by the freedom from import duty of necessary foreign materials. At the same time their home market was guaranteed by the prohibition of the import of manufactures similar to their own. It must always be remembered, however, that this system was far more complete in theory than in practice, and that the laws regulating import and export were in fact but little observed. There were now no complaints of the prohibition of the export of wool and hides as there were under the Protectorate Government, but this is far more likely to be due to a lax observance of the law than to the supply being entirely engrossed by the manufacturers.

By further legislation encouragement was given to industry by the imposition in 1663 of heavy duties on English cloth and other commodities, in retaliation for the English Navigation Acts. But the country was for the first few years after the Restoration too poor to take advantage of these encouragements. The English wars with Holland, which began in 1664, were also a very serious check to Scottish trade. Rothes, the Commissioner, wrote many letters to Lauderdale in 1665 and 1666, asserting the poverty of the country, and its inability to raise either troops or money. "It is almost impossible for this kingdom to raise money," he writes— his spelling is corrected—"being so impoverished and harassed with the late miserable troubles and rebellions that our poverty is not to be expressed." "As I hope to be saved, this country is so exhausted that they are not in a capacity to do anything as to money, but God help us." "We in this kingdom are wilful and proud and necessitous even to beggary so consequently a ticklish people to deal with."

Some progress was made, nevertheless, especially in Glasgow, which had suffered less from the troubles than the towns in the east. In 1667 soap-works were started there, in which nine "persons of distinction" were interested, to the extent of £1500 sterling each. In the same year and in 1669 sugar manufactories were founded, the Easter and the Wester Sugar Works. In these nine people were engaged, and taking advantage of the Act of 1661 each had a foreigner as "master boiler," a German and a Dutchman. Further information about these two works is given in a petition of their master to Parliament in 1681. In this he asserts that the price of manufactured sugar has been much reduced, and now is sold at only 85. Scots. Also Scottish manufactures are exported to Virginia and the Caribbee islands, whence the raw sugar is brought. The only "Benefit and advantage" to the manufacturers themselves, consisted in the export of molasses, "which is the coursest part of the sugar," to Holland and the eastern countries. But the Dutch finding themselves injured by this trade have forbidden the import of molasses, and heavy impositions have been laid upon it by the eastern countries. The manufacturers have therefore begun to manufacture strong waters instead of molasses and beg that these may be free of any excise. This was granted, and all former privileges were renewed. A paper manufactory was also started in 1675. The only other industry in which there is much trace of progress being made during the early years of the period was in fishing. The Act for establishing fishing companies in 1661 had had no effect, and so in 1670 efforts were again made to encourage this industry. One-company was formed, with exclusive rights of fishing and trade, and all the privileges of companies formed under the Act of 1661. They were also granted the monopoly of trading to Muscovy, Greenland, Iceland, and other northern parts. To this company Charles subscribed £5000 and the total capital amounted to £25,000. Proclamation was made at the same time forbidding foreigners from fishing on the coasts. Unfortunately the future career of this company was not very successful.

According to the account of a merchant travelling in Scotland in 1672 there had been but little advance made in industry by that time. His account however seems to be more prejudiced than dependable. His name was Dennis de Repas, and he had travelled over most of Europe. He wrote to Sir Edward Harley, vilifying Scotland and the Scots. "I may assure your honour that in all my travels...I never saw a nation in general more nasty, lazy, and least ingenious in matter of manufactures than they are....Except in great towns, they do not bake bread though they may have plentiful of corn, but make nastily a kind of stuff with oat half grinded which they do call ' cake' which hath no more taste nor relish than a piece of wooden trencher....I do speak so much of Scotland, by reason that being your neighbours I do wonder that they do not take something after the English, which through all the world are counted the most ingenious in all manner of manufactures." The only manufactures which he allows to them are those of plaiding and of stockings, but the latter are "most nastily made."

The fact was that the country was too exhausted, by the Civil and then by the Dutch wars, to really profit by the legislation of 1661. No new manufactures were sent abroad. Salmon, stockings, plaiding, linen, tallow, coals, salt and skins were still the principal exports. Plaiding and linen were however both manufactured and exported in greater quantities. England was a great market for linen. In 1672, 488,800 ells were carried thither overland from Glasgow alone, while large quantities were entered at all the Border customs houses, and a great deal was also sent by sea.

After some years affairs began to improve, and in 1681 Parliament again turned their attention to industry. A complete system of protection was evolved, and this time there were manufacturers who were able to take advantage of it. During the next fifteen years, especially from 1690 to 1695, many manufactories were established, with varying success. One difficulty faced them all and gradually became more pressing—the difficulty of finding markets. The demand of the home market was small, France and England had closed their markets to some Scottish manufactures, and though trade with the Plantations was carried on, the fact that it was forbidden was naturally a hindrance to it. The merchants and manufacturers therefore gradually came to recognise the necessity of union with England, in order to provide markets for their goods.

