The peace and prosperity of the Scotland of the early middle ages were rudely broken in upon by the War of Independence, at the beginning of the fourteenth century. Not only were trade and industry interrupted and the most fertile parts of the country laid waste, but the readjustment of Scotland's international relations, resulting from the war, prevented her recovery, and checked her development. For more than two centuries she remained at enmity with England, while her alliance was sought and gained by England's other opponent, France. This change in her circumstances had a disastrous effect upon Scottish economic development. Her southern district was in constant danger from English raids or Scottish reprisals, and this, owing to the care of the great monastic establishments, had been one of the most prosperous parts of the kingdom. Her trade with England was interrupted, and her population had to keep themselves in readiness for military service. The frequent minorities of her kings, and the feuds of the nobles with each other and with their sovereign also combined to hinder Scottish economic progress in the fourteenth and fifteenth centuries. Friendship with France did, however, bring some commercial advantages, for the Scots merchants obtained considerable trading privileges there, especially in the province of Normandy, which they chiefly frequented.

Not until the middle of the sixteenth century did any substantial change occur in these relationships. In 1560 the Scottish Estates met in Convention adopted Protestantism as the national religion. Of this momentous decision Professor Hume Brown says: "Had Scotland remained a Roman Catholic country, the Union of the Crowns could hardly in the nature of the case have taken effect, and the Union of the Parliaments would have been excluded alike by the laws of God and man." This adoption by Scotland of the Reformed Religion was the first step towards a breach with France. A further step in the same direction was the Union of the crowns of England and Scotland in 1603, in the person of James VI. Scotland was now bound to England by the ties of common sovereignty and a common religion, while her ancient friendship and her commercial interests still attached her to France. Her principal trade also was with the Dutch, England's great commercial rivals of the seventeenth century.

It was not however in this direction only that the economic interests of the two countries did not harmonize. Scotland's economic development was far more backward than that of England. She was, says Professor Hume Brown, backward in "breaking away from the traditions of mediaevalism." "In Scotland the hard and fast regulations which had bound the mediaeval merchant were as rigidly enforced as ever, whereas in England the door was virtually thrown open to all and sundry who might desire to put their capital to profitable uses." Industry in Scotland was still controlled by the Craft Gilds, and organisation and method were alike mediaeval. Manufactures were little developed, and the chief exports were raw materials* The countries, therefore, required different commercial regulations.. This was one reason why the Union of 1603 could not be complete; it was neither parliamentary nor commercial, the crowns alone were united. The chief reason for the backwardness of development in Scotland was the lack of capital. Her soil was poor; also her situation, remote from the ordinary course of European trade, was a drawback to her. During the latter part of the seventeenth century a change came about. The Scots found themselves favourably placed for the new trade with the West. Companies were founded to promote industry, partly with the help of English capital. Scotland's economic history in the seventeenth century is that of her development into a modern state, which, though she could not be a successful rival to England, could and did force her greater neighbour to grant to her commercial equality. During the seventeenth century the relationship established in 1603 became more and more unsatisfactory, and this was greatly due to the conflicting economic interests-of the two countries. The English suffered from the Union in four particular directions. These were, firstly, the French trade; where the English merchants were jealous of the Scottish privileges in France during the first years of the century, while during the latter part they objected to the Scots maintaining their trade connection with a country with whom England was at enmity. Secondly, the Dutch trade was a source of grievance, for the English always feared that the Dutch merchants through their connection with Scotland, might obtain some share in English carrying trade, particularly in that to the Plantations. For, thirdly, after the Restoration the Scots gradually established an illegal trade with America, which was an offence against the English commercial system as embodied in the Navigation Acts. Fourthly, difficulties arose because of the different regulations as to import and export, which made the smuggling of certain commodities across the Borders a profitable occupation.

Scotland also suffered from the Union, especially in her foreign trade. Partly because of her connection with England she gradually lost her privileges in France. Her trade to France, and also to Holland, was interrupted and sometimes stopped by English wars with these countries, from which the Scots derived no benefit. She felt these checks to her trade especially towards the end of the century, when her industries developed, and when, as a crowning grievance, she was allowed no legal share in the English Plantation trade.

