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Mercantilism

Mercantilism refers to a theory of economics that is focused on economic nationalism in order to create a more prosperous state. It was the predominant school of economic thought throughout two centuries, spanning the 1500s to the 1700s. The renowned economist Adam Smith was the first to use the expression “mercantile system”, and it defined a system based on the government actively fostering economic policies of protectionism that would promote export and discourage import so as to enhance capital. This was done with the intent to maintain a positive balance of trade by facilitating the influx of gold and silver bullion, the basis at that time for measuring the wealth of a nation.

It was during this era of mercantilism that much of what constitutes modern capitalism was instituted, as witnessed by the economic policies of government intervention and control. It was a system that benefited the merchants and manufacturers since they enjoyed state protection and support. For example, capital for new businesses would come from the state, as would exemptions from taxes. The state would also reward high yield producers with titles or pensions. And with regards to trade, the state would enforce tariffs and restrictions on importers so as to protect the local industries. It would even prohibit the export of skilled workers, tools and the like.

Mercantilism lost its toehold with the arrival of classical economics and the arguments of men like Adam Smith in his book Wealth of Nations.

Web Resources On Mercantilism

Concise Encyclopedia of Economics
Wikipedia: Mercantilism

Book Resources On Mercantilism

The Modern World-System II : Mercantilism and the Consolidation of the European World-Economy by Immanuel Wallerstein
Politicized Economies: Monarchy, Monopoly, and Mercantilism by Ekelund & Tollison

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