The "Act for Encourageing Trade and Manufactories" of 1681 ratified the Act of 1661, and also bestowed further privileges. The import of foreign materials made of wool, cotton, lint, gold or silver thread was prohibited, also of stockings, shoes, and some silks. The duties were removed from the import of goods to be used in the manufactories, and from the export of the manufactured articles, for nineteen years. All stock was freed from taxation, and the employes from military service for seven years. All works that had been set up or that were to be set up, were to be declared manufactories by Act of Parliament, in order that they might enjoy these privileges and immunities. Under this Act about fifty undertakings were erected into manufactories, and received these extensive privileges. Most of these were jointstock companies. Dr Scott gives an estimate of the capital employed in these works. The amount subscribed to-some of them is recorded—the Royal Fishing Company £25,000, the Glasgow Soap Company £11,700, one of the Glasgow Sugar Works £10,000, the Scots Paper Manufactory £4000, the Bank of Scotland £10,000, the Glasgow Hope Company £3333, and the Linen Company about £10,000. Calculating from these figures, Dr Scott estimates the total capital employed at about £194,033. Some of this was contributed by English undertakers, of whom a number were interested in Scottish undertakings, Foreign help was received too from some Huguenot refugees, skilled artisans, whose knowledge of the methods of cloth, silk, pottery, or other manufactures was of great value to the new companies. Foreign "tradesmen and merchants" were received as burgesses and freemen in the larger royal burghs on payment of £20 Scots, and in the smaller for £10 Scots.

As has been said, the regulations regarding import and export were never strictly enforced. Only two years after the Act of 1681, the Privy Council found it necessary again to forbid by Proclamation the importation of goods made of wool or lint3. Various petitions from cloth manufacturers shew that woollen cloth continued to be imported, partly, no doubt, because the manufacturers could not supply sufficient quantities of certain varieties, and because some Scots were unpatriotic enough to prefer the finer kinds of cloth which were not made in Scotland. Most of this imported cloth was English. In 1698 it was suggested that the import of woollen manufactures should be forbidden and penalised by a heavy imposition, or that the wearing of any wool not made in the kingdom should be prohibited, "which will be more civil but less effectuall." Soon after this a number of people banded themselves together, and drew up a "Resolve containing a plain and direct Ingagement against the wearing of Forraign Cloths and making use of certain Forraign Liquors." This was presented both to "single persons and Societies for Concurrence." But any "Leagues or Bonds" were "reprobat by law," and, as the Resolve manifestly came under that category, all persons were forbidden to engage in it. In 1701 the agitations of the manufacturers were successful, and the importation of both woollen and silk, materials was again forbidden3. Frequent agitation was also made to enforce the acts dealing with the export of raw material, especially of wool. The foreign trade in wool was large, and of great advantage to the wool growers, who declared that the home demand for their wool was so small that they would be ruined were they not allowed to export. The manufacturers on the other hand declared that the reason that the cloth works did not flourish as they ought, was that they had difficulty in securing a sufficient supply of wool. The town of Aberdeen in 1693 declared that "since the exportatione therof" (i.e. of wool) "may tend to the utter ruine of woolling manufactories in this kingdome which in former tymes brought in considerable coyned money to the Countrie, but by the late considerable Exportatione of the said Commoditie vertuous people are forced either to give over the making of woolling manufactorie or to make it so slight as renders it unvend-able abroad." Aberdeenshire was one of the chief seats of the manufacture. These and other like arguments were successful, and in 1701 the export of wool was forbidden. It was still smuggled out of the country to some extent, but on the whole the Act was said to be of great advantage.

The trade in the old established cloth manufacture had decayed very much. In 1674 about 400,000 ells of plaiding had been exported from Aberdeenshire, at 11s. 6d. per ell. In 1694 and until 1700 the trade had declined, and only about 80,000 ells yearly at 6s. or 7s. per ell were sent away. After the Act of 1701 the trade recovered again, and about 200,000 ells, at the old price, were exported in 1701 and 1702. The triumph of the manufacture was short-lived, however, for in 1704 the export of wool was again allowed4.

That the Acts regarding import and export were observed to some extent is shewn by the grants of abatements made to the farmers of the customs, after Acts prohibiting some imports or exports were passed. In 1681 the tacksmen declared that "the restraint...being so Comprehensive and relateing to a great part of the subject of trade has made a present Interruption of all trade the merchands being at a stand and not knowing what to Import." When the export of linen yarn was forbidden in 1693, they received an abatement of £591. 35. 8d. This was calculated from the amount of linen yarn exported in 1692—101,272 pounds, on which the duty was £591. 17s. 0d. Later the tacksmen of the customs between 1697 and 1702 claimed an abatement of £14,159. 11s. 4d in consideration of their losses by the various Acts of 1698, 1699 and 1701, prohibiting the export of wool and the import of foreign woollen manufactures.