The century between the Unions of 1603 and 1707, treated chronologically, falls into three periods. James was anxious for an incorporating union, but neither nation was as yet ready to make the necessary concessions. During the first period, therefore, the reign of James I and part of that of Charles I, trade between the two countries was not free. James's subjects in England, Scotland, and Ireland, were, however, allowed to trade as natives, not as aliens, with any of the three countries. On the whole, however, there was little increase of intercourse between the countries. The most important feature of the period was that, although Scotland did succeed in retaining her privileges in France, the connection between these two countries gradually became less close.

Scotland suffered very much during the Civil Wars, and consequently the establishment of a complete Union under the Commonwealth in 1654 found her in an exhausted and poverty stricken state. Owing to this fact and also to the short duration of the Union it is difficult to estimate its possible results, had conditions been different. As matters stood the Union in this second period was unsatisfactory to both parties. England found the maintenance of an army, garrisons, and the civil government in Scotland a very heavy drain on her resources, while Scottish trade was hampered by the enforcement of English regulations as to import and export and navigation, and also by the wars of the Commonwealth with Holland.

As a result neither nation after the Restoration wished to continue this close relationship, and accordingly England and Scotland again became, but for their common king, separate countries. This third period is by far the most interesting. In it the English commercial system was further developed, and more strictly enforced, and France also developed a strong protective system. Scotland, by the actions of the English Parliament, and by the loss of her privileges in France, was shut out from the advantages of both. At the same time the Scots became more anxious to develop industry and trade. They found themselves, however, greatly hampered by want of markets. Heavy duties hindered their trade with England, and by successive Navigation Acts they were excluded from any lawful share in the Plantation trade. They were partly shut out from the French trade by Colbert's protective measures, and their old privileges there were lost. For this they blamed their connection with England.

But on the other hand they still had some French trade, and they continued this connection during William's wars with France, in spite of the indignation and remonstrances of the English government and merchants. The English manufacturers joined in the complaints because the Scots supplied France and other continental countries, with English wool. The export of wool from England was prohibited, but the Scots carried it over the border, .and, the export of wool from Scotland being generally .allowed, they took it abroad to be used in the cloth manufactories of England's commercial rivals. In spite of the Navigation Acts the Scots built up a considerable trade with the Plantations. To this the English most strongly objected, not only because Scotland supplied herself, and might in time supply other countries, with Plantation products, instead of getting them from England, l3ut also because they feared that Dutch ships might trade with the Plantations under cover of the Scots connection. Towards the end of the century it became more and more obvious to the thinking men of both countries that the relationship in its present state could not continue, and the episode of the Scots East India Company served to intensify this feeling. The Scots were determined to secure for themselves some market. The extensive privileges obtained by a Scots company from the Scots Parliament alarmed alike those interested in the East India and in the Plantation trades, while the results of the Darien expedition threatened to involve England in political difficulties with Spain. In both countries popular feeling ran very high, and it was now felt on all sides that some change must be made. Owing to the development of Scottish industry it was no longer necessary that the commercial regulations for the two countries should differ. In fact, Scotland had also built up a protective system very much on the lines of those of England and France, and partly in retaliation for her treatment by those countries. At this time the question became complicated by political considerations—England had settled the succession on the Hanover line, and feared that the Scots might refuse to co-operate with them and might recall the Stewarts, and that thus French influence would again become predominant in Scotland. In order, therefore, to consolidate and secure her commercial system, and to ensure the succession of the same sovereign in both kingdoms, England was willing to admit Scotland to commercial equality, while Scotland, anxious to secure markets for her manufactures, consented to merge her Parliament with that of England. Thus over a century of misunderstanding and dispute was brought to an end, and, very largely for commercial reasons on both sides, that Union was accomplished which has done so much to promote the prosperity and success of both kingdoms.