Having now touched upon the disadvantages of the system it is necessary to glance at the degree of success which attended it. As has been said, about fifty new manufactories were started. Of these the woollen and linen were the most important. Seven works for manufacturing woollen cloths of different kinds were erected between 1681 and 1695, and two in 1703. They chiefly manufactured the coarser sorts of materials, serges, baizes, etc., and it was in this line that they were most successful, as there were not so many rivals with whom to compete. Coarse cloth had a good sale in the Plantations, it was cheap and strong and useful for servants' wear. According to the writer of A Representation of the Advantages... of Manufactories (1683), a great deal was sent to Holland and some was even smuggled into England. The finer serges found good markets in Holland, Hamburg and Spain. The minutes of the New Mills Manufactory afford a good deal of information as to the working of the cloth works. Four varieties of cloth were made, the finest with Spanish wool only, the next quality with Spanish and English wools mixed, the third with English, and the coarsest with Scottish wool alone. This company never seemed to have large quantities in stock, nor to be able to provide a supply quickly. The directors were occasionally applied to to supply cloth suitable for uniforms, "to distinguish sojers from other sculking and -vagrant persons," but generally failed to have enough material by the required time, and licences had usually to be given to import the necessary amount from England. The manufacture on the whole, however, had advanced a great deal since the beginning of the century, and the improvement was nearly all subsequent to the passing of the protective legislation. That its prosperity was due to protection, and that without protection it could not stand, was obvious after the union, when the Scottish cloth manufacture suffered very much from the free competition of the English manufactures.

The linen manufacture was more successful. For one thing the country was more adapted for it, and also it was easier to find a market for linen than for cloth. A special Act dealing with this manufacture was passed in 1693, forbidding the export of linen .yarn, and'providing for the import of linen yarn and export of cloth duty free. It was thought that it would be a particularly suitable time for setting up a linen manufactory, "when the seas are troublesome and.tradesmen abroad ruined with warrs," as it might be possible to get the trade of supplying England with those cloths which the French and Dutch now sent her. One manufactory was founded in this year at Leith, which exported in the year 1693-4, £2012. 8s. 5d. value of linen. The custom remitted on this was £427. 4s., and on the goods imported for its use £308. 19s. Further encouragement was given by an Act making burial in Scots linen compulsory. A good deal of linen was exported to the Plantations, and also to Holland, Spain and England. It was in fact the most important of all Scottish imports to England, amounting to about £40,000 value yearly. On the .whole the linen industry was perhaps the most important of all the industries, at any rate from the point of view of the export trade. Those engaged in it were anxious for the union, as they expected to profit greatly by the increased opportunities for export to the Plantations.

The manufacture of sugar was also a flourishing one. New works were founded at Leith, Glasgow, and elsewhere. In connection with one of these works a distillery was established, to make spirits out of molasses. This, it was said, would be of great advantage to trade. Not only would more sugar be imported from the Plantations, and more woollens and other manufactures sent there, but spirits would be made at home instead of being imported from England. The Fishing Company established in 1670 was not so successful however. Another Act was passed in 1685 giving many privileges to those engaged in the fishing trade, but no great advantage was taken of it. Most of the pamphlets which advocate the union deplore the neglect of this trade, and the loss of the wealth which it should bring to the country, most of which, they assert, goes to the Dutch. Other works were erected for the manufacture of soap, silk, glass, salt, starch, ropes, paper, oil, gunpowder, etc. Of great importance was the founding of the Bank of Scotland in 1695 the "first instance of a private joint stock bank formed by private persons for the express purpose of making a trade of banking, wholly unconnected with the State, and dependent on their own private capital." It was not, however, till after the union that the Bank proved its true usefulness to the country in the facilities which it gave for raising money to promote industry and agriculture. It was not until after the union also that any advance was made in agriculture, the practice of which continued very backward and on much the same lines throughout the seventeenth century. As has been said, the promotion of industry received a check after the year 1695, due to the large investment of capital in the African Company, and to the bad harvests of the succeeding years. The harvest of 1695 was very bad, that of 1696 was worse, and 1697 was also a bad year. Complaints from all over the kingdom attest the widespread nature of the dearth. In Aberdeen "ther is on of the greatest skaircities of Victuall that ever you heard of." The famine in Inverness "is more calamitous then was ever felt heretofor in our age," while round Edinburgh many had not even been able to sow their land in 1696 because of the want of seed. The dearth increased the discontent of the country. After 1700 harvests improved again, but the want of markets was an ever present grievance. The Lord Chancellor in his speech to Parliament in 1703 asserted that "Our Manufactures are very much improved but we have almost no forraign trade." For this condition of affairs the union with England was blamed, but it was also commonly realised that it was the nature of the union that was at fault, and that the only means of remedy lay in a complete and incorporating union.